As the U.K. minimum wage rises to the level of entry pay for professional jobs, concerns are spreading across the business community about labor cost burdens and a hiring slowdown. Experts warned that inflows of young talent could fall and social mobility could shrink.
According to the Financial Times (FT) on the 2nd, U.K. Chancellor Rachel Reeves signaled a roughly 4% hike in the minimum wage to £12.70 an hour, drawing concern from the business community. If raised as outlined in the budget, the annual salary based on a 40-hour workweek would be £26,416 (about 49.55 million won), close to the lowest entry-level pay for university graduates in finance at £25,726.
According to the Institute of Student Employers, entry pay for graduates in professional services is £33,000, with a record high of £65,000.
Experts are voicing concern over the steep increase. Job seekers could lose the incentive to complete professional training, and employers would be forced to reduce direct hiring. A chief executive officer (CEO) at a large London-based company said, "The reason to go to university while shouldering £45,000 in student loans is disappearing," adding, "If professionals and supermarket staff receive the same pay, social inequality will worsen."
James O'Dowd, CEO of staffing firm Patrick Morgan, also said, "In the mid-sized professional jobs institutional sector such as audit and consulting, automation and overseas outsourcing will surge due to labor cost pressures," adding, "In the end, the job opportunities themselves are likely to shrink."
In fact, some companies have already moved to adjust working hours amid concern that when new employees work long hours, their hourly pay could fall below the minimum wage. If corporations end up on the government's list of minimum wage violators, they could face penalties and criminal investigations. The U.K. government earlier announced in 2010 a policy of publicly listing companies that failed to comply with the minimum wage and implemented it from 2011, but halted it after 2016.
Charles Cotton, an advisor at the Chartered Institute of Personnel and Development (CIPD), said corporations are closely monitoring benefits such as health insurance and the provision of bicycles and vehicles to ensure employees' hourly pay does not fall below the legal minimum.
The chair of an FTSE 100 company said in an interview with the FT, "The combination of the minimum wage hike, higher National Insurance contributions, and the introduction of new hires' 'day-one rights' has made recruiting young talent a high-risk undertaking," adding, "The job market is already tightening, with the number of job postings declining." Day-one rights means that various employment rights accrue from the first day of employment, regardless of length of service.
Still, some say professionals could engineer rapid wage growth by building careers over the long term. Will Holt, an executive at the Institute of Chartered Accountants in England and Wales, explained, "Choosing a workplace that embeds structured training rather than receiving high pay from the start can be advantageous for a long-term career." For example, in accounting, including the Big Four, entry pay increases are classified as minimal, yet highly educated applicants continue to flow in thanks to robust career development systems and brand value.
However, some warn this could effectively shut off talent inflows altogether. Brett Dixon, vice chair of the Law Society, said, "In the legal profession, where new lawyers at small firms are paid at minimum wage levels, it is hard for younger generations to find entry attractive," adding, "Low compensation relative to long working hours will raise turnover and block the inflow of talent."