Dundee Liberal Democrat welcomes 4% Rise in Minimum Wage

6.09.00pm UTC (GMT +0000) Fri 30th Sep 2005

4% increase in Minimum Wage Welcomed

More than 1m of some of the country's most disadvantaged workers will receive a pay rise tomorrow when the minimum wage rate increases by just over 4 per cent to £5.05 an hour. Despite protests from business that higher labour costs would cause massive job losses, the introduction of a national minimum wage in 1999, then £3.60 an hour, is generally regarded as having been a success.

A report by the Low Pay Commission concluded that in spite of minimum wage rises ahead of inflation in 2003 and 2004, "the UK economy has grown faster than its long-run trend. The labour market continues to be remarkably robust" and "wage and price inflation pressures continue to be relatively subdued".

At the same time disadvantaged groups such as women, disabled workers and some ethnic minority groups had seen their incomes "significantly improved," the commission said.

But business doubts remain. The British Chambers of Commerce is deeply concerned by the recent trend to award minimum wage increases well above general wage inflation.

Although this year's increase of 4.1 per cent is broadly in line with the growth in average earnings, it follows increases of 15.5 per cent over the previous two years when general wage inflation was 8 per cent. Next year the commission has proposed to increase the minimum wage by a further a 5.9 per cent to £5.35 an hour "subject to the prevailing economic conditions".

Welcoming the rise, Cllr Fraser Macpherson, Dundee City Council Liberal Democrat Group Leader, said: "The extra 20 pence an hour this year, following above average rises for the last two years is making a real difference to many low paid families and is helping to raise many of them out of poverty. However, the continued exclusion of younger workers from the full minimum wage, against the advice of the Low Pay Commission has no justification. If it is the case that the minimum wage does not deter employers from hiring labour and indeed attracts workers into the labour force, then the same logic must apply to younger workers. It is wrong and unnecessary to do otherwise."