Over a million low-paid workers across the UK are expected to see a wage increase of around 6 percent next year as the government plans to raise the national living wage to £12.10 an hour.
The move, part of Labour’s pledge to introduce a “genuine living wage,” aims to alleviate financial pressures on workers, though it has sparked concerns among businesses.
The Low Pay Commission, which has been tasked with aligning the national living wage with two-thirds of median earnings, announced the proposed wage increase and suggested that the rise could be even higher when the final recommendation is made ahead of the next budget.
Currently, the national living wage stands at £11.44 an hour. Deputy Prime Minister Angela Rayner emphasised that the government’s intention is to “raise the floor on wages,” ensuring that pay keeps pace with the rising cost of living. Business Secretary Jonathan Reynolds echoed these sentiments, instructing the commission to ensure that wages reflect economic realities.
Is this good enough?
Projections from the Low Pay Commission indicate that wages need to increase by 5.8 percent to match the growth in earnings for 2024, a significant jump from the 3.9 percent rise predicted earlier this year. Young workers aged 18 to 20 are likely to benefit from even larger pay increases, as the government moves towards equalising pay across age groups. Currently, this demographic earns £8.60 per hour, but the proposed changes could see them paid the same as those aged 21 and over.
While the wage increase is welcomed by workers, many business leaders are concerned about its impact on smaller firms. Tina McKenzie, a board member of the Federation of Small Businesses, warned that without adequate support, small companies could struggle to absorb the rising costs. “Labour costs are now the biggest pressure for small firms, with many responding to the April 2024 increase by becoming more cautious in hiring,” she said.
However, not all reactions were negative. Paul Nowak, General Secretary of the Trades Union Congress (TUC), dismissed the concerns, drawing parallels to when the minimum wage was first introduced by the Blair government in 1999. “The scaremongers were wrong then, and they’re wrong about this now,” he said.
The economic impact on businesses
Economist Nye Cominetti of the Resolution Foundation highlighted that while the minimum wage has outpaced inflation in recent years, Labour’s new mandate might push it even higher. Though this is good news for workers, businesses may have preferred a more moderate increase. Cominetti cautioned that continued wage hikes could carry risks, noting that the possibility of job losses grows as wage levels rise.
“As wages increase, there comes a point where the trade-offs between higher pay and potential job losses become a real concern,” Cominetti warned. He urged policymakers to carefully weigh the potential impact on employment as they pursue further increases.
A spokesperson for the Department for Business and Trade defended the policy, stating: “We are changing the rules to put more money in working people’s pockets, but we’re also mindful of the need to support businesses and maintain employment levels.”
The government remains committed to striking a balance between higher wages for workers and the potential economic impact on businesses, especially smaller firms, as it continues to navigate the complexities of the UK’s evolving wage landscape.
Meanwhile, supermarket chain Asda is reportedly considering cutting the pay of 7,000 staff in southeast England to bring salaries in line with those at other locations, adding further controversy to the ongoing wage debate.
Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.
- Amelia Brand
- Amelia Brand
- Amelia Brand
- Amelia Brand
