Is raising minimum wage by 20p enough to end “in-work poverty”?

The UK’s national minimum wage is set to rise to £6.70 per hour from October 2015.

Prime minister David Cameron and his deputy Nick Clegg made the announcement yesterday as the government’s top two proclaimed that 1.4 million workers in the country will benefit from the 20p increase.

While the coalition has used the rise to reflect its dedication to Britain’s lower-paid workers, others have not greeted the news with such optimism.

For one, the Trade Union Congress (TUC) do not think this three per cent rise – the biggest real-terms increase for adult workers since 2008 – will go far enough to address the issue of in-work poverty in Britain.

TUC’s general secretary Frances O’Grady said: “For the low paid to get a fair share of the recovery, this was a year in which we could have had a much bolder increase in the minimum wage. With one in five workers getting less than a living wage, this is nowhere near enough to end in-work poverty. Britain’s minimum wage workers should be very fearful of the billions of pounds of cuts to government help for the low paid that the chancellor is planning if re-elected.”

For someone to exist comfortably outside of London they need to be earning at least £7.85 an hour; in the capital, it is £9.15. It does not take an economist to work out that £6.70 is still some way off both figures.

A 2014 report from the Joseph Rowntree Foundation revealed that incomes among the poorest in the UK have dropped by nearly ten per cent in real terms and that only one fifth of Britons on low pay managed to climb up the wage ladder to a higher salary over the last decade.

Rising costs in the private rental sector and a lack of social housing are also adding to the plight of those earning under the living wage, according to the report; and with these issues still affecting households up and down the country, it is hard to see how the increase in minimum wage will really make a difference.

On a positive note, lower energy prices and fuel costs have helped drive inflation down marginally towards the back end of 2014, with the Bank of England optimistic about the chance of negative inflation over the spring. The rate of Retail Prices Index (RPI) inflation also dropped by 0.5 per cent in December last year, according to the Office for National Statistics.

In terms of the wider debate of living wages in the UK, the Independent’s recent revelations that not one high street chain would commit to the standard living wage for their employees failed to move either Cameron or Clegg to speak out about the issue.

Perhaps one should wonder whether the recent minimum wage increase is a genuine attempt to address in-work poverty, or a last-gasp publicity stunt to sway opinion before a general election.

Joseph Tyson