The National Minimum Wage (NMW) will rise above £5 for the first time from October 2005, trade and industry secretary Patricia Hewitt confirmed today.
The adult rate of the NMW will increase from £4.85 to £5.05 in October 2005 – in line with average earnings – with a further 6% increase to £5.35 in October 2006.
The rise is in line with the Low Pay Commission’s recommendation. In 2006, the increase will take the NMW to almost 50% above its 1999 introduction rate.
The latest increases will extend coverage of the NMW to 1.3 million workers in October 2005, and 1.4 million workers in October 2006.
Hewitt said: “The great news is that well over a million workers will receive a guaranteed pay rise by this October, rising to almost a million-and-a-half people by October 2006.
“The minimum wage has made a real difference to the lives of thousands of low paid workers – particularly women, who make up some 70% of those benefitting. Year-on-year increases protect some of society’s most vulnerable people from exploitative rates of pay.
“Despite predictions to the contrary, the national minimum wage has not affected the job prospects of low-paid workers in the UK. Unemployment is at record low, and a record 28 million people are now in work.”
EEF, the manufacturers organisation, said the government has missed an opportunity to provide employers with greater certainty about the impact of the NMW on their businesses by failing to introduce a pre-determined formula for calculating future increases.
David Yeandle, deputy director of employment policy at the EEF, said: “While most manufacturers will be able to live with this increase, they continue to believe that a pre-determined formula should be used to set further increases.
“The government has missed an opportunity to provide them with greater certainty about the future impact on their businesses which would enable them to plan accordingly.”
The CBI said that this year’s more modest increase in the minimum wage was a “sensible reaction to business concerns”.
On the 2006 increase of 5.9%, CBI director general Sir Digby Jones, said: “The CBI is pleased the minimum wage will not increase next year by as much as it did in 2003 and 2004, but a rise to £5.35 will still be difficult for some companies to accommodate.”
He said the impact of all increases must be monitored closely by the government and the Low Pay Commission.
“Business does not want the minimum wage to wither on the vine, but it must be set at an affordable level, otherwise it could threaten to do more harm than good,” Jones said. “Those that call for a rise to £6 in 2006 are placing the jobs of our most vulnerable workers on the line.”