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- Written by Tom Espiner & Lucy Hooker
- BBC news
image source, Getty Images
The government-set minimum wage, known as the National Living Wage, has risen by more than £1 for the first time, a welcome boost for 2.7 million low-paid workers.
The key pay rate will rise from £10.42 to £11.44 an hour and will apply to workers aged 21 and over, rather than those aged 23 and over.
Tax rates applicable to young workers would also rise.
But some companies argue that rising labor costs will make it harder to keep prices down.
- A full-time adult worker paid at the minimum wage can expect a pay rise worth £1,800 a year.
- A 21-year-old moving from the lower minimum wage to the main minimum wage would see a rise of £2,300.
- The minimum wage for 18-20 year olds will rise from £7.49 to £8.60 an hour.
- Apprentices will also receive an above-inflation pay rise, with their hourly wages rising by more than 20% from £5.28 to £6.40.
The pay rise will benefit 2.7 million low-paid workers, including Samuel, who works at Salford’s Grindsmith coffeehouse.
The 26-year-old said that before the pay rise he would have around £400 left over at the end of the month after paying his rent and bills, but each time he felt he had “less and less” left over.
“Maybe for a month you’ll be like, ‘Oh, I have money this month,’ but next month it’s going to be a little tough,” Samuel says.
He said raising the minimum wage would help offset rising prices and help people afford more than just the essentials.
When setting the minimum wage, the government relies on recommendations from the Low Pay Commission, which was set up to advise the government in this area.
In response to the rising cost of living, an independent commission recommended a significant increase in the minimum wage. The government accepted the recommendation, saying raising the minimum wage to two-thirds of average income meant the Conservative Party’s goal of “ending low pay” had been achieved.
But Peter Gibson, Mr Samuel’s employer and director and co-founder of Grindsmith, says recent cost increases are putting the company under strain.
An increase in pay for the lowest-paid employees means other staff members’ pay must also increase to maintain the difference, he says.
Peter Gibson, director of coffee company Grindsmith, says rising costs may need to be passed on to customers.
“With this large increase, the minimum wage is catching up with what we pay our supervisors, so there must be some inflation in their wages as well.
“So for us, as small businesses, it’s not just a minimum wage increase. [workers]that’s a company-wide salary increase,” Gibson said.
To combat rising costs, the company added that it would consider raising prices and reducing employees’ working hours.
“Our hands are being forced,” he says. “It’s not about increasing the company’s profits; it’s about paying a higher price and ultimately making exactly the same amount of money.”
The Resolution Foundation, an independent think tank focused on improving the standard of living for low- and middle-income people, says the minimum wage increase would represent a 7.8% real increase after accounting for inflation, and a 9.8% increase after accounting for inflation. Stated. % increase in cash equivalent.
The foundation said pay inequality had narrowed significantly since the minimum wage was introduced in 1999, making it “the most successful economic policy in a generation”.
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