A think-tank report has calculated that the planned increase in the national minimum wage for 2012 will leave it lower in real terms than it was in 2004, and 6 per cent below its 2009 peak.

After sharp increases in the 2000s, the value of the minimum wage has recently ‘flat-lined’ at just over 50 per cent of median earnings.

The report highlights ‘overwhelming’ evidence that the minimum wage has reduced wage inequality without damaging employment. It examines several options for future reform designed to ensure maximum impact without risking job losses. These include:

• Introducing a higher rate for workers aged over 25, or 30 - making the minimum wage somewhat better targeted on low income households.
• Introducing a higher rate for London and the south east region.
• Asking the Low Pay Commission to publish an estimate of the minimum wage that big companies in different sectors can afford, raising pressure on them to pay more than the legal minimum.

The report (Alan Manning, Minimum Wage: Maximum Impact, Resolution Foundation) is available on the Resolution Foundation website.