Since the beginning of this year, we have heard stories of possible increase in minimum wage. George Osborne even claimed that he thinks the national minimum wage should rise to £7 an hour by October 2015. We truly do not expect such a dramatic increase but good news… it has been confirmed that the National Minimum Wage will be £6.5 an hour starting this October. This change will definitely benefit millions of workers nationwide. This is a rise of 3%, by 19p. Finally, the wage rise has increased more than the inflation rate, first time in six years (since 2008). The consumer prices index (CPI) rate of inflation is currently 1.9%. The LPC’s new forward guidance gives us a much better understanding of how an economic recovery can be translated into faster and significant increases in the national minimum wage for low-paid workers, without costing jobs.
So for students like ourselves, for instance the rate for 18 to 20-year-olds will go up by 10p to £5.13 an hour, which implies a 2% increase. For the 16-17 age range, the rise is to £3.79, also a 2% increase. Apprentices will earn an extra 5p an hour, taking their wages to at least £2.73.
Apparently, in some sectors, the employers are actually capable to pay much more than this. Professor Sir George Bain, founding chair of the Low Pay Commission said there should be a “special case for London to have a higher national minimum. The latest rise means the national minimum wage is still well below the definition of low pay, as set by the Organisation for Economic Co-operation and Development (OECD) due to the fact that the “living wage” is about £7.65 an hour (£8.80 per hour in London).
Len McCluskey, Unite’s general secretary said “The government claims it is on the side of working people but companies are sitting on a cash mountain of £500bn and they should be forced to share more of it with the lowest paid”.
* Source: BBC News
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Hi Alisa
Thank you for sharing such a important topics in economics which has great impact on any economy 🙂
UK is not the only country looking at increasing the minimum wage for their lower end workers. USA recently has also suggested such measures for their retails workers. Even at Singapore, our government has provided some similar guideline for workers in selected industries.
I guess the key objective behind such policies is to ensure a more equal income distribution. However, such wage increase without corresponding productivity increase will only resulted in cost push inflation which will eventually drive investors off the country.
Thus, the long term solution should focus on upgrading the workers skills to increase their productivity.
Feel free to visit my blog on economic issues at my website http://www.econspecialist.com and i welcome your comment.
Cheers