Ed Miliband has alarmed business groups by committing to the introduction of a “living wage”, after government figures indicated that changes to the existing national minimum wage would already cost organisations £48 million.

As of today, Friday 1 October, the minimum wage will apply to low-paid workers aged 21 rather than over 22 for the first time. They will also receive an increase to £5.93 per hour, up from £5.80. The wage for 18 to 20 year olds will likewise rise to £4.92 per hour from £4.83, while renumeration for those aged 16 to 17 is set to increase to £3.64 per hour from £3.57.
 
For the first time, an apprenticeship minimum wage of £2.50 per hour will also be introduced for under-19 year olds as well as for those that are aged 19 and over but in their first year of the scheme. The Low Pay Commission estimated that about 970,000 people should benefit from the increases.
 
But the newly elected leader of the Labour Party did not believe the moves went far enough. As a result, in his debut speech, he called for the creation of a “living wage”, which he indicated should be in the region of £7 per hour.
 
“I believe in not just a minimum wage, but that the foundation of our economy in the future must be a living wage,” Miliband said. He added that there should be “responsibility in every part of our society” and that it was “wrong” that a banker could earn in one day what a care earner currently took home in a year.
 
Although he did not spell out how a living wage would be implemented, during his leadership campaign, he suggested that businesses could be given tax incentives to pay higher rates. Another option would simply be to boost the existing minimum wage.
 
But business leaders reacted angrily to the proposals. Richard Lambert, director general of lobby group the CBI warned that the issues raised would inevitably “worry” companies and more debate was required.
 
Graeme Leach, director of policy and chief economist at the Institute of Directors, said however: “Ed Miliband says that he wants Labour to be the ‘party of enterprise and small business’. How are these sentiments reconcilable with a commitment to new employment regulations for agency workers and a large hike in the minimum wage?”
 
Both measures would hurt business of all sizes rather than support them, he added.