Minimum wage declines to below 2004 levels

Despite the national minimum wage being increased by 11 pence in March, it is still worth less today than it was eight years ago, reports Dick Skellington.

The national minimum wage will rise in October to £6.19 per hour for workers over 21, though it will remain frozen for under- 21s because Ministers contend that to spread the 11-pence-an-hour increase across the board might impede the creation of jobs. If you are working on the minimum wage such margins will be of little comfort in deficit Britain because the minimum wage has failed to keep up with inflation.

According to the economic think tank the Resolution Foundation, not only is the minimum wage worth less than it was eight years ago, but it has fallen by six per cent from its peak value in 2009. The increase later this year will be the third increase in a row below the rate of inflation. Following sharp minimum wage increases in the 2000s, the value of the minimum wage has flat-lined at just over 50 per cent of median (middle) earnings.

The Resolution Foundation report, Minimum wage: Maximum Impact, by Professor Alan Manning, Head of Economics at the London School of Economics, acknowledges that recent caution on increases is justified but finds the impact of the national minimum wage has now stalled. Professor Manning maintains that the minimum wage has reduced wage inequality since it was introduced, without costing the jobs Government economists feared it would. He urges Government to establish a more radical approach.

Among Professor Manning's recommendations are that there should be a higher rate of minimum wage for workers aged over 25 and a top-up for workers in London and the South East where living costs are greater. He also invites the Low Pay Commission – the independent agency that recommends the level of wage to Government – to calculate the minimum wage that large employers in various sectors of the economy could afford, so that they pay more than the legal minimum. Around 10 per cent of 22-year-olds are paid the minimum wage compared to around three per cent by the age of 30. Internationally, the UK rate sits in the middle of the pack lagging behind France and New Zealand where the wage is closer to 60 per cent of median earnings.
Dick Skellington 11 June 2012

The views expressed in this post, as in all posts on Society Matters, are the views of the author, not The Open University.

Cartoon by Catherine Pain

Your rating: None Average: 5 (3 votes)

TweetDespite the national minimum wage being increased by 11 pence in March, it is still worth less today than it was eight years ago, reports Dick Skellington. The national minimum wage will rise in October to £6.19 per hour for workers over 21, though it will remain frozen for under- 21s because Ministers contend that to spread the 11-pence-an-hour increase across the board might ...

Yvonne Cook's blog
Login or register to post comments

About Society Matters

Provocative, relevant, current: for the last decade Society Matters magazine has been informing, engaging and annoying social sciences students in equal measure. Now, its move online has given us the chance to bring its lively mix of analysis and opinion to a wider audience.

Society Matters online started in October 2010 and has, so far, covered a wide range of issues and topics ranging from inequality and the big society to arms sales and foreign policy. All can be seen by scrolling down from the top of the Society Matters front page.

We have also illustrated many of these posts with the work of our two illustrators (see below). Serious analyses have been interspersed with posts on a less weighty issues which show both human folly and innovation.

Society Matters continues to be edited by its original creator, Dick Skellington. Dick, pictured above, was previously a programme manager in the social sciences faculty, walks the talk through an active involvement in the affairs of his home town of Stony Stratford, Bucks, and finds light relief through writing poetry and the occasional stage appearance in local productions.

Since many years at the coalface of journalism have taught us all that sometimes a picture really is worth a thousand words Dick is aided and abetted by resident illustrators, Gary Edwards and Catherine Pain – both former OU students.

Catherine has drawn and painted all her life, and when she is not pillorying public figures for Society Matters paints animal portraits, works in stained glass and produces alphabet teaching posters for children. Her work is in several galleries in and around her current home in Cambridgeshire and her publications include an illustrated cookbook sold on behalf of the National Trust, a colouring book for small children, Alphabet for Colouring, and The Lost Children, a story for older children. Her website is at catherinepain.co.uk

Gary has written two best-selling books about his travels all over the world watching Leeds United FC, Paint it White and Leeds United - The Second Coat. His third title No Glossing Over will be published by Mainstream in September 2011. He has not missed a Leeds game anywhere in the world since February 1968 and married his wife Lesley at Elland Road.

Specialising in wall murals, Gary also holds diplomas from the London Art College, The Morris College of Journalism, has a Diploma in Freelance Cartooning and Illustration and is a contributing cartoonist for Speakeasy, an English-speaking magazine in Paris. During the 1970's and 1980's he collected hearses and is a long time member of the Official Flat Earth Society as well as the Clay Pigeon Preservation Society.

Please note: The opinions expressed in Society Matters posts are those of the individual authors, and do not represent the views of The Open University.