What are the prospects for another minimum wage increase next year?

The TUC will meet the Low Pay Commission (LPC) on Monday to discuss next year’s National Minimum Wage (NMW) rise. We will be asking for an increase of 3.5 per cent on all the rates, which would increase the adult NMW next year by 21p to £6.14. The NMW needs to increase every year in order to ensure that the earnings of low paid workers do not fall behind.

Our guest writer is Paul Sellers, a policy officer at the TUC

The TUC will meet the Low Pay Commission (LPC) on Monday to discuss next year’s National Minimum Wage (NMW) rise. We will be asking for an increase of 3.5 per cent on all the rates, which would increase the adult NMW next year by 21p to £6.14. The NMW needs to increase every year in order to ensure that the earnings of low paid workers do not fall behind.

Despite the cuts and continuing unemployment, this modest boost can be achieved without generating any adverse effects on employment and job creation.

The LPC, which advises the government on the NMW, has managed to recommend NMW increases throughout the recession – 3.8 per cent in October 2008, 1.2 per cent in 2009 and 2.2 per cent in 2010. The LPC is now considering the rates to apply from for October 2011 to September 2012 and will make its report to government early next year.

The commissioners have the tough job of trying to work out what the economy will be doing some months after their final recommendation.

The Treasury’s October round up of independent economic forecasts suggests that:

• Inflation will fall next year, but RPI is still likely to average 3.5 per cent throughout 2011;

• Growth should continue at 2.0 per cent or above;

• A small net increase in the number of employee jobs is expected.

It is reasonable to expect the government to believe their own projections for the economy, and as evidence suggest that people spend nearly all of their NMW increases in their local economy, this modest increase in purchasing power will be good for the wider economy.

The TUC’s objective is to persuade the Low Pay Commission to recommend the highest sustainable rate for the NMW. But we recognise that this is still short of a living wage. There will still be plenty of room for trade union bargaining and campaigning. It should not be forgotten that this government contains ministers who once believed that any minimum wage would destroy jobs, yet the minimum wage has already helped hundreds of thousands of families without any negative side effects.

Its success shows that the UK economy can easily cope with sensible labour market regulation that makes life at work fairer, whatever kneejerk attacks on red tape they provoke. At a time when directors’ pay and bankers bonuses make it look as if the crash never happened, it is right to press for a reasonable increase in living standards for the working poor.

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