The 2009/2010 national minimum wage increase - which saw the adult rate rise by 1.2% to £5.80 per hour when it came into effect on 1 October 2009 - was the lowest since a statutory minimum wage was introduced in April 1999. But now that the key economic indicators for October 2009 are in, how does the 2009/2010 national minimum wage increase stack up against rises in inflation and in whole economy pay awards? It all depends on what measure you use.
- Retail prices index (RPI) inflation stood at -0.8% in October 2009. Therefore, when measured against RPI (the most commonly used inflation measure for private sector pay setters), the 2009/2010 national minimum wage uprating was 2.0 percentage points ahead of inflation.
- But when consumer prices index (CPI) inflation is used, the picture is substantially different. CPI rose by 1.5% in October 2009. Consequently, the 1.2% national minimum wage rise seen in October 2009 comes in at 0.3 percentage points below CPI inflation.
- Whole economy pay awards rose by 1.2% over the three months to 31 October 2009 (after spending the preceding three rolling quarters stuck at zero), according to latest data from IRS. This rise in the headline pay award is a direct consequence of the number of employers acting to match the 2009/2010 national minimum wage uprating. The latest data reflect the national minimum wage effect, as is traditional at this time of year: the 1.2% median pay award is in line with the latest annual increase to the national minimum wage adult rate, which came into effect on 1 October 2009.
Therefore, whether the 2009/2010 national minimum wage increase can be argued to be inflation-busting depends on your preferred measure of inflation.
But what is certain is that while this year's national minimum wage increase was lower than those seen in recent years, it has nonetheless served to prop up whole economy pay awards, lifting them above zero.
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