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Is the Government gearing up for action on the minimum wage?

By Peter Hoskin
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Here’s a story that could turn out to be significant. The Government has told the body that sets the minimum wage, the Low Pay Commission, to formally take account of its wider effect before signing off on increases. Indeed, the Commission’s remit will now contain a clause on “the understood and accepted goal to raise the wages of the lowest paid without damaging employment or the economy.”

As the Daily Telegraph’s report suggests, this heightens the possibility of a freeze or even a cut in the minimum wage. You know the argument by now: that an ever-rising minimum wage might dissuade employers from taking on new staff, particularly when it comes to young people. And so a lower minimum wage could help raise the employment numbers.

The Government has displayed some sympathy to this argument, even before today. Indeed, it defended a freeze in the youth rate of the minimum wage last year – the first freeze in any of the rates since 2005 – by citing the “balance between pay and jobs”. And then there was the prospectus set out by Matt Hancock last week, which included a provision for “strengthening” the minimum wage by ensuring that it incentivises work ahead of benefits.

The question now is whether the Coalition will take this thinking further. As I’ve reported before, ideas such as regionalising the minimum wage, or suspending it for young people, have certainly been floated around Downing Street since 2010. And they were considered by the Brown Government before then, too. Today’s formal adjustment of the Low Pay Commission’s remit could be more than just words.


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