The minimum wage for workers over 21 is set to increase by 3.9 per cent in this week’s Budget, bringing it to around £13.20 per hour or £27,456 a year for a 40-hour week.
The increase will likely be billed as a victory for those on low pay – but in reality, it isn’t.
In April 2020, just as Covid-19 was beginning to cause chaos in the British economy, the minimum wage for those over 25 sat at £8.72 an hour. For those aged 21 to 24, it was even lower at £8.20.
By April 2027, when the new increases are expected to be implemented, the wage will have increased by over 50 per cent. In only seven years, such a drastic increase is unprecedented.
Over that period, many young people who have followed the advice of their careers advisors and gone to university – taking on tens of thousands of pounds of debt to do so – will barely have seen a pay increase at all.
I lived with this exact issue. I graduated in 2020 in the midst of Covid with a first-class degree from one of the country’s top universities. I started work at a big professional services firms and my starting salary was just over £18,500. This breaks down at £8.89 per hour for a standard 40-hour work week.
Five years later, in 2025, following job changes and much time spent on career development, I was earning £27,000 – around £12.98 per hour.
This is less than what a minimum wage worker will work out at from next year with no degree and no debt, and without the expectation of mass amounts of unpaid overtime that graduate jobs are renowned for.
At the time – before I left this line of work and moved on to a new career – my salary of £27,000 was even above what many of my friends, saddled with the same tuition fee debt and plunged into a struggling job market, were earning. Many of them could not find work at all.
And now, an individual working 40 hours per week on minimum wage will be earning the same as what was viewed as an aspirational sum to many of my peers only one or two years ago. It makes you wonder – what is the point of going to university and working to better yourself, taking on a large financial burden in the process?
Further problems arise when considering the slow pace of wage growth in the private sector itself.
This year’s minimum wage increase of 3.9 per cent significantly outranks the private sector wage growth as it stands in October at 3 per cent. This is now a common occurrence.
As the minimum wage continues to increase faster than other low-paying wages, such as those usually given to the few university graduates fortunate enough to find employment, the gap between earners decreases.
Soon, there may be no meaningful difference between minimum wage and graduate pay, except that university graduates will also be saddled with debilitating student loan repayments which make them worse off overall.
The issue is not that those on minimum wage are getting paid too much; it is rather that everyone else is getting paid too little – with the general exception of those in the public sector, for whom average annual wage growth is more than double that of the private sector, currently sitting at 6.3 per cent, according to the Office for National Statistics.
Frequent and drastic minimum wage increases in a generally slovenly economy also punishes employers who are facing increased business costs at the low-earning end.
Subsequently, they cannot give high pay rises further up the corporate ladder, further feeding into the pay trap that the country has found itself in.
This inadvertently leads to fewer jobs being advertised both on minimum wage and for new graduates, with both retail employment and graduate job advertisements recently falling to record lows.
There is an argument that far too many young people are going to university than what is necessary, and this may be true to an extent.
But, Britain cannot continue to run an economy where the sensible financial choice for its brightest young people is to avoid further education entirely and commit themselves to minimum wage working forever, as statistically they may be financially better off.
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