Britain lifts minimum wage for more than a million people

Saturday, April 02, 2016

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LONDON, United Kingdom (AFP) — Britain’s Conservative government raised the minimum wage that is pocketed by more than a million people Friday, trumpeting it as a transformative step for the economy but winning few plaudits from employers or austerity-weary unions.


Affecting between 1.3 million and 1.8 million people according to varying estimates, the minimum gross salary for all British workers aged over 25 climbed by 7.5 per cent to £7.20 (9.10 euros, US$10.36 or J$1260.80) an hour as of April 1, a pay boost that far outstrips inflation.


The pay rise, first announced by Prime Minister David Cameron’s government last July, represents a complete about-turn for the Conservative party, which opposed the introduction of the minimum wage in 1999 when then prime minister Tony Blair’s Labour party was in power.


"The National Living Wage will play a central role in moving Britain to a higher wage, lower tax, lower welfare economy," British finance minister George Osborne said as the pay boost came into effect.


"It will also mark the end of the gender pay gap for some of our lowest-paid and hardest-working people."


The opposition Labour party criticised the policy as a "cruel sleight of hand", however, pointing to the government’s enactment of sharp cutbacks in welfare spending.




Stagnant wage growth


Other nations, too, have raised minimum wages in recent years to address stagnant wage growth and inequality between rich and poor.


France lifted the minimum wage at the start of this year to almost 9.70 euros an hour.


Germany launched a minimum wage one year earlier at 8.50 euros, where it remains.


And in the United States, California plans to raise the pre-tax minimum wage to $15 per hour in a move which might be followed by other US states.


In Britain, where unemployment is relatively low at around 5.0 per cent, large wage inequalities persist and London School of Economics professor Alan Manning described the new living wage as "more symbolic" than anything else.


"It’s significant but I don’t think one should exaggerate its significance," he told
AFP.


When Britain’s Conservatives opposed the introduction of a minimum wage 17 years ago, they had feared the minimum wage would destroy jobs, Manning said.


"The minimum wage is often popular with voters who are actually quite conservative on many issues, because many of them think that if people work hard and can’t earn enough to support themselves and their families, there is something wrong with... society."


However, the hourly rate of £7.20 is significantly less than the minimum pay recommended by the lobby group Living Wage Foundation, which says workers aged 18 and over should earn at least £8.25 a hour, rising to £9.40 in London where housing rents tend to be high.


"Today’s new legal minimum is an important step forward in tackling low pay in the UK," said Katherine Chapman, director of the Living Wage Foundation.


"We welcome the news that millions of workers will get a pay rise. However, the job is not done when it comes to tackling low pay," she said.


About six million people earn less than the minimum level recommended by the foundation, with women, young people and part-time workers hardest hit, Chapman said.




Key issue for voters


Workers’ representatives stressed that government cuts to welfare benefits hurt people on the bottom rung of the pay ladder.


"Many people on the lowest pay are also reliant on in-work benefits, such as tax credits or housing benefits, to ensure a sufficient minimum household income," said Tim Nichols, senior media officer at the Trades Union Congress, Britain’s biggest union organisation.


Employers gave a lukewarm response, too.


"Companies are committed to raising prosperity and living standards, but for wage increases to be sustainable they must go hand-in-hand with productivity growth," said Josh Hardie, deputy director-general for policy and campaigns at the business lobby group the Confederation of British Industry.


 


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