The lowest-paid workers are set to get a rise of around 6% next year, as government ministers have pledged to increase the minimum wage.
The Low Pay Commission is planning to increase the National Living Wage to £12.10 per hour, and may recommend a higher figure before the next Budget. Ministers also said that those aged 18-20 should be paid the same as those older than 21, and should therefore see an even bigger increase. The Living Wage is currently £11.44 per hour. Workers aged 18-20 can legally be paid at a lower rate of £8.60 per hour, but ministers are pushing for a “single adult rate”.
The news will be welcome for employees, but less so for business leaders. They have warned that it could put them off employing staff, as wages will increase at the same time as the government intends to give them new rights.
Upon taking office, Angela Rayner, the deputy Prime Minister, and Jonathan Reynolds, the business secretary, told the Low Pay Commission to recommend an increase “which takes into account the cost of living” and ensures the national living wage does not fall below two thirds of median earnings. They said it was “more important than ever that we protect and boost low earnings”.
The Commission has said that wages will have to rise by around 5.8% to keep pace with earnings, which is higher than their previous estimate in March of 3.9%.
Previous fears of job losses due to the rising minimum wage have not materialised, however some believe that ministers should be careful when increasing wages further.
Tina McKenzie from the Federation of Small Businesses said that “When mandatory wage increases come without the right support, small firms face intense pressure, making it harder to survive and recruit those who are out of work… small firms are now saying labour costs are their biggest cost pressure. Our research shows 64 per cent of small firms are responding to the April 2024 increase in the national living wage with more risk-averse recruitment practices, meaning those out of work and economically inactive are already finding it harder to find roles.”
