By Max Clarke
Yesterday’s decision to raise the national minimum wage by 15p, a rise of 2.53%, has been met with contrasting opinion.
The trades union congress (TUC) welcomed it as a boost for the poorest individuals and the local economy of their communities, while Unite union’s Len McCluskey blasted the ‘paltry increase’ as a Tory attack on the nation’s young.
From an economic point of view, David Frost, British Chamberrs of Commerce director criticised the move, deeming it the ‘wrong change at the wrong time’.
Said Frost: “With over a million unemployed, the priority has to be getting people back into the job market. Youth unemployment is at a record high and we can’t afford to price young people out of work. It’s clear from speaking to businesses that a significant number are having to freeze wages in 2011. These changes will be a barrier to job creation, and ultimately economic recovery.”
The TUC's Brenden Barber voiced his support for the increase, saying: "These rises are relatively modest, but they will provide a welcome pay boost for around 840,000 low-paid workers in the UK."
Neil Bentley, Deputy Director General at leading voice for British Business, the CBI (confederation of British industry) supported the move, recognising that a greater increase would damage the recovery and make firms less likely to hire new staff whilst acknowledging the need to stimulate local economies and improve consumer confidence among the lowest earners.
Said he: “This moderate increase strikes the right balance during a period of economic uncertainty. It means that workers on the minimum wage will not fall behind the rest of the workforce in terms of pay rises. A larger rise would have hit businesses hard and could have put many lower paid jobs on the line.”
On the increase to the youth rates of the minimum wage, Dr Bentley added:
“The decision to adopt a more cautious approach to the youth rates reflects the record levels of young people who are unemployed. We must not put barriers in the way of school leavers getting into work.”
The 2.53% increase is approximately half of the current consumer price index of inflation. Although wages are up they have failed to rise in line with high inflation, so in reality the purchasing power of minimum wage earners has dropped.
"This small increase in the minimum wage is completely outstripped by the current rate of inflation. The rise will do little to help the lowest paid in our society keep up with the rising cost of food and fuel,” said McCluskey.