The government’s evidence to the Low Pay Commission (LPC), which will be used to help decide the level of the National Minimum Wage (NMW) from October 2015, has been submitted today (15 October 2014).
The evidence outlines the strength of the economic recovery and restates the government’s commitment to seeing the NMW rise as fast as possible without having an adverse impact on the significant jobs growth we have seen this year.
The evidence submitted shows that:
- the UK economy is improving. It is growing faster than any other Western economy, with GDP over 3% higher in the second quarter of 2014 compared to the previous year
- record numbers of people are in work with millions more private sector jobs created since early 2010
- although average earnings have fallen in real terms, since 2012 this fall has reduced because inflation has been below target. Going forward, average earnings growth is predicted to rise and we have already seen the first real increase in NMW since 2007
Employment relations Minister, Jo Swinson said:
This month we have introduced the first above inflation rise in the National Minimum Wage since 2007, helping workers share the benefits of economic growth and providing protection for the lowest paid. But I’m keen to go further if possible, which is why we have asked the Low Pay Commission to consider how we can increase the real value of the NMW, without having an adverse impact on jobs.
I also want to explore how we can ensure apprentices are being paid the right wage and help employers by simplifying the apprenticeship pay system. I have asked the LPC to consider this.
Earlier this month, the Business Secretary Vince Cable announced his intention to ask the LPC to consider how best to simplify the apprenticeship pay system to make apprenticeships an even more financially attractive route for young people deciding whether to go into full time employment or to earn whilst they learn.
Dr Cable suggested putting the apprentice NMW in line with the NMW rate for 16 to17 year olds for the first year of an apprenticeship, before moving them on to the relevant age rate. Based on the current NMW rates for 16 to 17 year olds, the proposal would give around 31,000 apprentices in the first year of their programme a pay rise of more than £1 an hour, rising from £2.73 to £3.79 per hour.
Apprenticeships provide an excellent route to a successful career. There have already been 1.8 million apprenticeship starts since 2010, with 868,700 apprentices deciding to earn whilst they learn in 2012 to 2013 alone – the highest recorded in modern history.
Jo Swinson also reiterated the government’s commitment to enforcing the NMW to ensure everyone who is entitled to it receives it. This action includes:
- increasing the enforcement budget by over £1 million to £9.2 million to increase the number of HMRC compliance officers identifying businesses that exploit workers by paying them below the NMW
- naming and shaming businesses that pay their staff below the NMW and forcing them to pay the owed wages to their staff
- increasing the penalties employers face for not paying their staff the NMW from £5,000 to £20,000 per worker. This is subject to parliamentary clearance through the Small Business, Enterprise and Employment bill.
On 1 October 2014 the National Minimum Wage rate for adults increased by 19p to £6.50.
Notes to editors:
- The interim government evidence for the Low Pay Commission’s 2015 report can be found at National minimum wage: interim government evidence for the 2015
- The evidence relates to labour market data to the end of June 2014. The government will provide updated evidence to the LPC based on labour market data in December 2014.
- Further information on the Business Secretary’s announcement on simplifying the apprentice national minimum wage structure can be found at Cable to bolster apprenticeship pay.
- For more information about the changes to National Minimum Wage visit www.facebook.com/nmwage
- This year’s (2014) increase in the adult rate will increase the real value of the minimum wage for the first time in 6 years through the biggest percentage increase since 2008.
- The LPC has said we would need the following conditions to see a faster rise in National Minimum Wage:
- sustainable rise in real wages in the economy generally
- stable or rising employment
- an expectation of sustained economic growth
- The independent LPC was established following the National Minimum Wage Act 1998 to advise the government on the National Minimum Wage. It is made up of representatives from all sides of industry.
- The LPC’s recommendations follow consultation with academics, businesses and workers representatives, together with extensive research and analysis. The LPC’s recommendations on NMW rates reflect unanimous views of all the commissioners. The LPC monitors and evaluates the impact of the NMW. In reaching unanimity on its recommendations, the LPC has balanced the need to protect the earnings and jobs of low paid workers against the difficulties faced by employers and businesses, paying particular attention to the employment prospects of young people.
- The LPC makes recommendations to the government in its annual report. For more details and copies of the report see the Low Pay Commission’s presence on gov.uk.
- If workers feel they are not getting the minimum wage that they are legally entitled to, they should contact the free and confidential Pay and Work Rights Helpline on 0800 917 2368.