The following press release has been issued this morning by Unite, the union of which I am a member and for whom I work on occasion (including at present). It refers to work by Howard Reed, both a friend of mine and an occasional co-author of mine, and so I reproduce it in full as I think his findings are important, and I also trust them:
A major new independent report to be submitted to the Low Pay Commission today (Friday 26 September) has shown that a national increase of £1.50 per hour in the national minimum wage in 2015 would benefit 4.6 million workers by an average of £1,400 per year while at the same time adding an extra £2.1 billion to the public finances and potentially generating at least 30,000 new jobs.
The independent report, which forms the central plank of Unite's submission to the Low Pay Commission, the body charged with considering the annual increase in the national minimum wage, shows that a £1.50 an hour increase in the minimum wage is affordable now and would bring a much-needed stimulus to the economy.
Written by eminent economist Howard Reed, formally of the influential think tank the Institute for Fiscal Studies, and commissioned by the trade union Unite, among the key findings of the report are:
- A £1.50 per hour increase would help 4.6 million low paid workers, 60 per cent (or 2.8 million) of whom are women
- The average net gain from a £1.50 per hour would be £1,400 per year gross (£813 net)
- The increase would help the poorest families the most, with the biggest gainers in the bottom 60 per cent of income distribution
- A £1.50 per hour increase in the minimum wage would be a boost for employment with a potential increase of 30,000 new jobs as a direct result of the increase.
When the increase is analysed by employment sector the biggest winners are workers in the retail sector where it is estimated over 900,000 will see a significant increase in their wage packets. The next biggest winners are those employed in the hospitality industry where three quarters of a million workers (750,000) will benefit while 190,000 cleaners will see a boost to their incomes.
The report adds weight to the growing calls for a substantial increase in pay for the poorest in the labour force. Last week, leading business figures from some of the UK's leading employers, including Kingfisher, Findus and Stobart's, all expressed concerns that the minimum wage had fallen in value, with a detrimental impact to the economy.
Commenting on the report Howard Reed director of Landman Economics said: “These findings show that a £1.50 per hour increase can only be a good thing for the economy. An increase would lift millions of low paid people out of poverty while at the same time it would increase income for the Treasury, which has seen tax receipts from employment drop, fuelling an increase in government borrowing. It would also create new jobs making it a case that is difficult to argue against.”
Earlier this year, chancellor George Osborne held out hope that the minimum wage could rise to £7 per hour this year, only for the increase to come this October to fall far short of that. The hourly rate will rise from £6.31 to £6.50, substantially below what economists agree is a living wage of £7.65 per hour (£8.80 in London).
Len McCluskey general secretary of Unite added: “We have long-argued for an immediate uplift in the minimum wage of £1.50 to get people out of poverty and get some real growth into our economy, not this phoney one fuelled by a housing bubble. This report shows that this is both affordable for employers, would in fact create not cost jobs, and is a great deal for the national finances. It need not be put off any longer.
“Millions of working people have seen their income reduce by an average of £1,600 during the life of this government as they work harder but get poorer. They deserve a better deal from our country and only a lack of political will is preventing them from getting one.”
Unite will be making its submission to the Low Pay Commission, the body responsible for recommending the annual level of the minimum wage, on the final day of the consultation period, Friday 26 September 2014.
- Download an executive summary of the report
- Download a copy of the full report
- Read the Guardian report of the intervention by business leaders
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The “commitment” by Labour to increase the minimum wage to £8.00 per hour in 2020 was, quite frankly pathetic, as was the plan to cut child benefit and means test the free TV licence for over 75’s and the winter fuel allowance.
Ball’s speech was all about telling big business “we’re on your side”.
I’m afraid Labour do not seem to have learned anything.
I thought the £8 minimum wage pledge was good politics. It has been introduced to the debate as “Wow, what a big increase”, and provoked wails from Tories and business that it is too generous, just what we want! this is the ground Labour should be fighting on.
Of course some of us have noticed the “by 2020” and worked out that it is not all that generous. This year’s rise is £6.31 to £6.50, 3%. If the uplift was £% every year to 2020 we would get NMW of £7.77. If it was 4% every year we get to £8.21. The £6.50 increase is the biggest this Parliament, an electioneering rise, and the product of a bit of a bidding war as to whether the Tories dared offer more.
So let’s put this in perspective. It is not “pathetic”, but it is not wildly generous either. A nightmare scenario is that a really cunning and desperate Tory party might offer more. There is certainly scope to campaign to reach £8 much sooner and progress from there.
