UK minimum wage raised to 12.21

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Britain's minimum hourly wage will rise by 6.7% to $12.21 from April next year, with younger workers receiving larger pay increases, Prime Minister Rachel Reeves said on Tuesday.

The increase, announced ahead of Wednesday's budget, is designed to keep the floor for adult wages at two-thirds of median earnings after new data showed average earnings in 2023 were higher than previously thought and expected to grow faster.

The minimum wage for 18-20 year olds has risen by more than 16% from $8.60 to $10 an hour, with ministers trying to bring it in line with adult wages. The hourly wage for apprentices and workers aged 16 to 17 will rise by 18% to $7.55.

Reeves, who pledged to protect workers in his first fiscal event, said the increase would benefit more than 3 million workers and was an important step toward providing a true living wage for all workers.

Britain's minimum wage is a flagship policy of Tony Blair's Labor administration, introduced in 1999, and has risen rapidly under the Conservative-led government to become one of the highest in the rich world.

The changes put forward by Reeves mean adults working full-time at the so-called National Living Wage would earn an extra $1,400 a year, and workers in the 18-20 age group would earn an extra $2,500.

But it also means that many companies will see wages rise steeper than budgeted, on top of a nearly 10% increase in NLW in 2023 and 2024.

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Business groups have warned that small employers in particular will suffer from wage increases, new labor laws that could increase hiring costs in low-wage sectors by up to 1.5% and a 20 billion hike in payroll taxes. .

Kate Nicholls, chief executive of trade body UKHospitality, said the pay rise was well above expectations and would add $1.9 billion to sector wages. Companies wanted to pay their workers more, but what was being asked of them was simply unsustainable if taxes were to skyrocket at the same time, he added.

John Foster, chief policy and campaigns officer at the CBI employers lobby group, said the minimum wage had been valuable in protecting the incomes of the poorest, but an increase amid difficult economic times would make it harder for businesses to invest. said. innovation.

Baroness Philippa Stroud, chair of the Low Pay Commission, an independent body that advises on pay levels, said there were signs that employers were finding it more difficult to adapt to minimum wage increases, but these concerns and the government's He said he struck a balance between his ambitions.

Young workers, who make up more than a third of low-wage workers, appear particularly vulnerable to the risk of having their jobs pulled if employers fail to find other ways to manage wage increases, such as rising prices, improving productivity or accepting lower profit margins.

Nye Cominetti, chief economist at the Resolution Foundation think tank, said it would be important to monitor the employment effects of the new rates, including whether businesses switch to self-employment to minimize their tax bills and employment rights obligations. He said it would be.

But Paul Novak, general secretary of the Trades Union Congress, an arm of the British labor movement, said warnings that the minimum wage would destroy jobs had always proven unfounded in the past.

Young workers deserve fair wages for their work. He said it was right for the government to address these injustices.

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Ministers have asked the LPC to keep the adult minimum wage at more than two-thirds of median earnings and raise low youth wages as much as possible without harming job prospects, taking into account the rising cost of living.

LPC previously said adult fares were likely to rise by about 6%. The decision to recommend a larger increase follows a revision of data showing average wages were higher than thought and would grow faster.

The Office for National Statistics said on Tuesday that changes to the way it counts high earners would see the average hourly wage for full-time employees rise to 17.52 in April 2023, beating the previous estimate of 17.40.

If average earnings increased by 6% the following year, the average hourly wage in April 2024 would be 18.64, average weekly earnings would be 728, and average annual earnings would be 37,430.

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