The minimum wage was first implemented under Tony Blair in 1999 and has increased every year since. Initially, the minimum wage was divided into two categories: one for those aged 22 and over and another for those aged 18–21. In 2004, the wage was extended to include those under 18, followed by the introduction of the National Living Wage in 2016 for workers aged 25 and over. In 2021, the eligibility for the National Living Wage was lowered to include those aged 23 and over.

When discussing the subject, entrepreneurs, who are opposed to increases from a business perspective are often shocked when faced with the reality of the cost. The issues surrounding age brackets, yearly salaries and whether it is enough to live on, create challenges for those opposed to increases. 

While the minimum wage has risen yearly, this rise is not without controversy after the new government’s autumn budget faced widespread criticism. The most notable issue within the budget was the rise in National Insurance (NI) contributions for UK businesses. 

The decision did not increase costs for taxpayers but dealt a significant blow to small and medium-sized businesses. National Insurance Contributions (NICs) rose by £900 for an average salary of £33,000 and by £770 for a full-time minimum wage salary of £22,000. When considered with minimum wage increases, the decision has been met with criticism.

So what are the changes coming into force?

In the new financial year, the minimum wage will increase across all three age brackets as well as for apprentices. The rate for those under 18 and apprentices will rise from £6.40 to £7.55 per hour, while 18–20-year-olds will see the largest increase, from £8.60 to £10 per hour. For those aged 21 and over, the rate will rise from £11.44 to £12.21 per hour. Compared to 2021, this represents a 46% increase for those 21 and over, a 52% increase for 18–20-year-olds, and a significant 63% rise for those under 18.

Labour claims that the sharp increase in wages for those under 21 is a step toward creating more equality across age groups. However, this contradicts their previous statements and manifesto pledge to eliminate age-based wage brackets and address age-related wage inequality..

For someone over 21 working 35 hours per week, the increase brings their annual salary to £22,222. Despite the rise, this remains a relatively low income, potentially making many workers eligible for state benefits.

But what are the criticisms?

Businesses have criticised the move, arguing that it places a disproportionate financial burden on small and medium-sized enterprises.

The British Retail Consortium (BRC) warned up to 160,000 part-time retail jobs are at risk over the change in National Insurance and minimum wage which will add £5 billion to retailers’ Labour costs in 2025. Retail is one of the industries hit hardest by the move, as a major minimum wage employing body and industry facing profitability issues as UK disposable incomes have reduced due to inflation.  

The hospitality industry has also criticised the move, especially from pubs that are attempting to keep prices low for consumers. The founder of Wetherspoons, Tim Martin, spoke out that this decision could force the business to push prices up to cover costs.

While businesses grapple with higher costs amid a cost-of-living crisis that is already reducing consumer spending, will the wage rise be enough to help workers? 

The Living Wage Foundation sets out the ‘real living wage’ which essentially reflects the income a worker needs to meet basic living costs. Currently, this stands at £12.60 across the UK and £13.85 in London. While many employers, particularly in London, voluntarily adhere to this rate, it is not legally enforceable. The government’s increase of the National Living Wage for those over 21 to £12.21 still would not be enough to teach the real living wage.

Yet on the whole, at a time when the cost of living is not yet a distant memory, with energy bills rising further, it seems the improvement is not going to improve the situation drastically. 

A full-time minimum wage worker would still earn less than the income needed for a decent standard of living. This gap is even wider for the many minimum-wage workers in part-time roles, further reducing their earnings.

Labour’s decision to improve minimum wage increases was not as drastic as their manifesto set out. They originally stated that ‘we will remove the discriminatory age bands to ensure every adult worker benefits,’ however within months of taking office this was backtracked.

The age brackets, especially for those over 18, remain problematic, as employees doing the same job can receive significantly different pay simply because of their age. The changes coming into effect in April will continue to widen the gap, with a £2.45 difference between 16- and 18-year-olds and a £2.21 gap between 18-year-olds and those aged 21 and over. For a part-time worker on a 20-hour weekly contract, this age disparity amounts to nearly £2,300 in annual salary.

On the whole, there is a huge debate surrounding minimum wage and living wage increases. Business costs are increasing, and workers are feeling the pinch. It is a dilemma hard to balance, with strong arguments for removing the age brackets and increasing the minimum wage. The changes coming into force may have consequences on employment and prices, but we will have to wait and see.