LONDON (Reuters) – Britain’s government has ended its push to use increases in the minimum wage to narrow the gap between the lowest earners and those on higher pay, offering some relief to employers after this year’s nearly 10% jump.
Britain’s minimum wage for workers aged 21 and over will rise to 11.44 pounds ($14.45) an hour in April – hitting two thirds of median earnings for workers in that age group, and one of the highest among advanced economies.
The Department for Business and Trade said in a statement on Wednesday that this met a political commitment by Prime Minister Rishi Sunak’s Conservative Party and that for 2025 the minimum wage should rise in line with median earnings.
The Low Pay Commission, the panel of experts which advises the government on minimum wage increases, said the most likely increase needed for the National Living Wage in 2025 would be a 3.9% rise to 11.89 pounds an hour.
Britain first introduced a minimum wage 25 years ago to address the problem of pay inequality.
The Resolution Foundation, a think tank, said this week that the pay of low earners was now 6,000 pounds a year higher than it would have been had it risen in line with typical pay growth.
Employers have said big increases in recent years – which reflect in large part the jump in inflation – have put pressure on them to increase their prices or reduce hiring.
A survey of businesses published on Wednesday by Lloyds Bank pointed to a slowdown in hiring plans that the bank said might be linked to the increase in the minimum wage.
The Bank of England is watching pay growth closely as it assesses whether inflation pressures in the economy are easing sufficiently for it to cut interest rates.
($1 = 0.7915 pounds)
(Writing by William Schomberg; editing by David Milliken)