The Low Pay Commission, which advises the Government on the NMW, is currently considering the rates for the period from October 2011 to September 2012. The TUC will tell the commission that this 3.5% rise in the adult NMW is both sensible and affordable.
The TUC claims the 21p increase would benefit nearly one million workers and help address the gender pay gap, as two in three of those benefitting would be female. Women workers, employees from ethnic minority backgrounds, those with disabilities, and younger and older workers are among the groups that will benefit the most.
It says an increase in the NMW is required to ensure that the earnings of low-paid workers do not fall behind the rest of the country. Although predictions suggest that inflation will fall next year, RPI is still likely to average 3.5% throughout 2011; so too small a rise in the NMW would leave working families in poverty. And increasing the NMW encourages people into work and boosts consumer spending, as low-paid workers tend to spend nearly all of their NMW increases in their local economy.
Finally the unions claim that failing to set the NMW at the highest sustainable rate by making employers pay as much as they can afford would have an adverse impact on public finances – which are already under pressure – to the tune of approximately £360 million because of the need for greater subsidy of low pay via tax credits and in-work benefits. The TUC estimates, if the NMW was increased by 3.5% in October 2011, workers in receipt of the NMW would be paying £235 million more in income tax and national insurance. The increase would also save the Government £125 million in tax credits and in-work benefits, which is important at a time when public finances are being cut, says the TUC.
TUC general secretary Brendan Barber said: "The minimum wage has already helped hundreds of thousands of families without any negative side effects.
"Its success has shown that the UK economy can easily cope with sensible labour market regulation that makes life at work fairer. Indeed, the UK's economic problems seem to have been caused by too little regulation rather than too much.
"Modest economic growth has now returned and is set to continue, although the road to economic recovery is likely to be bumpy. A rise in the minimum wage is needed to ensure that working families are not left in poverty, and most business organisations now agree that an increase of some sort would be affordable. It would certainly not be fair to make the low paid suffer real cuts in their pay when there is no economic necessity to do so, and while City bankers are still getting huge bonuses."