Over a million low-paid workers across the UK could soon see a boost in their wages as Chancellor Rachel Reeves reportedly plans to raise the minimum wage by more than 6%.
This announcement is expected during Wednesday’s Budget and is likely based on recommendations from the Low Pay Commission.
Currently, the national living wage for workers aged 21 and older stands at £11.44 per hour. While the Low Pay Commission recommended an increase to £11.89 earlier this year, recent reports indicate that ministers are considering a higher rate, potentially reaching over £12.12 per hour. This planned increase supports the government’s commitment to improving wages for the lowest earners, providing much-needed financial relief.
Potential Changes for Younger Workers
The anticipated wage increase could also bring changes for younger workers. Workers aged 18 to 20 currently earn a lower rate of £8.60 per hour. However, there is growing support for a unified adult wage rate, which would significantly raise earnings for these younger employees. Such a change would not only boost their income but also contribute to a fairer wage structure, reflecting the government’s stance on equitable pay across all age groups.
Concerns from Small Business Leaders
While many workers welcome the potential wage hike, it has raised concerns among business representatives, especially in the small business sector. Craig Beaumont, Executive Director of the Federation of Small Businesses (FSB), expressed worry that combining wage increases with recent National Insurance contribution hikes could burden small businesses. Beaumont pointed out that the new National Insurance rates could add £600 in hiring costs per employee, a notable challenge for smaller employers.
“Small business owners are some of the hardest-working people around,” Beaumont noted, highlighting their dedication and entrepreneurial spirit. “They’re creating jobs and opportunities, often working long hours to keep their businesses running.” Beaumont warned that the added financial pressures might lead small businesses to pause hiring plans or even consider cutting staff.
Addressing Cost of Living and Economic Stability
This potential minimum wage increase is part of the government’s broader initiative to combat living costs and enhance the standard of living for low-wage earners. Amid ongoing inflation and rising living expenses, the increase could offer essential relief to many households. However, achieving a balance that supports workers without overly straining small businesses will be essential for long-term economic stability.