Embattled hospitality bosses today hit out at another round of above-inflation minimum wage increases coming into force for 2.4 million workers in April.
The Government announced today that the National Living Wage will rise by 4.1% to £12.71 an hour next year, while the rate for 18 to 20 year olds will go up by a higher than expected 8.5% to £10.85.
The rise will mean that the minimum wage for the 18 to 20 age group will have shot up by more than 65% from £6.56 an hour in five years.
The Government, which is committed to creating a single adult living wage rate for all over 18s, says the hikes are in line with recommendations from the Low Pay Commission.
But the steep increase in the rate for younger workers falls particularly heavily on pubs and restaurants who depend on students and younger workers to serve as bar staff, waiters and kitchen porters.
Trade body UKHospitality said the wage increases loaded an extra £1.4 billion in additional costs on the industry already suffering a bigger jobs shake out than any other sector.
The group said the eve of Budget announcement meant it was even more important for Rachel Reeves to provide other forms of relief in her speech tomorrow such as radical rates reform.
Kate Nicholls, Chair of UKHospitality, said: “Hospitality businesses have reached their limit of absorbing seemingly endless additional costs. They will simply all be passed through to the consumer, ultimately fuelling inflation.
“The sector needs the Chancellor to reduce its tax burden through significant business rates reform tomorrow. We need to see the maximum possible business rates discount for all eligible hospitality properties and no hospitality venue hit by the surcharge.
“The higher-than-expected increase to the rates for under-21s are also worrying for hospitality businesses, who had hoped the Government would take a more pragmatic approach to achieving its goal of equalising all wage rates.
“When there are almost a million young people not in employment, education or training, this will put further pressure on already fragile youth employment rates. Given the Government’s ambition to help young people back into work, this level of increase is concerning.”
UKHospitality has called for the maximum possible business rate discount for properties below £500,000 rateable value, and a pledge that no penalty charge is applied to any hospitality property above £500,000 rateable value.
Speaking at a Primark store Rachel Reeves said the increases would help lower paid working people who are “struggling to make ends meet.”
She added: “For a full-time worker on the National Living Wage, that means an increase in pay of £900 a year.
“And for someone on the National Minimum Wage, working full time, it will mean a £1500 increase.
“We also need to support businesses while protecting jobs and the economy. And that's why we've secured trade deals with the US, with the EU, and with India.
“It's why we're committed to economic stability. To help interest rates fall further.
“ It is why we have capped corporation tax, and why we're reforming business rates, particularly so that they help the high street. “
TUC General Secretary Paul Nowak said: “The government is delivering on its promise to make work pay.
“With living costs stubbornly high, an above-inflation pay rise will make a real difference to the lowest-paid.
“Putting more money in people’s pockets is good for workers and good for the economy as it goes straight back into our high streets and local businesses.
“And sticking with plans to scrap youth rates is absolutely the right call. Young workers have bills like everyone else and deserve a fair day’s pay for a fair day’s work. It's right they see a larger rise as youth rates are phased out.”
