U.K. Hikes Minimum Wage by 6.6% in Budget Boost for Millions
U.K. Raises Minimum Wage by 6.6% in Budget Boost for Millions
(Bloomberg) --
The U.K. is to increase its national minimum wage to 9.50 pounds an hour ($13.06), providing a boost for millions of low-paid workers ahead of the budget this week.
The legal pay floor for people aged 23 and over will rise by 6.6% from 8.91 pounds starting on April 1, the Treasury announced in statement Monday.
The increase may prove politically expedient for Chancellor of the Exchequer Rishi Sunak as the prospect of a rapid spike in inflation puts the government under pressure to support the poorest households. It also plants him firmly in the territory of the opposition Labour Party, for which the minimum wage is a central issue.
However, the announcement immediately ran into criticism from unions and companies alike. Frances O’Grady, general secretary of the Trades Union Congress, said a rate of 10 pounds without delay is the minimum needed to tackle the cost of living crisis facing households. The British Chambers of Commerce said the scale of the increase will pile further pressure on companies and could fuel inflation.
“There is a limit to how much more firms can continue to absorb rising costs before they have to raise their own prices,” said Jane Gratton, head of people policy at the business lobby. “If businesses are to lead our economic recovery, they desperately need room to breathe, rebuild their finances and have the confidence and capacity to invest, including in the training and development of their people.”
That sentiment was echoed by the British Retail Consortium, which said even before the announcement three in three in five retailers were warning that prices will rise before Christmas.
The wage increase is unlikely to affect larger retailers, where pay rates are generally above the proposed minimum wage now. Ken Murphy, chief executive officer of Tesco Plc, said earlier this month that Britain’s largest grocer had already raised shop-floor wages by 30% since 2014 and currently pays 9.55 pounds an hour.
Speculation that a rise in minimum wage was imminent has been rife since the Conservative Party conference this month, when Prime Minister Boris Johnson put a transition to a high-wage economy at heart of his message to voters.
Labour has demanded that the rate be raised to at 10 pounds but the level has divided the shadow cabinet. One member quit last month after failing to gain support among the party leadership for 15 pounds.
“This is a government that is on the side of working people,” Sunak said in a statement. “This wage boost ensures we’re making work pay and keeps us on track to meet our target to end low pay by the end of the Parliament.”
The government said it accepted in full the recommendations of the Low Pay Commission, which advises the government. The increase means a full-time worker on the main minimum wage will get an extra 1,000 pounds a year. Minimum rates for apprentices and people under the age of 23 will also rise.
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