Rise in National Minimum Wage in the UK

On 1 October 2012, various changes to the UK tax and benefits system came into force, including an increase in the minimum wage. This change means that for those aged 21 and above, the minimum wage has increased by 11p from £6.08 to £6.19 per hour. However, for those under 21, the minimum wage has remained frozen at £4.98 an hour for 18 - 20 year olds, and £3.68 an hour for 16 and 17 year olds, whereas the rate for apprentices has risen by 5p to £2.65 per hour.

This combination of change and freeze in the national minimum wage has been met with a mixed response. Some commentators have observed that the 1.8% rise in minimum wage for adults is actually lower than the rate of inflation, which currently stands at 2.9% (Retail Price Index). This means that although on the face of it, many workers will benefit from this increase, in real terms, it is a pay cut as the cost of living outstrips the earnings of some of the UK’s poorest workers. However, the Confederation of Business Industry has said that it believes that employers welcome the moderate increase in the minimum wage rate for adults and the freeze in the rates for young people in the light of "particularly tough conditions" faced by consumer-facing businesses.

The government has reasoned that the changes aim at increasing employment, particularly creating more jobs for young people. According to the Low Pay Commission, the employment prospects of 16 - 20 year olds have been deteriorating since 2007 in comparison to older workers. It is hoped that freezing the minimum wage for young workers will ensure that employers are not deterred from employing young people, and will give employers more confidence to invest in their training.