Summary of the editorial from IDS Pay Report 987, October 2007

Low Pay Commission maintains caution on minimum wage rises

The National Minimum Wage has increased from £5.35 to £5.52 from 1 October 2007, representing a 3.2 per cent increase, the lowest rise since 2002. The new October 2007 increase was slightly below the expected increase in average earnings, which is the first time since 2002 that the Low Pay Commission’s (LPC) recommendation has not kept pace with average earnings. Since the first minimum wage rate was introduced in April 1999, the NMW has gone up by 53 per cent. During the same period, the LPC predicted in their March 2007 recommendation report that average wages would increase by 41 per cent. When the LPC was preparing its 2005 report (with recommendations for October 2005 and October 2006 NMW rates), forecasters predicted that the proposals for the NMW increase would be slightly higher than average earnings. In fact average earnings grew by less than expected – 8 per cent over the two years, compared with an anticipated 9.2 per cent. This meant the ‘bite’ of the NMW, which is the ratio of the NMW to the median hourly wage, had increased faster than expected. With this is mind, the LPC has decided to make decisions for NMW increases using the most up-to-date information available and this is why the LPC only made recommendations for minimum wage rates for October 2007 in its report. The Commission will make its recommendations for the October 2008 NMW in early 2008.

... the full editorial can be read in IDS Pay Report 987