UK Wages are Rising at Last!
The recessions are over and it seems positivity is returning at last. UK wages are set to go up in October 2014 by 19p. While it is not a huge increase, the minimum wage is going to be £6.50 per hour. The minimum wage is increasing by a mere 3 per cent, but for many still being paid minimum wage this is wonderful news. It has been six years since the last rise in UK wages. It is also the first time that wages will be more than inflation.
The Breakdown of Wage Increases
The new increase is based on age. For those who are 16 to 17 wages are only rising 2% meaning 7p for an hourly wage of £3.79. Those who are 18 to 20 years old will also see a 2% increase of 10p for a total hourly wage of £5.13. Anyone who works as an apprentice will see an extra 5p per hour so their wage will be at least £2.73.
To put this in perspective inflation according to the Consumer Prices Index is 1.9%, thus the rate of inflation versus the hourly wage increase means that the hourly wage is above the rate of inflation.
Hourly Wages and Employers
Employers do not need to pay the minimum wage. It is the least amount they can pay a person; however, employers can set the hourly wage at a much higher amount if they have the budget. With the recession over there is some hope in media reports that employers will no longer be timid, but will pay a person to work more in line with expenses. Yet, there are definite worries that employers who only pay the minimum wage, will only increase their wages to the new minimum.
Is Minimum Wage Really Enough?
Despite the happiness that the minimum wage is going to increase, there is still worry. If a person only works 40 hours a week at the adult minimum wage then the person will make £260 per week. It puts a worker earning £1040 per month in gross income. This does not account for the taxes that need to come out of the salary.
To put this in perspective one has to consider the cost of living. Just looking at basic utilities a person needs £170 per month. Flats are on average for a 1 bedroom £571 outside of the city centre and £670 inside the city. This is monthly rental. So a person making £1040 that spends money just on basic utilities and outside the city rent will have £329 left over. This money of course does not include taxes taken out of the pay. So it leaves less than £300 for groceries, transportation, and incidentals.
If looking at the net income versus the gross, plus the expenses for utilities and rent, while adding in the other living costs even one person faces then the minimum wage is still not enough to allow a person live comfortably.
Given that employers are timid about raising wages, there is some definite trouble in the UK wage wise. Certainly any increase is going to help, but it won’t help enough. The high cost of living is just too much for the current situation. Even if inflation is lower than the increase in minimum wage this is nothing compared to prices in stores, for utilities, and for having a roof over one’s head.
Employers who do not want to pay out too much also use the concept of wage freezes to ensure no one can go over a certain amount for their hourly wage no matter how long they might have worked at the company. Other companies can also decrease salaries as long as they keep within the minimum wage limits. These issues are not gone.
Even though the UK economy is growing faster than the rest of the Western World, there is still a huge problem. Not all companies are bouncing back. It takes time for the SMEs or smaller businesses to get back on track. SMEs are known for employing the most employees total in various industries; even while individual companies only have two to 200 employees.
Growth is also going to continue to increase. Now with inflation at 1.9% and a little lower than it has been of late, the chances are that wages will start to rise above the rate of inflation and mean that people are actually enjoying what can be considered an actual increase in pay. As opposed to the mainly below inflation rises that have plagued so many people for the last years.