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Higher wages for low paid workers coming

By Chris Dawson September 22, 2014 - 6:11 am

£100Higher wages for low paid workers are coming with both the Low Pay Commission consultation due to report to the Government by February and on Sunday Ed Miliband pledged a minimum £8 per hour wage by 2020.

Currently the minimum wage is £6.31 per hour, due to rise 3.01% to £6.50 per hour from the 1st of October. This is one of the biggest increases over the past 9 years since the minimum wage was first introduced. Yearly increases have averaged £2.85%. Ed Miliband’s proposed increase would mean six consecutive annual increases of 3.52%.

It’s interesting to see Ed Miliband jump on the minimum wage so soon after the Scottish Referendum, where all three party leaders appear to have incurred the wrath of their MPs with their last minute pledge to Scotland. It also comes just before the Labour party conference. An increase in the minimum wage is likely to appeal to large swaths of the electorate, especially those of course on the lowest incomes.

Of course if you raise the minimum wage the country also starts to save a whack on other benefits. The government subsidises low pay with Tax Credits and Housing Benefits, for example. 90% of people in London and the SE who receive Housing Benefits are in full time work. It does seem wrong that someone who puts in a full week’s work still has to rely on government handouts to survive, although the increase in income tax allowances has also helped in recent years.

We won’t know what the Low Pay Commission will recommend until next year, but Labour’s stake is now firmly in the ground with an £8.00 promise by 2015. The big question is, is £8 per hour in 2020 enough?

Currently the so called “Living Wage” is £7.65 (£8.80 in London). Assuming an annual 3.52% minimum wage increase it will be 2019 before today’s Living Wage is reached, by which time doubtless the cost of living will have risen sharply and the minimum wage still won’t be enough to survive on.

How will a steady 3.52% increase in the minimum wage affect your business? What do you pay your own workers currently? Would an £8 an hour wage overly impact your business’s profits or do you already have to pay a higher rate to secure quality employees.

More to the point do you think that Labour’s proposal of £8 per hour in six years time is enough? Do you think you could live on £8 an hour in 2020?

  • 2 years ago

    Howdy Chris,

    More to the point do you think that Labour’s proposal of £8 per hour in six years time is enough? Do you think you could live on £8 an hour in 2020?

    Speaking for myself, which I’m guessing would be the same of nearly all fellow readers of Tamebay.

    As a business owner, I would rather work on zero or negative amounts per hour if needed, so that in the future I have to never worry about a minimum wage.

    Perhaps a better question would be, do you think your UK staff can live on £8 an hour in 2020?

    Matt
    PS. At a £6.50 with 3.5% annual increase, by 2020 would be £7.99p/hr, that’s a 1p payrise suggested by Labour.

    • Steve
      2 years ago

      Pity about the Scottish vote, it could have saved us a fortune! Those “canny” Scots certainly know which side their bread is buttered. It seems that money was more important than Nationalistic principals but I guess that’s no suprise.

      Minimum Wage. Don’t know about the rest of you but here in London I would not be able to live on £8 an hour now and certainly won’t be able to in 6 years.

      On the basis of a 40 hour week, £8 p/hr would currently net about £250 after tax and NI and if living in London over half goes on rent and travel. Whats left is a meagre existance.

      Labour are talking about scrapping the bedroom tax. That will only help people who own property, few of which are on £8 p/hr. What would really help people on minimum wage (and many others) is a cap on rent, and especially on room rents in major citys, where landlords have basically taken the piss and exploited people on low wages (who have no chance of buying anyway) for ages.

    • Danny
      2 years ago

      Bedroom Tax applies to those renting social housing – It is effectively a reduction in housing benefit for having ‘spare room’… Unfairly, there are literally next-to-no properties available for residents to move in to / downsize…

      Labour has also promised a cap on the annual increase of rent along with the rights to a three-year tenancy agreement as standard…

  • 2 years ago

    There has always been a problem with the National Minimum Wage. The UK does not have one unified economy. The UK has a series of different economies covering the country. The National Minimum Wage may very well be appropriate to some parts of the Country but not to others.

    As has been pointed out on numerous occassions I live and work in a small Cornish Village. But when the NMW was first introduced it caused chaos in many a small Village Shop(before you ask this Village is probably too small for a Village Shop).

    What happened was that the Shop Keeper calculated just what it would mean to his shop with its finances and he decided to cut back on his staff and possibly to cut back on his opening hours as well. So those hours when nothing much happened and only one member of staff was on duty but he had always considered it to be a service to his community went.

    Many small local businesses closed altogether. So leaving communities without a shop or whatever. But of course it also meant that people who previously had a job even if at a low wage were now unemployed with almost no chance of ever getting another job.

    In case anybody suggests catching a bus to the nearest town. They have to remember that over many parts of Cornwall the buses have been cut back. A few years ago we had bus routes that only ran on Market Day and then one trip in in the morning and one back in the afternoon(although most of these have either become full daily bus routes or have disappeared),

    But is does nobody any good to put in force regulations such as National Minimum Wage and then set them so high that many in some poorer areas promptly lose their jobs and their customers lose their services. But the rules are always set by the unthinking who are always located in the richer more prosperous areas without any consideration of the problems in other areas.

  • Stuart
    2 years ago

    I understand wages need to increase, the difficulty is when wages increase prices have to increase, if my staff base has an increase of 3.5% then I have to either find the money somewhere or increase prices by 3.5%.

    Plus dear old Ed said at the weekend that it would save the government money, the government is the UK’s largest employer, as it wouldn’t have to pay out benefits. The issue will be in five years time everything else will of gone up by then so they won’t be able to cut the benefits back.

