Low-paid workers will receive a pay rise set to match inflation as the UK’s minimum wage increases to £10.42 per hour from April, the Low Pay Commission said on Friday.
The 92p rise in the main rate of the national living wage represents a 9.7 per cent increase on 2022 and means 2mn workers will now be paid at or close to the statutory earnings floor, according to the LPC, which advises the government on policy.
Bryan Sanderson, LPC chair, said he was “confident that today’s increase is unlikely to have a detrimental impact” on jobs, and would help those who felt high inflation most acutely.
Consumer price inflation stood at 10.4 per cent in February. But Nye Cominetti, economist at the Resolution Foundation, a think-tank, said that since inflation was expected to fall to about 7 per cent in April, low-paid workers were “set to enjoy a rare real-terms pay boost” even as average UK wage growth, which eased to 6.5 per cent at the turn of the year, continued to lag the rise in prices.
The boost to wages for the lowest paid will have knock-on effects, as employers seek to ensure that jobs higher up the pay scale remain attractive. Cominetti said this could benefit a further 5mn workers.
However, it is unlikely to change a broader trend of slowing wage growth that the Bank of England’s Monetary Policy Committee called attention to when it raised interest rates last week.
The committee said earnings growth in the private sector in particular had “fallen significantly” and could undershoot its forecasts.
Surveys published by the BoE show companies expect pay reviews in the second half of this year to result in lower wage awards than in 2022, reflecting lower inflation and a weaker jobs market.
“Organisations can see the profile of inflation and they can see things are coming down . . . equally trade unions’ and employees’ expectations will also be lower,” said Sheila Attwood, content manager XpertHR, a research firm that collects data on pay awards.
XpertHR’s research suggests pay awards peaked at an average of 6 per cent in the first quarter of 2023 and are already on a downward trend, with the average for the full year set to ease to 5 per cent.
Even after this April’s increase, the real value of the minimum wage will be below the peak it reached in April 2021, before high inflation took hold.
It will pass this peak only in April 2024, when on the LPC’s latest estimates the main adult hourly rate will need to rise to £11.16 to meet a government goal of raising it to two-thirds of median earnings.
Paul Nowak, general secretary of the Trades Union Congress, said the increase was “not going to lift the pressure on hard-pressed families”, with food inflation running at double the rate of the pay increase and the government’s support for household energy bills set to end.
However, the LPC said the outlook for the household incomes of minimum wage workers was more positive than in previous years, once changes to taxes and welfare benefits had also been factored in.
This is because of a government decision to uprate benefits in line with inflation, following on from previous changes allowing workers to keep more benefits income as their wages rise.
Source: Economy - ft.com
