In a move which will benefit low-paid workers, the British government has announced to increase the minimum wage for most adults will increase by 6.7% from April next year.
Finance Minister Rachel Reeves announced the decision on the eve of delivering her first budget, which is expected to include deliver large rises in spending, investment and tax.
The move though encouraging for workers, is in fact concerning for employers who are finding it harder to implement such rises.
The new Labour government that came to power in July has said the minimum wage should take more account of the cost of living and boost low earnings while keeping the floor of two-thirds of median hourly earnings introduced by the Conservative government that preceded it.
Under the previous government, expert independent advisers said the adult minimum wage was on course to rise by 3.9% next year. Tuesday’s announcement of a 6.7% increase means it will rise to £12.21 ($15.88) per hour in April, up from £11.44.
There were larger increases for younger workers — who receive lower hourly pay — with the rates for those aged 18-20 and 16-17 rising by 16.3% and 18.0% respectively.
Overall, the minimum wage increases will directly affect around 3 million workers.
“This government promised a genuine living wage for working people. This pay boost for millions of workers is a significant step towards delivering on that promise,” Reeves said in a statement.
The Low Pay Commission, an advisory body of employers and trade unions which recommends minimum pay rates, said employers have had to deal with the adult minimum wage rate rising by more than 20% in the space of two years.
“The data show some signs of employers finding it harder to adapt to minimum wage increases,” said LPC chair Philippa Stroud.
The LPC was not able to provide details of this data before the publication of its full report, due on Wednesday.
The Confederation of British Industry trade body said the increase in the minimum wage would put pressure on company finances and crimp room for investment spending.
The Resolution Foundation think tank, which focuses on living standards, said Tuesday’s announcement was good news for low-paid workers but that the LPC should watch for unintended consequences, such as employers using more self-employed workers to minimise costs.
The Bank of England is watching pay growth closely as it assesses whether inflation pressures in the economy are easing sufficiently for it to cut interest rates again.