    Vicious circle I think….

    • 2 years ago

      All across Rural Britain and indeed across a lot of Urban Britain there are small businesses. They have managed to survive such as the Supermarkets but while surviving they are not prosperous and they are doing their best for their employees and communities.

      The the National Minimum wage goes up. As Stuart so rightly says Prices have to go up. But people these days do a large proportion of their shop in Supermarkets. The Village Shops often get the bits and pieces. So if the Village Shops do put their prices up they are likely to find more of their customers buying more of their shop in Supermarkers.

      Also some items you cannot put your prices up. If a significant proportion of your sales are say Newspapers and Magazines which you sell to the passing trade you cannot increase the price of a Newspaper. All you can hope is to sell a bit more to the passing trade. Cigarettes used to be a good start but that has all but gone. So what is there?

      Yet small businesses employ a significant proportion of the countries population and in rural Britain the importance is very significant. Yet time and again we are told that because this is right for London, the South East and Midlands then Rural Cornwall has to lump it even if its effect is to put yet more people out of work possibly for the rests of their lives.

  • elvis
    2 years ago

    I’m with Chris T. If there has to be a higher minimum wage it should only apply to certain companies, maybe PLC’s or comanies with a certain number of staff such 50+.

  • boardsurfer
    2 years ago

    I’m willing to bet that most folk here wouldnt get outta bed for £8 an hour.

    They would however bitch like hell about spending it!

    • Stuart
      2 years ago

      The amount of hours I work to keep the business going I probably earn less than £1 an hour, so I would love to get out of bed for £8 an hour, in fact I would jump and run at the chance.

      Yes I choose to have my own business, but I receive zero help from the Government, in fact all I get is to pay more for everything and get more hoops to jump through!

    • 2 years ago

      Stuart raises a very interesting point. If we were an employee we would get the National Minimum Wage or more likely better than. Our hours are also regulated and we are subject to this and that regulation.

      But as the Boss we get no protection at all. I am certain that most of us know businesses where the boss is the first into work in the morning. An hour or so after he starts he welcomes his staff to work. He works alongside them all day and at the end of the day he waves them off home and then continues to work on. His hourly rate is probably less than his employees. But it is his business and he will do whatever is necessary.

    • Bjorn
      2 years ago

      So if you don’t sleep that caps your earnings at £168 per week. That would be tax free.

      You’d also be eligible for a good chunk of working tax credits (and probably housing benefit too)!

      People need money to live. Staff are no good to anyone if they can’t survive on their wages. If your business is failing it’s not because minimum wage got raised, it’s because you’re not selling enough.

    • jimbo
      2 years ago

      I bet there are a fair number of eBay “professional sellers” making less than £8.00 an hour. Truth is many are self employed piece workers. That’s what keeps the prices low.

  • Neil
    2 years ago

    An average of 3.52% for the next six years… Bring on Auto-Enrolment and there’s another 1% to 3% on top.

    Well thought out Mr Miliband. More job cuts here we come!

    • radroach
      2 years ago

      Higher wages gives consumers more to spend, so potentially boosting economic activity throughout. Though wage costs rise, so also might sales.

    • 2 years ago

      And so might pigs….lookout here comes another one…bad luck…It’ll wash off…eventually.

  • Danny
    2 years ago

    The Minimum Wage increase is a must…
    Average wages have not fallen at this level since the Victorian era.

    Higher pay creates a more motivated workforce and increases productivity.

  • Chris
    2 years ago

    £8 an hour, exactly one of the MANY reasons I won’t be voting labour and ‘RED Ed’ in power LOL no thanks.

    • jimbo
      2 years ago

      Chris you haven’t actually said anything. Do you not agree with a minimum wage? Is it too low?

  • James
    2 years ago

    £8 minimum wage is a ridiculous level. It will just deter me from hiring new staff at that level.

    This is a typical ploy by socialist idiots on the left who think that raising the minimum wage (above market rate) is the way to boost the economy. In fact anything that comes from a socialists mouth re boosting the economy is laughable. These people only know how to take from some to give to others.

    The consumption boost argument is also rubbish (because it ignores all the issues it causes) but that won’t stop labour pandering to the idiots / less successful / uneducated / lazy people who are the vote base for the party. Feed them lies and like the uneducated illiterate people they are they will vote for the party that promises them less work and more pay.

    What people also forget is that once the base moves up to £8 then those earning £8 will now ask for say £10, those on £10 will then ask for more etc. etc. This just adds onto costs.

    • Chris
      2 years ago

      This mirrors my exact thoughts, I replied to my original post but errors came up about posting to tamebay.

    • 2 years ago

      I seem to remember that the USA has a minimum wage system although I also seem to remember that it is set at a much lower level than the UK one. Also it is not used as a club to drive small employers to the wall as it is in the UK.

      Can I ask any of Tamebay’s USA correspondents to give us a run down on Minimum Wage USA style.

    • Danny
      2 years ago

      £8 an hour is still below the level of wage defined by the Living Wage Commission as ‘liveable’ once the average cost of living is acoounted for.

      Look, I run a small business and yes, in the beginning I worked for a pittance – But thanks to the initial hard work, the future prosperity is mine to keep…

      Raising the minimum wage is the right thing to do but not the only thing – The modern British economy needs to look at much more, such as; employee ownership, representation of staff on company boards and also the Pay Ratio of companies –
      Executive pay has risen exponentially whilst average pay has fallen.

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