By David Milliken
LONDON (Reuters) -Britain’s main minimum wage rate will probably need to rise 4.1% next year to 12.71 pounds ($16.88) an hour to keep up with the government’s goal for it to match two thirds of median earnings, the body which effectively sets the rate said on Tuesday.
Britain’s minimum wage has risen steeply in recent years – increasing by 6.7% in April to 12.21 pounds an hour – and last year it was the second-highest in Europe after France, as a percentage of median earnings, according to OECD data.
Rising wage costs across the whole economy are seen by the Bank of England as one reason why British inflation has been higher than elsewhere in Europe, though it expects pressure to ease as the job market is slowing.
Britain’s minimum wage is set by the government each year based on a recommendation from the Low Pay Commission, a government appointed body that includes representatives from employers, trade unions and academia.
Around 6.5% of British workers receive the minimum wage and a significant number – especially in sectors such as retail, hospitality and cleaning – are paid only slightly more.
Earlier on Tuesday Britain’s government gave guidelines to the commission on the factors it should consider which were little changed from 2024. They include keeping minimum pay no lower than two thirds of the median while taking into account economic competitiveness and employment.
In May, the commission made an initial prediction that the minimum wage for employees aged 21 and over, which the government calls the National Living Wage, would rise by 3.6% next year.
The commission said Tuesday’s higher estimate reflected faster growth in average wages in the past three months and higher expected wage growth over the coming year. The final figure could range between 12.55 pounds and 12.86 pounds an hour, it added.
“Our recommendations are not purely formulaic and we are required to take economic conditions into account, so these figures should be taken as indicative only,” it said.
The central estimate was based on a prediction that annual wage growth for the average worker would slow from 5.1% in May 2025 to 3.9% at the end of this year and 3% by the end of 2026.
The government has also asked the Low Pay Commission to continue to work towards eliminating the lower minimum wage rate paid to workers aged 18-20 – which currently stands at 10 pounds an hour – while avoiding hurting employment in that age group.
($1 = 0.7532 pounds)
(Writing by David Milliken; editing by Giles Elgood)
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