Minimum wage set to rise to £5-per-hour

The UK government has announced plans to increase the adult minimum wage from £4.85 to £5.05 in October 2005 and a further increase to £5.35 in October 2006.

The youth rate, that for 18-21-year-olds will rise to £4.25 in October 2005 and to £4.45 the following year.

The rises, which have been recommended by the Low Pay Commission (LPC), will extend the coverage of the minimum wage to 1.3 million workers in October 2005 and 1.4 million in October 2006.

The government also agreed to a review by the LPC of the 2006 rates and the operation of the rate for 16-17-year-olds, which is currently £3 and agreed to keep the issue of whether to pay 21-year-old workers the adult rate under review.

Trade and Industry Secretary Patricia Hewitt said: "The great news is that well over a million workers will receive a guaranteed pay rise by this October, rising to almost a million and a half people by October 2006. The minimum wage has made a real difference to the lives of thousands of low paid workers - particularly women, who make up some 70 per cent of those benefiting. Year on year increases protect some of society's most vulnerable people from exploitative rates of pay."

There had been calls from business leaders to freeze the minimum wage rate, over fears that further rises could affect jobs and competitiveness.

However, Ms Hewitt said: "Despite predictions to the contrary, the national minimum wage has not affected the job prospects of low-paid workers in the UK. Unemployment is at record low and a record 28 million people are now in work."

The Minister announced that more than £3 million has been recovered from bosses who had not been paying the national minimum wage since April 2004. The total amount recovered since the minimum wage was introduced in April 1999 is now nearly £20 million.

Commenting on minimum wage increases, Adair Turner, Chairman of the LPC, said: "Although we are disappointed that the government has decided not to accept our minimum wage rate, we are encouraged that it is indicating a willingness to consider this again in the near future. We see this change as an appropriate step in the evolution of the minimum wage."

The Director General of the British Retail Consortium, Kevin Hawkins, said: "The BRC are pleased the LPC has taken our evidence into account and only recommended an increase of 4% to the NMW. Whilst this is still an above inflation increase, retailers will be relieved as the two consecutive increases of 7-8% in October 2003 and 2004 are proving very difficult for both larger and smaller retailers to absorb in today's trading conditions.”

He said there was concern that the LPC has recommended an increase of 6% to £5.35 for October 2006.

Adding that in a climate where retail sales growth was slow and the outlook uncertain, “ill thought out” decisions on the minimum wage could hit business hard.

(KmcA)