Wednesday, 17 February 2010

Inflation, the minimum wage and the TUC

Inflation figures out yesterday showed inflation had risen to 3.5% on the CPI measure and 3.7% on the RPI measure.

As LEAP research published in September 2009 showed, inflation tends to hit the poorest hardest.

All parties are threatening public sector pay freezes, and a freeze in the National Minimum Wage has been called for by the Association of Convenience Stores, British Chambers of Commerce, and by CIPD.

Let's be clear a freeze means a cut. In real terms, a freeze would be a 3.5% cut.

Thankfully, at the 2009 TUC, USDAW (not the most radical of trade unions) passed a motion calling on the Low Pay Commission (LPC) - of which the TUC is a part - to "significantly increase the National Minimum Wage". The motion also called for the full NMW to be payable from 18 (currently those aged 18-21 are paid a lower rate).

So when the TUC made its submission to the LPC what sort of significant increase did it call for? 20p. Yes the TUC - "the voice of Britain at work" - with clear Congress policy for a significant increase instead calls for the minimum wage to be increased by just 20p from £5.80 per hour to £6.00. The CBI, BCC and FSB must be laughing their arses off. We know they will call for a minimal increase and the LPC will settle somewhere in the middle.

20p by the way is 3.4% - around or slightly lower than many experts believe inflation will average this year. So the "significant increase" is a real terms freeze. And what of applying the NMW to all from 18? No, the TUC submission advocates all three age discriminating bands remain and all increase by 3.4% - so young workers won't even catch up.

Last Friday even New Labour was floating "a pledge to raise the minimum wage sharply" in the Independent. What incentive is there though for Brown to take a radical turn when even the TUC is not calling for a sharp increase?

On hearing the new inflation figures
, TUC General Secretary Brendan Barber said:

"The inflation message is don't panic. The rise today has more to do with what was happening a year ago than anything new in the economy, and is likely to fall back to its target range in due course."

"Don't panic" - wasn't that the refrain of the ineffective Corporal Jones in Dad's Army?

Extra: Watch Paul Mason's piece on inflation on BBC Newsnight. It's followed by a debate between Tory spokesperson on competition John Redwood MP and PCS General Secretary Mark Serwotka over public sector pay policy

Extra 2: Unison calls for reopening of pay settlement in local government - obviously they are panicked, despite Mr Barber's reassurances ...

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