The national minimum wage to rise to £6.50
The national minimum wage is being raised to £6.50 an hour from October this year.
The increase follows a recommendation by the Low Pay Commission that the minimum wage should be increased by 3%.
Business secretary Vince Cable said: “The recommendations I have accepted today mean that low-paid workers will enjoy the biggest cash increase in their take-home pay since 2008.”
The change represents the first time in six years that the minimum wage has increased above inflation, which currently stands at 1.9%. The rise of 19p per hour will benefit one million workers across the UK.
The rates for those aged 18 to 20 and 16 to 17 years old will both increase by 2% to £5.13 per hour and £3.79 per hour respectively.
Furthermore, apprentices will receive a extra 5p, raising their wages to £2.73 per hour.
Announcing the changes today, Mr Cable suggested that all businesses should consider sharing the benefits of increasing prosperity.
He said: “I urge businesses to consider how all their staff – not just those on the minimum wage – can enjoy the benefits of recovery.”
The minimum wage remains controversial with even its founder suggesting it needs major reform.
Professor Sir George Bain, founding chair of the Low Pay Commission said: “The minimum wage had become a blunt instrument and that many employers could now afford to pay their employees much more. If you set it at the living wage, which is about £7.65 an hour, you would cause massive unemployment in areas like retail and social care. But there’s only about five sectors where this is true. There’s a whole range of sectors where you could easily afford to pay more than the minimum wage.”
Despite the increase, the national minimum wage remains well below the definition of low pay set by the Organisation for Economic Co-operation and Development (OECD).
The OECD defines low pay as wages below two-third of the median full-time hourly wage, which amounts to £7.71 an hour.
Currently five million full-time workers in the UK are earning less than this value.
The minimum wage continues to be significantly below the living wage, which is £8.80 an hour in London and £7.65 in the rest of the UK.
The current rise could pave the way for the national minimum wage reaching £7 an hour by October 2015, as suggested by the Chancellor earlier this year.