This Autumn the news about the National Minimum Wage is not just about the regular annual uprating. Last week at the Labour Party Conference it was an important focus in Ed Miliband’s key note address. It also featured in speeches by the shadow chancellor Ed Balls and Rachel Reeves, shadow chief secretary to the Treasury. This week we have been hearing more about the Conservatives’ response. But to get the new limits out of the way first. The main rate increases today by 12p to £6.31 per hour. There are also modest rises to the development, young workers and apprentices rates (up to £5.03, £3.72 and £2.68 respectively). In addition to increasing the rates, the Government is also bringing in what it hopes will be a more effective naming and shaming regime. While there appears to be broad consensus on the need for more effective enforcement, using the NMW as a lever to tackle falling wages is more controversial. As the modest increases this year demonstrate, it is falling in real terms – ie after adjusting for inflation - in a way that reflects a similar fall in the value of average earnings over the past three years.
Vince Cable used his speech at the Lib-Dem Conference two weeks ago to announce plans to “boost fairness for workers”. As well as promising a consultation on regulating zero-hours contracts he also announced that the Government would be asking the Low Pay Commission “to consider what labour market conditions will need to be in place in the medium term to allow further increases in wages without an adverse impact on jobs”.
The following week at their conference, the Labour Party went one step further, committing at least to restoring the value of the NMW in real terms. Ed Miliband also floated the idea of introducing a sector-based approach, so that it could be increased more quickly in those sectors which could afford it. So far the Conservatives appear not to have responded directly to this idea at their conference. However it is clear from George Osbourne’s speech yesterday that he favours a different approach. He claimed that raising the tax threshold to £10,000 (as already planned in April 2014) will be equivalent to a 10% rise in the value of the NMW to workers. Another conservative MP, Robert Halfon, writing yesterday for ConservativeHome, called for the tax threshold to be raised even further, to £12,875, which he said would mean people working 40 hours a week at NMW rates would pay no tax (though I make the sum £13,125 if the today’s rise is taken into account).
These are just opening shots in a debate that is likely to run up to the next general election. We will need to wait and see what emerges from the Low Pay Commission following the review announced by Vince Cable, and how the main parties’ policies on low pay develop in the coming months.