National Minimum Wage

Chapter 5: Setting the Rate
5.75 We have examined a number of ways of indicating what rate recommendations might be
expected in the second year. A substantial majority of consultees, from across the spectrum
of employers and workers, opposed these ideas. We agree with them that the disadvantage
of constraining the Commission to positions which by definition cannot be based on timely
evidence outweighs any benefit in increased clarity, particularly in the present uncertain
business environment. We have also considered whether the implementation date for our
recommendations could be moved in order to give increased notice of upratings, but again
this would mean the data informing our recommendations would be less timely than at
present.
5.76 On a separate point, stakeholders did indicate strong support for the publication of the
Commission’s report and the Government’s response as soon as the Government is able
to publish them. Many stakeholders suggested there should be a deadline by which the
Government should publish our report and respond to our recommendations. The CBI
thought the rates should be confirmed before the start of the new financial year, while others
thought that the time of the Budget should be the latest the Government should respond.
The timetable for publicising our report and responding to our recommendations is a matter
for the Government.
5.77 Our remit also asked us to consider whether any recommendations could be introduced
more promptly. During our consultation stakeholders stressed that there should be no
reduction in the current time period between the rates being recommended and
implemented. We also believe that the regulatory process needed to enact the upratings
in law prevents this from being possible. Our non-rate recommendations are not generally
time-bound.
Recommended Rates
5.78 In arriving at our recommendations to Government we examined the evidence carefully and
at length. We took a number of factors into account, including those which our remit
specifically directed us to consider.
5.79 We recognised a number of arguments for a substantial increase in the adult rate. Although
the economy had performed worse than expected in 2011 some forecasters were predicting
stronger growth from late 2012, the time at which an uprating would come into effect. The
sustained period of high inflation, including significant price rises for necessities such as food
and energy, had materially reduced the real incomes of the lowest paid. Although inflation
was forecast to fall over the year, RPI was still forecast to be rising at around 3 per cent in
the fourth quarter of 2012. We also noted that employment in low-paying sectors had
increased in the year to September 2011 while total jobs in the economy had fallen.
5.80 We could on the other hand also see arguments for a freeze or small increase. The economy
had not recovered, and could remain weak for some time to come. The bite of the minimum
wage was higher than ever, and had continued to rise in low-paying sectors and among small
firms. The relative resilience of the labour market was probably due to falling real wages.
Productivity was weak and an increase in the minimum wage which pushed up real wages
147