Minimum wage increases coming... but held at the rate of inflation

29 March 2007

The Government has announced that the national minimum wage is to rise from October 2007.

The rate for workers aged over 21 will rise by 17p - about 3% - from £5.35 to £5.52 an hour.

The rate for workers aged 18-21 will rise by 15p to £4.60 an hour, while workers aged 16 and 17 will see a 10p rise to £3.40 an hour.

The increases will affect 1.3 million workers and are in line with inflation.

Unions said the government should have been "bolder" and increased the minimum wage by a rate above inflation for the eighth year in a row.

The increases in the minimum wage were recommended by the government's Low Pay Commission and were accepted by the Trade and Industry Secretary, Alistair Darling. However, Mr Darling rejected a recommendation that 21-year-olds should receive the full adult rate of £5.52 an hour, saying that such a move could damage their job prospects.

When the minimum wage was first introduced in 1999 the adult rate stood at £3.60 an hour, and it has risen at a rate above inflation every year until now. However, the Low Pay Commission said that the established pattern of above-inflation rises in the minimum wage would have to come to an end due to a fall in the number of jobs in the low paying sectors for the first time since the introduction of the minimum wage in 1999.

Employer organisations have long warned that above-inflation increases could damage business and employment prospects, whereas unions have called for a £6-an-hour minimum for adult workers, stating that “there is still scope to continue raising the wages of the lowest paid compared to the rest of us without ill effects."

If you would like further information on this issue, please contact Guy Abbiss, Tracey Horne or Colin Kendon.