The government has announced that the national living wage, which is the minimum wage set by them, is set to increase by over a pound. This move will provide a boost for 2.7 million low-paid workers and represents the first time that the minimum wage has received such an increase.
The new rate will apply to workers over 21 instead of over 23, and the main wage rate will increase from £10.42 to £11.44 per hour. Younger workers will also receive an increase in the hourly rate that applies to them. Apprentices will also see their hourly pay go up more than 20%, from £5.28 to £6.40 an hour.
The pay hikes will represent a rise of 7.8% in real terms, or a 9.8% increase in cash terms, when taking inflation into account. For a full-time adult worker paid at minimum wage, this increase will result in £1,800 more per year. If a 21-year-old moves from a lower minimum wage rate to the main rate, they can expect a £2,300 rise.
Businesses have warned, however, that the increase in labour costs will make it difficult for them to keep prices down. Peter Gibson, director and co-founder of Grindsmith coffee house in Salford and employer of 26-year-old Samuel, is concerned that the increase in the minimum wage will leave him with no choice but to pass on these costs to customers by raising prices or cutting staff hours.
Despite the controversy, the government has said they accepted the Low Pay Commission’s recommendation for the increase, stating that it has lifted the minimum wage to two-thirds of average earnings, thereby achieving their goal of ending low pay. The Resolution Foundation, an independent think-tank, has described the minimum wage as “the single most successful economic policy in a generation
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