Yesterday it was announced that the national minimum wage will rise in coming months by a recommended 3%, the biggest increase since 2007. The move comes amidst a record low inflation rate of 0.3%, which is likely to go negative in the next few months.
Last week, the Bank of England advised that wages should rise by 3.5% by the end of the year, something Ernst and Yong ITEM club has predicted is likely to happen. The forecast is that real wages will rise by 1.8% this year, with a possibly growth of 3.7% by 2018. Martin Beck, Senior Economic advisor for the EY ITEM Club, confirmed,“workers will finally see more money in their pockets this year”.
The government is also cracking down on any businesses that have underpaid workers. In another name and shame scandal, 160 employers have been confirmed to have underpaid staff since 2013. Northern Ireland supermarket chain Supervalu was on the list, having failed to pay two of its staff £905.86. Business Minister Jo Swinson supports this ‘name and shame’ technique, stating how it gives, “a clear warning to employers who ignore the rules, that they will face reputational consequences as well as financial penalties of up to £20,000 if they don’t pay the minimum wage”.
The news comes with a global focus on wages, with US giant Walmart announcing that it will be improving wages for over 500,000 of its hourly employees. The company’s President and CEO, Doug McMillon, stressed the importance of retailers caring for all employees in a letter posted to Walmart’s blog:
“Today’s cashiers will be tomorrow’s store or club managers. Today’s managers are tomorrow’s vice presidents. Tomorrow’s CEO will almost definitely come from inside our company” McMillon said. News of Walmart’s development and debates over the UK wage system is putting pressure on British retailers to follow suit.
Wage developments have already started, with the final three months of 2014 seeing average earnings increase by 2.1% compared to the previous year. If all goes to plan, next month’s budgets could confirm the increase and see the rate for 18-20 year olds rise to £5.30 an hour, while the Low Pay Commission believe a 20p raise should be sufficient for the adult minimum wage, providing those 21 and over with £6.70 per hour. Vince Cable, the Business Secretary sees the increase as a positive move forward, “restoring the value it (minimum wage) lost during the financial crisis”.