LONDON, U.K. (Reuters) — Britain's minimum wage is likely to rise faster than inflation for several years to come, so long as the economy
continues to improve, the body which advises Britain's government on the topic said on Wednesday.
Earlier in the day the government agreed to the Low Pay Commission's recommendation for a three per cent increase in Britain's minimum wage this year to 6.50 pounds ($12 Cdn), which will be the first above-inflation increase since 2008.
"Provided the economy continues to improve we expect to recommend further progressive real increases in the minimum wage, so that 2014 will mark the start of a new phase of bigger increases," said David Norgrove, who chairs the commission.
Finance minister George Osborne said in January that he would like to see the minimum wage rise faster than inflation, after several years in which Britons' living standards have fallen in real terms.
The decline in living standards — which continued last year despite a strong pick-up in growth and employment — is now a major theme for the opposition Labour Party, which will face Osborne's Conservatives in a national election in May 2015.
The increase in the minimum wage will take effect in October, and economists have said the three per cent rise may also set a benchmark for private-sector wage deals being negotiated now.
Inflation fell to 1.9 per cent in January, undershooting the Bank of England's two per cent target for the first time since November 2009, but average weekly earnings rose by just 1.1 per cent on the year in the fourth quarter of 2013.
Over the past four years, the minimum wage has risen by an average of 1.9 per cent a year, well below the average inflation rate of 3.3 per cent over the same period.
The Bank of England has said faster real wage growth is needed to sustain consumer demand and Britain's economic recovery, but that it should be based on an improvement in productivity, which slumped after the financial crisis and has yet to recover significantly.
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