Lowest paid set for inflation-busting pay rise in Budget
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Rachel Reeves is set to increase the minimum wage by 6 percent during Wednesday’s Budget announcement, benefiting over a million low-paid workers with a salary boost.
The chancellor is expected to reveal the inflation-defying rise during her first financial update, with the increase being greater than what was anticipated in September.
This increase will have the greatest positive impact on young individuals, as the government is committing to paying workers aged 18 to 20 the same wages as their older counterparts, helping to eliminate the existing disparity.
According to The Times, the minimum wage, also known as the national living wage for those aged 21 and over, is set to increase from £11.44 to a range of £12.12 to £12.20 starting next year.
Last month, the Low Pay Commission, which provides guidance to the government regarding the national living wage, predicted that the rate would go up to £12.10. However, faster wage growth has led to a larger increase than initially anticipated.
The current goal set by the government is for the national living wage to reach two-thirds of the average hourly earnings. However, officials have indicated that they aim to go beyond this benchmark.
Nye Cominetti, a principal economist at the Resolution Foundation, stated that "countless low-income workers can expect positive news in the budget as the chancellor prepares to unveil the latest increase in the minimum wage."
He mentioned that companies should be accustomed to wage hikes that outpace inflation when it comes to the national living wage. He also pointed out that Labour’s proposed changes are, in fact, “less ambitious than what the previous government achieved” in terms of wage increases.
However, he cautioned that when paired with anticipated raises in employer national insurance contributions, “certain businesses may justifiably claim that their payroll expenses have risen significantly due to this Budget.”
Last week, the Living Wage Foundation announced the new Real Living Wage, which they say reflects the true costs of living. For the upcoming year, the wage is set at £12.60, while workers in London will receive £13.85.
However, the Real Living Wage is not mandated by the government like the national minimum and living wage; it is optional. Currently, only about 500,000 individuals employed by more than 15,000 companies are earning this wage.
The businesses and organizations that are part of this initiative include: IKEA, Aviva, KPMG, Oxfam, LUSH, Nationwide, Burberry, as well as the football clubs Liverpool, Everton, and Chelsea.
Last November, Jeremy Hunt raised the national living wage as part of his commitment to "eliminate low pay" in the UK. This increase brought the hourly wage up to £11.44, benefiting nearly three million employees.
A representative from the Treasury stated, "We do not provide commentary regarding rumors related to budget decisions or tax alterations outside of official financial announcements."
