Analysis by the Low Pay Commission (LPC) has revealed that a quarter of all UK employees aged 25 and over had a pay increase in 2016 following the increase of the minimum wage to £7.20 last April.
Although the law forced companies to increase the salaries for the 1.6 million workers – or 6.7% of all employees over 25 – at the bottom of the ladder, many employers appear to have given those on the next few rungs up a pay rise too. The reason for this is to maintain pay differentials between roles.
The decision to increase the minimum wage was taken by former Chancellor George Osborne to try to combat the “low-pay, low-productivity trap”. Employers managed the cost of this pay increase seemingly through lower profits and by passing on some of the cost to customers via higher prices. However, some economists had warned that the national living wage would cost jobs by making employees too expensive to hire. Yet the unemployment rate has continued to fall and is now at an 11-year low of 4.8%.
Mr Osborne promised to increase the rate steadily until it reached 60% of median earnings by 2020, which would give the UK one of the highest minimum wages in the world. So while many employers said they coped over 2016, they are worried about how to manage the increases being considered between now and 2020.
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