The government is planning to increase the national living wage in the UK to PS12.10 per hour. This will affect over a million low paid workers.
This move is part of Labour’s pledge to implement a “genuine living wages” and aims to ease financial pressures for workers. However, it has raised concerns among business owners.
The Low Pay Commission announced that it would increase wages and said the wage hike could even be higher when the final recommendations are made before the next Budget.
The national living wage is currently PS11.44 per hour. Angela Rayner, Deputy Premier of Australia, said that the government aims to “raise wages” and ensure that they keep pace with rising costs of living. Jonathan Reynolds, the Business Secretary, echoed this sentiment and instructed the commission to make sure that wages reflect economic reality.
This is good enough for you?
The Low Pay Commission’s projections indicate that wages will need to rise by 5.8 percent in order to keep pace with the earnings growth for 2024. This is a substantial increase from the 3.9 percentage predicted earlier this summer. Young workers aged 18 to 20 are likely to benefit from even larger pay increases, as the government moves towards Equalising pay between age groups. This demographic currently earns PS8.60 an hour. However, the proposed changes may see them earning the same amount as those over 21.
Many business leaders worry about the impact of wage increases on smaller businesses. Tina McKenzie is a member of the Federation of Small Businesses and warned that small businesses could have difficulty absorbing the costs if they do not receive adequate support. She said that “labour costs are the most pressing issue for small businesses, and many have responded to the April 2020 increase by being more cautious about hiring.”
Not all reactions, however, were negative. Paul Nowak (General Secretary of the Trades Union Congress, TUC) dismissed concerns by drawing parallels with the introduction of the minimum wage in 1999 by the Blair Government. He said that the scaremongers of 1999 were also wrong.
Economic impact on business
Nye Cominetti, an economist at the Resolution Foundation, said that the new Labour mandate could push the minimum wage even higher. Although this is great news for employees, the businesses might have preferred a moderate increase. Cominetti warned that wage increases could be risky, noting the increased possibility of job loss as wages rise.
Cominetti said that as wages rise, the tradeoffs between higher salaries and possible job losses will become more real. Cominetti urged policymakers not to pursue wage increases without carefully weighing the impact they could have on employment.
A spokesperson for Department for Business and Trade supported the policy. “We’re changing the rules so that more money can be put in the pockets of working people, but we are also conscious of the need to maintain employment levels and support businesses.”
The government is committed to finding a balance in the UK wage landscape between the need to raise wages and the impact that this may have on small businesses.
Asda, the supermarket chain, is said to be considering cutting the salaries of 7,000 employees in southeast England in order to align them with other locations. This will add further controversy to wage debate.
