Inflation means the minimum wage is no longer viable

Published:  31 Jul at 9 AM Because wages have not managed to keep pace with inflation over the past half-decade, a new report claims that the minimum wage is no longer relevant. Low Pay Commission chairman, Professor Sir George Bain, said today’s problems are not being adequately addressed so a new approach is needed.

The Resolution Foundation has released a study that reveals the minimum wage is no longer adequate for a basic living standard. The paper’s author, James Plunkett, said although exploitatively low wages are a thing of the past around 20 per cent of workers are still trying to survive on less than £7.49 per hour. He added that £13,600 per year was not enough to afford a basic living standard.

The report calls on the government to address low wage levels rather than pump money into benefits. Co-author Alex Hurrel said conservative projections indicate that by 2017/18 the minimum wage will be £7.20 per hour, or the equivalent of a drop to £6.12 per hour today. This is less than the minimum wage in 2004/5.

The paper points out that while the economy continues to struggle, increasing benefits is far less useful than concentrating on increasing wages, adding that facing the challenge of doing this cannot wait until the economy improves.

Figures published in June by the Office for National Statistics suggest that there was an intensification of the squeeze on household budgets at the beginning of this year. There was a 1.7 per cent slump in disposable incomes during the first quarter of 2013, according to the ONS.