Minimum wage to increase to £5.80
The minimum wage will increase by 7p to £5.80 an hour from October, the government has announced.
Despite calls from business leaders to freeze the minimum wage at its current level of £5.73, the government has decided to increase this by 7p from October. The rate of 18 to 21-year-olds will also rise, by 6p to £4.83 and 16 and 17-year-olds will see their hourly rate increase by 4p to £3.57.
An estimated one million people will benefit from the increase.
From October 2010, the national minimum wage structure will change again, with 21-year-olds given the same rights as adults. Currently, only workers aged 22 and over are entitled to the top band of the minimum wage (see below).
The Low Pay Commission (LPC), which was established to advise the government about the national minimum wage, recommended the increase. Chairman George Bain says: “These are very challenging times for the UK and unprecedented economic circumstances for the minimum wage.
"We believe that the our recommendations are appropriate for this economic climate. They reflect the need to protect low-paid workers’ jobs as well as their earnings.”
The 7p hike represents a 1.2% increase in the national minimum wage - well below the current rate of inflation (which was 2.9% in April). But The Low Pay Commission warned that raising wages by more than 1.5% could risk hurting businesses.
The British Retail Consortium (BRC) has supported the decision as appropriate for "these difficult times".
“The best protection for wages is preserving jobs to keep people working and earning not handicapping employers with excessive new costs," says Stephen Robertson, director general of the BRC.
“A 1.2% increase strikes a common sense balance between helping low-paid workers and enabling retailers to maintain, and where possible, increase job opportunities.”
Previous national minimum wage bands:
Workers aged between 16-17: £3.53 an hour
Workers aged between 18-21: £4.77
Workers aged 22 and over: £5.73 an hour
New national minimum wage bands (from October 2009):
Workers aged between 16-17: £3.57 an hour
Workers aged between 18-21: £4.83 an hour
Workers aged 22* and over: £5.80 an hour
* This will include 21 year olds from October 2010.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).