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March 7, 2007    

New minimum wage decision pleases business, “disappoints” unions

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by Elaine Frei

New minimum wage decision pleases business, disappoints unions

Minimum wages in the UK will go up by just 3.2 percent in October, to £5.52 per hour. It was the first time since 2002 that the rise in the minimum wage was less than the rise in average earnings. In addition, the minimum wage for 18 to 21 year old workers will rise by 15p to £4.60 per hour and that for 16 and 17 year olds will go up to £3.40 per hour, a raise of 10p. A recommendation from the Low Pay commission that 21-year-olds be brought within adult minimum wages was rejected. However, the Trade and Industry secretary will look at tougher penalties for employers who pay their workers less than the minimum wage.

The chairman of the Low Pay Commission, Paul Myners, said that it had decided to ask for less of an increase in minimum pay rates this year out of a concern that a larger hike would mean that businesses would hire fewer workers. Some business leaders had warned that would be the case if the minimum wage was raised by percentages similar to those in recent years. Mr. Myners pointed out that the adult minimum wage has gone up 27 percent since 2002, while average earnings have only risen by 17 percent in the same period.

Business leaders expressed approval for the announced wage increases, but unions said that they were “disappointed” by the decision. The unions did say, however, that they are pleased by proposals to treat employers who pay their workers less than the minimum more harshly.

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