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20 October 2014

Alan Milburn attacks Miliband for not being “ambitious“ enough on the minimum wage – is he right?

The Labour leader's plan to raise the main rate to £8 by 2020 is more radical than Milburn suggests. 

By George Eaton

Alan Milburn is regarded by most in Labour as the epitome of Blairite centrism and moderation. But today, in his capacity as chair of the government’s Social Mobility and Child Poverty Commission, he’s attacking Ed Miliband for not being radical enough on the minimum wage.

In the commission’s second annual State of the Nation report, he warns that Miliband’s proposed rate of “at least” £8 an hour by 2020 is “not at all ambitious as it implies a slower rate of increase between 2014 and 2020 than there was between 1999 and 2014. 

“If that trend continued into the future the national minimum wage would actually be worth £8.23 an hour in 2020, not £8.”

In response, it’s worth noting that this represents a difference of just 23p at a time when real wages are still falling (Labour points out that under its plan the minimum wage would rise from 54 per cent of median earnings to 58 per cent, its highest-ever level). The concern among party figures is that a higher rate could lead to significant job losses among the low paid. Many on the left would like Miliband to pledge to introduce a universal living wage (which would see the minimum wage rise from £6.50 to £7.65 nationally and to £8.80 in London), but respected forecasters such as NIESR estimate that such a move would reduce labour demand by 160,000 jobs, the equivalent of a 0.5 per cent rise in unemployment. 

Milburn’s intervention will, however, put Miliband under pressure to adopt a more ambitious target for 2020. The Greens, for instance (who, as I revealed last week, Labour is targeting with a new strategy unit) have proposed a minimum of £10. But it’s worth remembering that should growth surprise on the upside, there would be nothing to prevent Miliband from introducing a rate above £8. 

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