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The rises to minimum wages announced today are still below the rate of inflation.
This means that someone earning the new rate will still be making less money in real terms because the prices of goods and services are rising more quickly.
The minimum wage increases are as follows:
- Adult minimum wage - 1.9% increase
- 18-20-year-old minimum wage - 1% increase
- 16-17-year-old minimum wage - 1.1% increase
- Apprentice minimum wage - 1.1% increase
And the current rate of inflation is:
- Consumer Prices Index (CPI) - 2.8% per year
- Retail Prices Index (RPI) - 3.2% per year
The Business Secretary, Vince Cable, said he was in favour of companies paying more than the minimum wage if they could afford it. But if wages are too high, it could lead to "significant loss of employment".
The new rates for minimum wage compare to the so-called Living Wage of £7.45 (outside London) and £8.55 in the capital. The Living Wage is worked out according to the basic cost of living in the UK, but employers only pay it on a voluntary basis.
Unite General Secretary Len McCluskey says the 12p rise in the minimum wage for adults is not enough, and wants it to go up by £1-an-hour.
- Australia: 15.96 Australian dollars (£10.84)
- France: €9.43 (£8.04)
- UK: £6.31 (new level)
- Tokyo: 750 yen* (£5)
- US: $7.25 (£4.73)
- Beijing: 9 yuan* (£0.94)
- *Average figure - wage varies by region
Tim Thomas of the manufacturers' organisation the EEF said the announcement struck a balance between the need for pay progression and the limitations employers face accommodating pay rises.
Tim Thomas said:
"The modest increase in the apprenticeship rate is unlikely to negatively affect apprenticeship recruitment and of much greater importance is the raising of apprenticeships standards, better information to students and ensuring that apprenticeships are truly employer-led and employer-driven."
Ministers say they have rejected a recommendation from the Low Pay Commission that the rate for apprentices should be frozen. Business Secretary Vince Cable said:
The Government says the national minimum wage will increase by 12p an hour to £6.31 for adults and by 5p to £5.03 for 18-to-20-year-olds.