Britain’s new Labor government won a landslide election victory, promising to return Britain to its economic peak. The latest evidence of wage growth for workers will give them a good platform to deliver on that promise.
Salaries in the UK rose by 7% in the year to June, according to Indeed Recruitment Lab. That’s nearly twice the 3.7% wage growth in the euro zone and more than twice the 3.1% wage growth in the United States.
Results vary depending on the broader economic context of the three economies. Britain’s economic growth this year is expected to be slower than that of the euro zone and the United States, according to the latest forecasts from the International Monetary Fund.
One explanation may be the substantial growth of the British national economy. Live In terms of wages, employers must pay employees over the age of 21 the legal minimum wage.
The UK government is tasked with maintaining the national living wage at two-thirds of the UK median wage, based on the recommendations of its advisory committee, the Low Pay Commission. This goal helps prevent workers from falling into relative poverty.
To keep pace with inflation and private sector wage growth, the National Living Wage increased by 9.8% in April, the third largest increase since its introduction in 2016. at the lowest limit Salaries for those aged 16 to 20 have increased even more.
The Labor government, led by Tony Blair, introduced a national minimum wage in 1999. At the same time, median wages have only grown by around 20% over the same period, indicating a reduction in pay inequality in the UK
The Low Pay Commission estimates that around 1.6 million people were paid at or below the minimum wage last April, so an increase in the base could have a huge impact on economic growth.
Indeed says last year’s rapid wage growth in the UK was driven by the national living wage, but that’s not the full explanation.
“Strong wage growth across all pay ranges shows that the 9.8% rise in the UK national living wage on 1 April is not the only driver behind wage growth, but that it is having a lasting impact on low-wage wages and on wages in specific sectors. Labor demand” , said Pawel Adrjan, head of research for Europe, the Middle East and Africa at Indeed Recruitment Labs.
“Low-paid occupations could get another boost as Labor plans to remove age limits from the UK’s national minimum wage structure.”
Labor said it would also allow the Low Pay Commission’s remit to extend to the cost of living, paving the way for a bigger increase in the national living wage in the future.
Inflation headache
While workers will cheer the wage increase, it could become the latest headache for policymakers keen to cut interest rates.
The Bank of England has kept its base interest rate at 5.25% for nearly a year in response to rising prices.
The consumer price index (CPI) in May reached the bank’s 2% target. However, the central bank expects inflation to spike again in the third quarter, leading them to delay cutting interest rates.
At the same time, the country is lagging behind the euro zone, with the European Central Bank (ECB) becoming the first major central bank to cut interest rates in June.
Any signs of wage growth in the UK could prompt Bank of England rate setters to tighten their already cautious interest rate ambitions.
