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Minimum wage rise 'can create jobs'

Increasing the national minimum wage by £1.50 an hour would add £2.1 billion to the public finances and create at least 30,000 new jobs, according to a new report.

A study commissioned by the Unite union found that 4.6 million workers would benefit from the uplift in wages, giving them an extra £1,400 a year on average.

The report, which formed the central plank of Unite's submission to the Low Pay Commission, said that a £1.50 an hour increase in the minimum wage was affordable now and would bring a much-needed stimulus to the economy.

The hourly rate is increasing from £6.31 to £6.50 on October 1, while Labour has pledged to make it at least £8 over the next five years.

Unite said the study, by economist Howard Reed, formally of the influential think-tank the Institute for Fiscal Studies, showed that a £1.50 rise now would help the poorest families the most.

The biggest winners would be workers in the retail sector, where it is estimated more than 900,000 will see a significant increase in their wage packets, followed by those employed in the hospitality industry, where three-quarters of a million workers will benefit, while 190,000 cleaners will see a boost to their incomes, said Unite.

Mr 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."

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."

Meanwhile, the manufacturers' organisation, the EEF, urged the commission to scrap the current apprentice rate and align it instead to rates based on age.

Head of Employment Policy, Tim Thomas, said: "There is an opportunity to create some clear winners such as young apprentices by abolishing the apprentice pay structure and replacing the Apprentice Rate with a learner's age specific rate. Apprentices would see a significant boost to pay and employers will no longer be faced with a complex and confusing pay structure.

"The Low Pay Commission has to date demonstrated a real ability to weight up a delicate balance in recommending a wage floor which does not negatively impact on employment or growth and protects the lowest paid, and should continue to do so whilst government addresses wider causes of low pay.

"What the LPC must do is give businesses greater certainty and direction on where the national minimum wage will go, and the pace it will get there. Its recommendations for pay in 2014-15 must cut through the current political noise on the national minimum wage."

A Business Department spokesman said: "The national minimum wage provides vital protection for low-paid workers. Next week's rise to £6.50 per hour will mean workers will see the biggest cash increase in their take-home pay since 2008, benefiting over one million people in total.

"As the economy continues to strengthen, we want more workers to share the benefits of the recovery. This is why we have asked the independent LPC to once again look at whether the economy is strong enough to support above- inflation rises, helping those on low pay get a fairer deal, without costing jobs.

"We have also asked them to look at ways to simplify the apprenticeship wage system to make it easier for employers to know exactly what wage they must pay."

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