More than a million low-paid workers are poised for a pay rise of approximately 6 per cent next year as the government pledges to hike the minimum wage.
The Low Pay Commission is on course to boost the national living wage to £12.10 an hour in April 2025, with the potential to propose an even loftier rate before the budget, following Labour’s mandate revision to ensure a “genuine living wage”.
Young workers aged between 18 and 20 could see an even more substantial wage increase, as ministers consider aligning their pay with those over 21.
This move has been hailed as “good news” for lower-income earners, yet business leaders express concern that the elevated wages, along with the government’s plan to extend additional rights to workers, may discourage them from hiring new employees, according to the Times.
Currently set at £11.44 per hour, the living wage has consistently surpassed inflation rates, and now Labour intends to push it further up. Deputy Prime Minister Angela Rayner has committed to “raise the floor on wages”.
The commission acknowledges that the government’s focus on wage growth gives them “scope to recommend increases above the ‘floor’ if the economic evidence supports this”, but they would advise a smaller increment only under the threat of “significant job losses”.
Currently, 18 to 20-year-olds in the UK are legally entitled to a lower hourly wage of £8.60, but there’s a move towards “a single adult rate”. To this end, plans for “larger increases for the 18 to 20-year-old rate” compared to their older peers are on the table.
Downplaying Labour’s dramatic rhetoric about the hikes, Nye Cominetti of the Resolution Foundation suggests that traditionally minimum wage increments have beaten inflation.
Nevertheless, Cominetti warned about the potential repercussions of significant rises: “As you go higher the risks rise and you need more careful consideration of how you trade those off,” adding, “What size of employment effect are you willing to tolerate for higher pay? We’ve never had a clear answer to that partly because no politician wants to say ‘our policy is costing jobs’. But at some point those decisions become material.”
Meanwhile, Tina McKenzie from the Federation of Small Businesses expressed concern over employers’ growing reticence to hire amid rising minimum wages.
