The latest review of the minimum wage has attracted more attention than usual, perhaps because we are not that far away from the next general election. First, the Department for Business, Innovation and Skills (BIS) announced that the maximum penalty for failure to pay minimum wage is to increase to 100% of unpaid wages, up to £20,000 (from £5,000) from the end of this month (The National Minimum Wage (Variation of Financial Penalty) Regulations 2014).
Shortly after that announcement, the Chancellor mentioned in a BBC interview that the standard rate of minimum wage may be increased from £6.31 to £7.00 for workers aged 21 and over on the basis that “the economy can now afford it”. The current “living wage” outside London is £7.65 so the proposal still falls short of what many consider should be the default rate. According to BIS as reported in Hansard, the Department “supports the living wage and encourages businesses to pay it when it is affordable and not at the expense of jobs”.
With inflation at 1.9% recent increases have broadly retained parity with the cost of living. However, this is on the back of much higher inflation when the real value had fallen back.
Notwithstanding the Chancellor’s bold statement, Vince Cable announced to a legislative committee on Wednesday that the Low Pay Commission has recommended an increase of 3%, i.e. an increase to £6.50 per hour. Consequently, notwithstanding the fanfare and bold aspirations the very likely increase is broadly in line with previous years.
Finally, the effect of plans announced last summer to “name and shame” employers found who are caught paying under the minimum wage should start to become apparent soon. Whether the process will name all the guilty, and how the process is to be managed is not yet clear.
It remains to be seen whether all this politicking will translate to any real change.