Time for a minimal rise in the minimum wage
You can’t blame the trade unions for seeking a substantial increase in the minimum wage but politicians must resist their demands.
The Trade Unions Congress wants the minimum wage received by 1m people to be increased by 6.4 per cent in 2009 – even though inflation is forecast to fall. The full hourly rate was raised by 3.8 per cent to £5.73 in October 2008 but the TUC proposal would take that to £6.10 in 2009 and increase a further 6.6 per cent to £6.50 in 2010.
The union body also wants the age for receiving the full minimum reduced from 22 to 21.
Since the minimum wage was introduced in 1999 the rate has been increased by 59 per cent – well ahead of the rate of inflation. Only in the past year has the Low Pay Commission conceded that the minimum wage need not always be increased in real terms. But with inflation set to be minimal by next October’s review date, there is scope to give an increase that is both real and low.
The introduction of the minimum wage was clouded by claims that it would reduce the number of jobs on offer. In the event, the buoyant economy ensured that employment increased at the same time as wages and that companies could afford the cost. But now that employment is falling rapidly there is reason to believe higher wages would result in even fewer jobs being offered.
A large swathe of people would surely rather work at £5.73 an hour than not work at all.
The commission is currently considering the rise for 2009 and will make an announcement early in the year. It must not set a minimum that interferes with the market however; annual increases were generous in the boom years but it is in the interests of lower paid people not to be greedy now resources are limited.
