Labour’s minimum wage announcement is much weaker than it seems

Ed Miliband goes into this week’s Labour Party Conference with another ‘big’ announcement. He is pledging to raise the minimum wage to £8 an hour. The minimum wage will be £6.50 an hour from October 1st this year, so on the face of it, that looks like a big rise. However, the £8 figure is what it will be in 2020. Labour want to raise it in stages in consultation with business. £8 an hour would be 23% rise on the current rate, but that doesn’t take inflation into account. To keep the minimum wage fixed in real terms, it must rise by inflation each year. So if Labour were to simply fix the minimum wage in real terms up to 2020, what would it’s value be?

If we assume inflation of 2% a year, by 2020, the minimum wage would be £7.32 an hour. With 3% it would be £7.76. So all Labour are actually promising is to raise the minimum wage in real terms by between 3% and 9%, which while better than nothing, will not give the low paid that much of an increase in spending power at all.

Labour also want to link the minimum wage to median wages, which seems inappropriate to me. They should be linked to the cost of living, with the wage set at a level that allows workers an acceptable standard of living.

Over the next 9 months we’ll see Labour desperately trying to differentiate themselves from the Tories. If you look beyond the headlines though, you’ll see that the material differences between the two parties is infinitesimal.

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8 thoughts on “Labour’s minimum wage announcement is much weaker than it seems

  1. I would not trust Labour ever again. They have shown just how blue they really are. We have no-one to actually stand for the lower paid and working class people.
    I think Labour will find that they have lost many, many votes from Scotland and they are going to feel it. I don’t think they’ll get as many MP’s as well.
    I am really looking forward to a Boris/Farage coalition (NOT!).
    As for the minimum wage rise, why don’t they just come out with it and say that the rise is not going to do anyone any good in the immediate future!

    1. A rise from 54 per cent of the average wage now to 60 per cent after 2020 will make a very real difference to people’s lives! Don’t forget that the minimum wage was only 44 per cent of the average when it was introduced in 1999.

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