Millions of workers over the age of 25 have received a pay rise as of Friday, April 1 as the new national living wage has come into force.
Unions welcomed the £7.20 hourly rate for adults, increasing by 50p from £6.70.
Despite this, they said it was not fair that younger workers were missing out, while business groups warned that firms’ payrolls will “ratchet up”.
The Government’s aim is to increase the rate to £9 an hour by 2020, which would affect an estimated nine million workers.
Research by the Resolution Foundation found that more than one in four employees in the Midlands, Wales and Yorkshire and the Humber will benefit, compared to one in seven in London.
Bethany Dodgson, 23, from Gateshead is a conference and events assistant. She said: “It’s a good idea but if your under 25 on a zero hour contract then your’e stuck.”
On the other hand, Michelle McCabe, 49, from Gateshead is a master’s student, and he said for him: “It’s just a new name for the minimum wage.
“It’s not a living wage, especially if you’re on a zero hours contract with no guaranteed hours.
“I’d completely forgotten about it only being for over 25 year olds too!”
Wayne Madden, 31, who is both self-employed and employed said: “I think it’s a boost in confidence and a step in the right direction. It is good to be earning more per hour, every hour.
“The living wage continues to rise and has done so, nationwide, every month as more data is correlated so associating the new minimum wage rise with the living wage is nothing short of a PR stunt, however.”
Charities and official organisations have also voiced their opinion on the move.
The Trade Union Centre’s (TUC) general secretary Frances O’Grady said: “Britain desperately needs a pay rise, and this increase is good news for those aged 25 or older.
“But the Government must ensure that younger workers are not left behind.
“21-24-year-olds will not be seeing an increase; this is not fair. Future wage increases must narrow the pay gap between old and young.”
Helen Barnard, head of analysis at the Joseph Rowntree Foundation, said: “The national living wage is an important step towards a high-wage, low-welfare economy.
“Investing in the skills of low-paid workers and encouraging the creation of more productive jobs would help us to reach this goal faster.
“However, on its own it won’t do a great deal for poverty.
“That’s partly because many workers with low hourly pay live in households with quite high overall incomes.”
Ross Smith, director of policy at the North East Chamber of Commerce, said: “There are undoubtedly some businesses that will be feeling the pressure from this increase, particularly in sectors such as care or retail.
“On the other hand, greater spending power among the population could bring economic benefits.
“Over the longer term, [the] Government must make sure that further increases in the living wage are based on economic evidence.
“It’s also vital to remember that the best way to boost individual prosperity, while at the same time benefiting business, is to ensure we drive up skill levels among the workforce and create better jobs.”
Josh Hardie of the Confederation of British Industry said: “Companies are committed to raising prosperity and living standards, but for wage increases to be sustainable they must go hand-in-hand with productivity growth.
“If the living wage doesn’t get this balance right it will risk being unaffordable for many firms. Smaller businesses and those in key sectors like hospitality, retail and care are likely to be particularly affected.”
Around 2,300 employers have already signed up to the higher voluntary living wage of £9.40 an hour in London and £8.25 for the rest of the UK.
Katherine Chapman, director of the Living Wage Foundation, said: “Today’s new legal minimum is an important step forward in tackling low pay in the UK. The landscape on low pay has shifted.
“This is down to the employers we work with, who have, over the past 10 years voluntarily, chosen to pay beyond the minimum wage rates set by Government.
“However, the job is not done when it comes to tackling low pay. Around six million people earn below the voluntary living wage with women, young people and part time workers most affected by low pay.”
The Government said the new rate will mean a £900 cash increase for a full-time worker on the current national minimum wage.
Politicians have responded to the move.
Owen Smith, Shadow Work and Pensions Secretary, said: “It’s a typically cruel sleight of hand from the Tories to introduce their version of the living wage with one hand, while taking five times as much in cuts to Universal Credit and Tax Credits with the other.
“While this higher minimum wage for the over-25s is welcome, it will feel like an act of deception for the two million families set to lose £1,600 a year through cuts to in-work support.”
Chancellor George Osborne said: “The national living wage will play a central role in moving Britain to a higher wage, lower tax, lower welfare economy.
“It will also mark the end of the gender-pay gap for some of our lowest paid and hardest working people.”
However, eurosceptic Culture Secretary John Whittingdale poured cold water on the initiative, warning that having a higher minimum wage for British workers while in the EU would fuel immigration.
He said: “The living wage was a great idea to give British families a pay rise, but because we have no control of our borders the main people that benefit could be from other EU countries,” he told The Times, adding that the influx would place public services under “great strain”.
Labour MP Chuka Umunna, from the Stronger In campaign, accused Mr Whittingdale of attacking the living wage and having “inherent antipathy to using the clout of government to raise wages for the very lowest paid”.
Mr Osborne added: “We said that Britain deserved a pay rise and today Britain is getting a pay rise.
“It’s going to be a pay rise for millions of people, it’s all part of a government that is delivering for working people.
“So often when the economy recovers and starts to grow it’s the better off who see the benefit of that but I wanted to make sure, we were determined to make sure, that everyone saw the benefits.
“That’s why we are introducing this national living wage.”
“For people under 25, there is the national minimal wage and we have just announced that it is going to go up to £6.95 an hour. We want to make sure that we are not putting people out of work as we increase the wages, so we thought the national living wage is best for people over the age of 25, although companies like Asda have decided to pay everyone, including the people under 25 that wage.”
What do you think of the national living wage? Let us know @SRNewsNow.