The government have decided that the national minimum wage is to rise by 12p an hour to £6.31 for adults and by 5p to £5.03 for 18-to-20-year-olds from October, business secretary Vince Cable revealed today.
The changes come on the recommendation of the Low Pay Commission, where it was also announced that apprentices will also see a 3p pay rise to £2.68 an hour, despite the fact the Commission said the rate should be frozen.
Despite the increases, all the changes are below the current inflation levels, with the Retail Prices Index (RPI) currently standing at 3.2%. The Consumer Prices Index (CPI) currently stands at 2.8%.
So how will the changes effect the working population? Obviously those employees on minimum wage and apprenticeships will be slightly better off. It is being claimed that the income of the low-paid goes straight back into the economy, in which case this will help aid the recovery. Although the increase isn’t huge, it is much better than a freeze, which is what was suggested prior to today’s news, and also sends out a clear message that apprenticeships are important and recognised by the government.
The other side of the announcement however highlights the fact that many business owners will not be happy with the adjustment. The 1.9% increase on the minimum wage is over 50% higher than current average pay growth. This will increase business costs for many already struggling with the pressure of the current economic climate. It has also been argued that because of this rise, many businesses will now question whether it is worth taking on new members of staff, a move where we could see unemployment figures rise even further.
The Government are clearly trying to find the fine line between helping employees and not crippling businesses, but it remains to be seen whether this announcement will have much effect in trying to revive the UK economy.
How will you be affected by the increase? Do you think it is a positive move by the government, or a further setback for business owners? Please leave your comments below.
Image sourced from Pixabay.