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National Minimum Wage 2024

National-Minimum-Wage-2024-Richard-image-SH

National Minimum Wage 2024

As the new National Minimum Wage kicks in this April, our founder Richard East reflects on the last 25 years, and what this new amount means moving forward.

In 1999, Tony Blair’s Labour Government introduced the very first UK minimum wage nationally. People over 22 years received £3.60 per hour and 18-21 year olds received £3 per hour. Numerous economists and business leaders voiced concern that business costs would increase to a dangerous level and lead to subsequent redundancies and high unemployment. This was later proven not to be the case and companies absorbed the cost, lifting many low paid employees out of poverty.

Fast forward 25 years, and from 1st April 2024, the national minimum wage is now £11.44 for people over 21 years and £8.60 for 18-20 year olds.

National Minimum wage can be applauded as a success (So far!)

The UK now has one of the highest minimum wages in Europe.

However, in recent years many companies have struggled to accommodate rising minimum wage with the economy being at a low ebb and business costs rising in all areas from energy to tax.

There is no evidence that high unemployment in some European countries is a result of high minimum wages, but then nor is there evidence that this isn’t a direct cause. There is evidence, however, that the increasing minimum wage significantly leaves businesses looking to pass the increase on, although SME’s often find this challenging as some of the big corporates remain steadfast with their pricing structures. Years of shrinking margin is now becoming unsustainable for some and business owners are becoming more determined in protecting margin to remain relevant in their sectors.

As this additional cost gets passed along the chain it will eventually end up with increased costs to the consumer, quite possibly negating the benefits of the increase in minimum wage.

The knock on effect

2.7 million of the lowest paid workers are set to benefit from the minimum wage increase, although it is still 56p behind the living wage outside of London as set by the Living Wage Foundation.

I’m pretty sure that with the expected incoming Labour Government this year, next year’s increase will align with living wage and see another significant hike. This is likely to put pressure on businesses to lift other wages and salaries to ensure that the gap for their higher paid staff is still proportionate.

In the main, this year’s increase has been absorbed and it seems businesses can manage the rise. I wonder about next year though. I think real consideration around next year’s rise is vital and that Government think tanks should listen to business. It would be a shame after 25 years of managing this to see businesses, particularly in our hospitality sector, unable to pass on costs and remain profitable.

Interesting times!

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