By Daniel Hunter
A bold rise in the national minimum wage (NMW) is needed next year to ease the living standards squeeze on the lowest paid workers, the TUC has warned in its submission to the Low Pay Commission (LPC).
The warning comes as the TUC has calculated that the annual salary of a full-time worker on the minimum wage would be £770 higher this year, had the NMW kept pace with price rises since 2007.
The TUC, which will present evidence to the LPC later this morning on next year's minimum wage rates, says that the government must increase the minimum wage by more than the rate of inflation or average earnings growth to avoid putting even more financial strain on hard-working low-wage families.
Despite inflation currently running at 2.7 per cent, the government last month announced a minimum wage increase of just 1.9 per cent per cent for adults and 1 per cent for younger people. These small rises have meant a real-terms pay cut for around a million minimum wage workers, says the TUC.
The TUC will argue that with higher household spending power so vital towards building a sustainable economic recovery, too low an increase in the minimum wage would limit demand and put more strain on the public finances. When employers pay decent wages, government spending on in-work benefits and tax credits falls, whilst revenues are boosted as income tax and national insurance receipts rise.
The LPC expects that the 1.9 per cent increase in the minimum wage last month will generate an extra £183 million for the Treasury.
The TUC's view is that as the long overdue economic recovery strengthens in future years, increases in the minimum wage should become more generous. A bigger increase in the minimum wage in 2014 is also needed to restore what has been 'lost' in recent years.
The TUC has strong concerns about the application and enforcement of the minimum wage, including the misuse of interns, the continued abuse of workers providing social care and the rapid growth in the use of zero hours contracts as a means to evade paying the minimum wage. The TUC wants the government to address these issues urgently.
TUC General Secretary Frances O'Grady said: "The recent minimum wage increase in October was actually a real-terms pay cut for hundreds of thousands of low-paid workers.
"With hard-working families all around the UK facing cuts to their benefits and tax credits, the minimum wage is becoming even more of a vital lifeline, and at the very least must keep pace with inflation and earnings.
"As the economic recovery strengthens there will be more capacity to increase minimum wage rates in 2014, and the government has a real chance to be more ambitious about raising the rates. Thousands of employers can easily afford to pay more than the legal minimum too, and should pay a living wage.
"It is also time to look at why certain sectors get stuck with so many low paid jobs and to try to help those industries to improve hourly pay rates.
"In addition, the TUC is also concerned about the rapid growth of zero hours contracts which effectively get employers around paying the minimum wage, and the continued misuse of interns and social care workers. The government must tackle this abuse now - there must be no hiding place for cheating employers."
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