An influential think tank has called for major reform of the minimum wage that would see a greater focus on reducing incidences of low pay, saying that the minimum wage has lost its value in real terms during the downturn.

The Resolution Foundation, which is chaired by Sir George Bain, the founding chair of the Low Pay Commission (LPC), has said the Government should set out a plan to reduce the share of employees who earn below two-thirds of the hourly median wage.

It’s part of what it calls an “explicit long-term ambition of economic policy to reduce the incidence of low pay”.

“We suggest that the government adopt the ambitious but achievable long-term goal of reducing the UK’s high incidence of low pay from 21 per cent to 17 per cent, a reasonable goal against international benchmarks,” a new report from the group says.

Yesterday the Government confirmed that the adult minimum wage is to rise by 3% to £6.50 from October, a rise of 19p.

The Resolution Foundation called for the minimum wage to be “more far-sighted”.

“We make two recommendations to increase clarity. In the short-term, the Secretary of State for Business should ask the LPC to set out how long it will now take for the National Minimum Wage to recover the value it has lost in real terms during the exceptional down-turn we have recently experienced.

“We also recommend that the LPC be asked to publish alongside its recommendation for each year’s minimum wage a preliminary view on its intention for the following year’s minimum wage.”

The Foundation labelled a single legal wage floor, which it favours, “a blunt tool”. It said the LPC should “encourage a debate over when employers could go further” than the statutory minimum.

“The proper arena for this debate is civil society, not Whitehall, but the state can help shift the terms of debate, in part by publishing information. Our analysis suggests that industrial sectors are a good way to start. The Secretary of State for Business should ask the LPC to publish analysis to show which sectors of the economy could afford to pay more than its recommended National Minimum Wage.”