Almost three million workers are set to receive a 6.2 per cent pay rise from April, after the government announced plans to raise the national living wage.
The raise, which the government says will be “the biggest cash increase ever”, comes as prime minister Boris Johnson seeks yo shore up support from the working class voters who helped deliver him a decisive victory in the recent General Election.
“Hard work should always pay, but for too long, people haven’t seen the pay rises they deserve,” Johnson said.
The national living wage for over-25s will increase from £8.21 an hour to £8.72 an hour from the start of April, in what Johnson described as “a well-earned pay rise”.
The rise represents a £930 increase in annual earnings for an employee working 35 hours per week.
Minimum pay for younger workers will also increase by between 4.6 per cent and 6.5 per cent, depending on their age.
In September, chancellor Sajid Javid pledged to raise the national living wage towards a new target of two-thirds of median earnings over the next five years, compared to its current rate of 60 per cent.
Under current forecasts, this would mean the national living wage would hit £10.50 by 2024.
“Raising wage floors by more than double the rate of inflation will pile further pressure on cash flow and eat into training and investment budgets,” said Hannah Essex, co-executive director of the British Chambers of Commerce.
“For this policy to be sustainable, government must offset these costs by reducing others – and impose a moratorium on any further upfront costs for business.”
Claire Ainsley, executive director of the Joseph Rowntree Foundation, welcomed news of the increase, but said that low-paid workers needed more support in the face of rising living costs.
“The government is right to take steps to tackle the injustice of in-work poverty and move towards a real living wage. But too many workers are finding that minimum wage increases are being lost due to high housing costs, and inadequate social security,’ she said.