Warning to low-paid workers as wage growth falls to lowest level in years

Wage growth for low-paid workers has hit a three-year low, warns job site Indeed, sparking concerns among economists that high inflation could eat into incomes.

Business Secretary Jonathan Reynolds suggested on Tuesday that a rise in the national minimum wage could enable low-paid workers to stimulate UK-wide growth, as reported by City AM.

However, fresh research from Indeed suggests that wage growth for lower-income individuals is now dwindling as inflation threatens to rise.

The study found that annual pay growth for low-wage roles was at 6.2% in February, the lowest since early 2022, down from 6.8% in January.

For this analysis, Indeed considered low-wage workers as anyone earning less than £12.55 per hour. As of Tuesday, the minimum wage has been raised to £12.21.

"For some time now, low-paid sectors have been seeing significantly stronger pay growth than the rest of the market," noted Jack Kennedy, a senior economist at Indeed. Recent data from the Office for National Statistics (ONS) showed that annual regular pay grew by 5.9%, a figure deemed "relatively strong" for national growth.

Kennedy points out that the closing gap between wage growth for low-paid workers and the national average indicates how increased employment costs are impacting businesses employing lower-paid staff.

Businesses are bracing themselves for an increase in employers' national insurance contributions that are due to take effect later this week.

The hospitality and retail industries appear to be the most impacted by the tax alterations introduced by Chancellor Rachel Reeves.

In parallel, Bank of England economists have forecasted that inflation may rise to as much as 3.75 percent this year.

Pantheon Macroeconomics analysts assert that Reeves' tax increments have triggered a "stagflationary" disturbance, exacerbating the pressure on the Bank to stave off additional spikes in inflation.

A majority of experts anticipate that the Bank will lower interest rates during its next session in May.