The reality is it would pay any party to increase it now
I’m sorry, butan increase to £8 by 2020 of a already chronically-low minimum wage IS pathetic!
It’s a rise of around 27% or 5.4% per year on average. Of course, inflation of nearly 2% a year reduces the value of this to about 3.4% a year.
27% of very little is still very little!
We need to put spending money into working people#s pockets. The living wage is over £7.50 now. It should be an immediate rise of the minimum wage to £8 at least to make up for the lost ground of 10 percent and more due to pay cuts ans freezes.
The minimum should be £10 at least now.
I genuinely don’t know what to think about this. In a closed economy it would certainly benefit workers. if the law were followed it would benefit workers.
On the street, however, the effect of the NMW, PAYE & employer’s NICs are just to encourage employers to employ people from outside the Uk who have no NINO & will work for cash. The Daily Mail bleats on about lazy young Britons, but this is the main reason why we combine high levels of unemployment with massive immigration of mostly low-skliied workers. I hate to sound UKIP-y (UKIP-ish?), but if you listen to people, anyone can get off the boat/plane, turn up at a hotel or restaurant & get work cash-in-hand. I appreciate this isn’t evidence, its just ‘word of mouth’ but, as I said before, economists need to listen to what is being said. If you had 2 identical restaurants, one of which paid its staff NMW, deducted tax & suffered Er’s NIC & the other that paid its staff cash, slightly below NMW, no tax or NICs, the 2nd Restaurant could undercut the first by about 25% (I’ve been told).
How many people will pay £20 for the Lamb Biryani that is £16 next door?
This is precisely why we need to invest more in HMRC
They also monitor minimum wage, with very limited and declining resources
A little bit of good news for you here Richard. HMRC resources are indeed limited and inadequate, but they are no longer declining. The coalition had frozen spending on NMW enforcement from 2010 at £8.3 million pa. This year and next year it is increasing to £9.2 million.
This is largely down to campaigning by the enforcers union, PCS and to a PQ from the shadow BIS minister which exposed the lack of resources and which it appears the coalition felt would leave it too politically embarrassing to continue in the same way.
Excellent
Delighted – because I knew a change downward was in the offing
This is partly an issue of free trade and the movement of Labour. Many immigrants come from debt -ridden countries that have been pillaged by multinationals and who are forced to export excessively to pay of debt, leaving poor infrastructure and rampant poverty – isn’t it the international debt culture that is at the root of this?
Sorry Eriugenus, I feel you have got this quite wrong. Were it not for minimum wage the increase in the supply of labour would be much more problematic. A very large number of those coming in are employed by labour providers. While they are disastrous for employment rights in many ways (zero hours etc.) they do pay exactly the legal minimum, and an increase in that minimum will result in an increase of exactly that amount for their workers. Those who feel strong enough to ask for statutory rights will usually get them. Even in the more hidden areas it has an influence on the below NMW bargain that is struck. While the enforcing agency is undeniably under-resourced it is still true that this law makes a real difference.
There is a very economic good case for a big rise in minimum wage, but as you say
it is enforced by HMRC and that is as good as sending a chocolate fireman to put out a fire. A favourite trick round here is to declare minimum wage for a certain amount of hours, but the worker actually works more undeclared hours.
I am hearing that too
Richard
in truth, if you look at the sheer number of restaurants, hotels, pubs plus other labour providers, this is almost unenforceable.
I’d like to see a “Fair Employer” kite mark where businesses sign up to say that they
Pay at least NMW
Deduct tax & NICs & account for them to the Govt
Obey H&S law
&, all being well, people would patronise that pub/cafe etc rather than others. I appreciate, obviously, that bad employers could lie & put the kite mark up anyway, but I suspect their long-suffering employees might take the opportunity to “dob them in”.
I’d also like to see Employers’ NICs abolished. We could easily pay for it by increasing SDLT or IHT, never mind introducing an LVT. IMO someone that gives someone else a job, particularly in these terrible times, deserves congratulation, Not a tax charge.
Easily replaced is not true
We are talking over £50 billion here
LVT would be the only possibility
50 billion doesn’t sound right! Are you sure?
Anyway, it is an unjustifiable hit on small businesses. If I were chancellor it’d go. Mind you, if I were chancellor, the world would be a different place!
What do you think about the “Fair Employer” kite mark ?
I like the idea of a “fair employer” kitemark
BUT only if employees were part of the ajudication process – and probably anomymously