Consumer price index figures released yesterday show that high rates of inflation are continuing to take their toll on the country’s cost of living.
The rate is forecast to hold at 3.4 per cent, the lowest rate since November 2010, still a long way off the Treasury’s target of 2 per cent. Inflation has dropped dramatically from 5.6 per cent in September 2011, thanks largely to cuts in energy and other commodity prices and the dissipating impact of the VAT hike implemented at the start of 2011.
Petrol prices broke the £1.40/litre mark for the first time in March, with Diesel also hitting a record high.
More shockingly perhaps, a report published by independent researchers the Resolution Foundation found that the minimum wage is now worth less than it was in 2004. This years planned increase in the minimum wage, to £6.19 p/h works out at 1.8 per cent, roughly half the rate of inflation.
The reports author, Professor Alan Manning of the London School of Economics, said that minimum wage’s value had ‘flatlined’ at just above 50 per cent of the national average income, while other European countries have maintained a level of 60 per cent or more.
Inflation in recent years has cancelled out rises to the minimum wage and the increase in average earnings, leaving many households facing up to a significant drop in their living standards. The report proposes a higher minimum wage for people over 30, who are more likely to be heads of households and have children, and also for minimum wage to reflect the cost of living in different areas of the country.
“Given the scale of the challenge now facing living standards, it might be time to think about more radical options for reform, we can do more to show that big companies in some sectors could afford to pay more than the legal minimum” Stated Professor Manning.
A spokesman for the Government’s Department for Business, Innovation and Skills said: “The national minimum wage must provide necessary protection for the lowest paid workers, whilst also not pricing employers out of the labour market.”
“The rates are recommended to the Government each year by the independent Low Pay Commission, which makes decisions based on extensive analysis and thorough consultation..