Wage growth falling for low-paid workers despite minimum wage hike
Wage increases among low-paid workers are at their lowest level in three years, according to the jobs website Indeed, as economists fear high inflation will erode incomes.
Business secretary Jonathan Reynolds said on Tuesday that an increase to the national minimum wage would mean that low-paid workers could help drive growth across the UK.
But new research by Indeed indicates that wage growth levels for those on lower incomes are now on the decline while inflation is set to creep up.
It found that annual pay growth for low-wage positions came to 6.2 per cent in February, the lowest figure recorded since early 2022.
Wage growth for people in low pay jobs was 6.8 per cent in January.
Indeed’s calculation for low-wage workers included anyone earning under £12.55 an hour.
The minimum wage increased to £12.21 from Tuesday.
“For some time now, low-paid sectors have been seeing significantly stronger pay growth than the rest of the market,” Jack Kennedy, a senior economist at Indeed, said.
The Office for National Statistics (ONS) recently found that annual regular pay grew by 5.9 per cent, a “relatively strong” figure for national growth.
The narrowing gap between wage growth among low-paid workers and the national average reflects how higher employment costs are taking a toll on firms that employ lower-paid staff,a according to Kennedy.
Businesses are looking ahead to a rise in employers’ national insurance contributions set to come into effect from later this week.
Hospitality and retail sectors are most affected by the changes to Chancellor Rachel Reeves’ taxes on employers.
At the same time, economists at the Bank of England predict that inflation could reach as high as 3.75 per cent this year.
Analysts at Pantheon Macroeconomics said Reeves’ tax hikes caused a “stagflationary” shock that put the Bank under pressure to prevent further inflation increases.
Most forecasters say the Bank will cut interest rates at its next decision in May.
Bloomberg reported that a researcher at the Institute for Employment Studies, Seemanti Ghosh, said pay rises in April are likely to be lower than in previous years.