Minimum wage to rise but at a rate below inflation

The Momentum UK Team 15 April 2013

The UK national minimum wage will rise to £6.31 per hour for those aged 21 or over and to £5.03 for those aged 18-20.

The rises represent an increase of 12p per hour and 5p per hour respectively and sit below the rise in the cost of living (inflation). The current rate of inflation stands at 2.8% (CPI) and the planned minimum wage increases for the younger age group represent an increase of 1%.

The business secretary Vince Cable said that he had accepted the recommendation made by the low pay commission, except in the case of the apprentice rate where the commission recommended a freeze but the government will in fact implement a 3p rise to £2.68 per hour.

The changes are due to be implemented from October 2013.

Cable said:

"The independent Low Pay Commission plays a crucial role in advising the government when setting the national minimum wage every year. It balances wages of low paid workers against employment prospects if the rate was set too high.

"Apprenticeships are at the heart of our goal to support a stronger economy, and so it is important to continue to make them attractive to young people. Therefore, I am not taking forward the LPC's recommendation to freeze the apprenticeship rate due to non-compliance, but instead am raising it in line with the youth rates.”

Commenting on new national minimum wage rates, Trades Union Congress (TUC) Secretary Frances O'Grady said:

“Boosting the incomes of the low paid goes straight into the economy and wage-led growth must be part of the recovery so we would have liked to have seen minimum wage rates go up further today, even if the government has rightly rejected calls for a freeze.

“But we are pleased that ministers have increased the apprenticeship rate. This sends a positive signal about the importance of apprentices.”

On Friday the Northern TUC published a report suggesting that since the coalition came into power, many full-time workers in the North of England worse off in real terms, once inflation has been taken into account.

The real terms fall was attributed by the report to a combination of below inflation wage increases, wage freezes and loss of public sector jobs pushing workers into lower paid jobs.

Kevin Rowan, Northern TUC Regional Secretary said:

“Ongoing pay restraint is harming families and communities that were already at the bottom of the income scale. While household incomes continue to fall this region will continue to struggle to come out of recession.

“The government must make high quality, sustainable job creation its number one priority and must ensure that the most vulnerable are protected from absolute poverty by promoting decent pay and raising the national minimum wage.”