Around two million workers will get a pay rise next year when the National Living Wage is increased from £8.91 an hour to £9.50.
The Treasury confirmed on Monday ahead of Chancellor Rishi Sunak’s Budget this week that the increase for all over-23s will take place on April 1.
The 59p hourly boost will mean a full-time worker on the living wage will get a pay rise of more than £1,000 per year, according to the Government.
But critics questioned how much better off workers will be considering the Chancellor has already hiked National Insurance and cut Universal Credit as inflation rises.
The 6.6% hike is more than twice the current consumer price inflation rate of 3.1%.
While the National Minimum Wage applies to everyone of school-leaving age, the National Living Wage applies to everyone aged 23 and over.
For those aged 21 and 22, the minimum wage will rise from £8.36 an hour to £9.18, while the figure for apprentices will go from £4.30 to £4.81 per hour.
Mr Sunak said: “This wage boost ensures we’re making work pay and keeps us on track to meet our target to end low pay by the end of this Parliament.”
But there will be questions over whether the hike is enough to support families facing a cost of living crisis.
Torsten Bell, the chief executive of the Resolution Foundation living standards think tank, said it is “nonsense” to argue that the raise will make full-time workers £1,000 better off because “fast” rising inflation will eat up two-thirds of the raise.
— HM Treasury (@hmtreasury) October 21, 2021
He also warned that firms who have their “profits squeezed” and customers facing higher prices will lose out because of the hike.
Senior research economist Tom Waters at the Institute for Fiscal Studies think tank said rising inflation will “blunt” the increase in real terms and noted that Universal Credit recipients will “see their disposable income go up by just £250 because their taxes rise and benefit receipt falls as their earnings increase”.
Shadow chief secretary to the Treasury Bridget Phillipson said the rise was an “underwhelming offer”.
“Much of it will be swallowed up by the Government’s tax rises, Universal Credit cuts and failure to get a grip on energy bills,” the Labour MP said.
“It’s clear that Labour is the only party serious about improving the prospects of working people.”
Frances O’Grady, the general secretary of the Trades Union Congress, said boosting the minimum wage is “vital” but urged the Government to “set its sights higher” by instead increasing it to £10 and cancelling the Universal Credit cut.
The National Living Wage (minimum wage for everyone aged 23+) will rise to £9.50 in April. Good – low earners have been by far worst affected by this crisis: much much more likely to have lost their jobs (and tragically to die) than higher earners 🧵 pic.twitter.com/xS60dsDElE
— Torsten Bell (@TorstenBell) October 25, 2021
She added: “This increase won’t come into effect until next spring by which time many household budgets will have been hammered by rising bills and the universal credit cut.”
Federation of Small Businesses national chair Mike Cherry called for increases to be “matched by support for those who will struggle to afford to maintain jobs”.
Liberal Democrat Treasury spokeswoman Christine Jardine suggested that workers will be “bitterly disappointed” when they see “almost half of any rise snatched away by the Treasury before it even reaches their bank accounts”.
“Instead of a fair deal, families across the country are facing a Budget nightmare with a soaring rise to the cost of living paired with tax hikes left, right and centre,” she added.
Mr Sunak increased National Insurance Contributions for workers by 1.25% to help pay for the NHS and social care, while he ended the £20-a-week Universal Credit uplift.