An inflation-busting rise in the minimum wage to £8.72 an hour for over-25s has drawn criticism from both bosses and trade unions.
Boris Johnson hailed the “biggest ever” increase in the official wage floor – a hike of 51p, or 6.2 per cent, from next April – saying: “For too long people haven’t seen the pay rises they deserve.”
Younger workers on low pay will see it boosted by between 4.6 per cent and 6.5 per cent, depending on their age, with 21 to 24-year-olds receiving a 50p increase from £7.70 to £8.20 an hour.
But the British Chambers of Commerce said such a large increase would create problems for businesses “in a time of great economic uncertainty”.
“Raising wage floors by more than double the rate of inflation will pile further pressure on cashflow and eat into training and investment budgets,” said Hannah Essex, its co-executive director.
“For this policy to be sustainable, government must offset these costs by reducing others and impose a moratorium on any further upfront costs for business.”
Furthermore, earlier this month, the government watered down its pledge to raise the floor to £10.50 by 2024, saying it would only happen “provided economic conditions allow”.
Frances O’Grady, the TUC’s general secretary, said: “Workers are still not getting a fair share of the wealth they create. And in-work poverty is soaring as millions of families struggle to make ends meet.
“No more excuses, working families need a £10 minimum wage now, not in four years’ time.”
Katherine Chapman, director of the Living Wage Foundation, said the increase still did not take the minimum wage up to £9.30 – or £10.75 in London – which the charity calculates is the level needed to cover the cost of living.
She said: “There are still over 5 million workers in the UK earning less than the real living wage.
“There is a still a gap between the government minimum and the real living wage, independently calculated based on what it costs to live.”
Ministers said nearly three million workers would benefit from the increases, worth £930 a year for an over-25 full-time worker, and that the wage floor was “on track” to hit 60 per cent of median earnings by 2020.
Nye Cominetti, an economic analyst at the Resolution Foundation think tank, welcomed the increase but warned it was “not risk-free”.
He said: “It should be matched by a renewed commitment to swiftly evaluating evidence of the impact of such large and sustained minimum wage rises – and acting on that evidence if problems emerge.”