Consumer confidence has skyrocketed in the past year or so, with High Street retailers and leisure firms reporting consistent increases in sales and footfall since the end of the recession. However, numerous financial experts have voiced the opinion that true recovery within consumer driven sectors will not be possible until the rate of real wage growth catches up with the cost of living – meaning many businesses are now considering upping the wages of their employees to meet recommended “living wage” standards.
Yet the Low Pay Commission does not believe that allowing employers to opt in to the voluntary living wage scheme goes far enough in solving the issues facing British householders, and as a result has submitted a report to the government calling for an increase in the minimum wage. Chairman of the commission, David Norgrove, believes a 3 per cent increase would be entirely justified given the recent improvements in the economy and a small initial change would pave the way for further wage increases in both the public and private sectors in coming years.
He says; “Provided the economy continues to improve, we expect to recommend further progressive real increases in the value of the minimum wage, restoring and then surpassing its previous highest level, so that 2014 will mark the start of a new phase – of bigger increases than in recent years.”
At present, the minimum wage is set at £6.31 per hour for adults, meaning a 3 per cent increase would add 19 pence and bring minimum pay per hour to £6.50. Eighteen to 20 year olds currently receive £5.03 per hour but are not expected to benefit from the same percentage increase – instead, the report recommends a 2 per cent increase to £5.13 per hour.
While this may seem unfair, it could go a long way in combatting youth unemployment as the lower wage increase could make workers under the age of 20 an attractive prospect for retailers and businesses in the catering sector in particular. Furthermore, if passed it will mark the first increase in minimum wage in real terms since 2008; indicating that future rises are entirely possible.
Yet while the majority of MPs and industry bodies have welcomed the news, it has not been universally well received. Unite union general secretary Len McCluskey called the proposals a “slap in the face” for those in jobs which pay the minimum wage, as he believes they do not go far enough in assisting those struggling with the rising cost of living in the UK.
He added; “An hourly rise of 19 pence for adults is an insult when the minimum cost of living has increased by a staggering 25 per cent since the beginning of the economic crisis.”
As the government has historically usually accepted recommendations from the Low Pay Commission, it seems that a wage increase is on the horizon for Britain’s lowest paid workers. However, the question is whether a 3 per cent rise will be enough to help those on the breadline battle against the high cost of living in the UK.
Do you agree with Mr McCluskey, or do you think a 3 per cent increase is an adequate starting point for real wage growth?
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