Real Living Wage rise takes effect ahead of predicted spike in inflation
More than 300,000 workers are set to receive a pay rise after higher rates were announced for the Real Living Wage, the voluntary rate paid by thousands of employers.
The Living Wage Foundation, which sets the rates, said the new hourly rate would be £11.05 in London and £9.90 outside the capital.
They amount to increases of 20p and 40p, respectively, as consumers grapple a surge of rising costs – especially for fuel and household energy – which are tipped to be reflected in inflation figures for October due to be released this week.
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The cost of petrol and diesel have hit record highs in recent weeks following a 60% hike in wholesale oil prices this year as economies reopen following widespread COVID-19 disruption.
While the energy price cap was raised by 12% at the start of October following unprecedented rises in gas costs – there are warnings of worse to come when the cap is next reviewed in early 2022.
Rising prices threaten consumer spending power but the Bank of England opted against an anticipated rise in interest rates to dampen inflation expectations earlier this month.
The Real Living Wage is higher than the statutory National Living Wage of £8.91 an hour for adults, which will rise to £9.50 in April.
The Foundation said 9,000 employers have now opted to pay the voluntary sum and new signatories included construction firms Taylor Wimpey and Persimmon Homes.
Fujitsu and Capita were also among those to be accredited since the last increase, taking the total since the pandemic started to more than 3,000.
Living Wage Foundation director Katherine Chapman said: “With living costs rising so rapidly, today’s new Living Wage rates will provide hundreds of thousands of workers and their families with greater security and stability.
“For the past 20 years, the Living Wage movement has shaped the debate on low pay, showing what is possible when responsible employers step up and provide a wage that delivers dignity.
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“Despite this, there are still millions trapped in working poverty, struggling to keep their heads above water and these are people working in jobs that kept society going during the pandemic like social care workers and cleaners.”
A government spokesperson said: “The government is determined to make work pay, having recently announced a significant rise in the National Living Wage from April 2022, to £9.50 an hour – the biggest increase since its introduction.
“We have also committed to further increases to the National Living Wage, to reach two thirds of average earnings by 2024.
“The minimum wages are a legal minimum, and we commend employers who are able to pay more, when they can afford to do so.
“We are committed to going even further to support workers, pushing ahead with plans to include a new right for all workers to request a more predictable contract from their employers, giving individuals the security they need.”
The UK’s jobless rate ticked up to 4.6% in April while payrolled employment has fallen sharply since, according to official figures covering the period when budget tax hikes on businesses came into effect.
The Office for National Statistics (ONS) said the new unemployment rate covering the three months to April was the highest since July 2021.
It had previously stood at 4.5% – a total of more than 1.6 million people.
At 4.6%, it is above the peak level predicted for this year, just in March, by the Office for Budget Responsibility.
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Figures from the taxman also highlighted by the ONS showed the number of people in payrolled employment during May fell by 109,000 – double April’s revised figure of 55,000 and the biggest monthly drop in five years.
The ONS Labour Force Survey data was the first to cover April’s rises in employer national insurance contributions and the national living wage – hikes to costs for businesses which lobby groups had warned would result in job losses, price rises and lower wage settlements.
The ONS figures showed average weekly earnings, excluding the effects of bonuses, over the three months to April were weaker, from a downwardly revised 5.5% to 5.2% year on year.
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Cost of living impacts families
Liz McKeown, ONS director of economic statistics, said: “There continues to be weakening in the labour market, with the number of people on payroll falling notably.
“Feedback from our vacancies survey suggests some firms may be holding back from recruiting new workers or replacing people when they move on.”
The ONS data piles more pressure on Chancellor Rachel Reeves, just a day after she confirmed her winter fuel U-turn would cost £1.25bn.
She has consistently defenced her budget, arguing the taxes on business were a one-off necessary evil to account for a £22bn “black hole” in the public finances inherited from the last government.
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Employment minister Alison McGovern said in response to the data: “Six months after we launched Get Britain Working, we are already seeing the benefits with economic activity at a record high, with 500,000 more people in employment since we entered office and real wages growing more since July than in the decade after 2010.
“People all over the country are benefiting from increased training opportunities and the newly launched Jobs and Careers Service will allow us to test new and innovative approaches to personalise employment support.”
Despite the wage figure easing, that 5.2% level remains comfortably ahead of the 3.5% rate of the pace of price growth – inflation.
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The curb to consumer spending power will be welcomed by the Bank of England as its rate-setters continue to fret that strong wage growth represents an inflation risk ahead.
The ONS figures did little to boost financial market expectations of a further rate cut next month.
LSEG data showed 90% of market participants believed there would be no no change – with just one further cut this year being fully priced in.
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