John Oxley is a consultant, writer, and broadcaster. His SubStack is Joxley Writes.
There will be an unexpected winner from the Budget this year – MPs’ lowest-paid staff.
Administrative assistants in constituency offices at the bottom of the pay scale will get a pay boost next April.
Otherwise, Parliament itself will breach National Living Wage laws, once known as the minimum wage. This reflects one of the under-discussed trends in our economy over the last decade or so. The lowest level of pay has risen and risen, while levels above it have stagnated. With John Healey continuing this trajectory, 40 hours a week at NMW will earn £27,456 next year.
Now, there are good arguments for raising the wages of the lowest earners. Better pay gives people more control over their lives and helps reduce dependency on benefits. In an ideal world, there should also be a productivity benefit. Raising wages for the lowest-paid jobs can encourage economic efficiency, with workers moving into roles and methods that add the most value.
The successive rises in minimum wage have, however, coincided with a different phenomenon: wage compression. While minimum wages have risen, others have stagnated, squeezing incomes together. Between 2016 and 2025 the National Living Wage rose by 70 per cent. Over the same years the typical full-time salary rose by 38 per cent. The longer view is starker. In the quarter century to 1999, real pay for someone at the 70th percentile grew by more than four-fifths. In the quarter century to 2023, it grew by 14 per cent.
The change is even more noticeable when compared with other benchmarks imposed by Chancellors. In 1999, a full-time worker on the minimum wage earned about a fifth of what it took to pay the higher rate of tax. From April, they will earn more than half. Rather than simply achieving a baseline for low pay, the minimum wage has driven a “great catching-up”. The floor has kept rising; the middle and the ceiling have not.
This will create a problem for employers. The pace of change brings many more into the minimum wage’s remit. Salaried workers who go beyond their contracted hours can inadvertently fall below the minimum thresholds. For companies, ensuring they are paid fairly and legally brings greater admin and risk. Someone on £30,000 might feel like they are above the threshold, but five hours of overtime a week could push them into breach, especially if signed up to a workplace pension or other salary sacrifice options. Firms that once kept time records only for hourly staff now need them for their managers as well. Getting it wrong means back pay, a penalty of up to twice the arrears, and a place on the government’s list of named employers.
The impact for workers is worse. The Low Pay Commission’s own research found that some of the NMW’s losers were those paid slightly more than the minimum. The risks of legal compliance make it attractive to put the money at the bottom and hold back everyone above it, or to cut out the supervisory grades altogether.
More broadly, many workers have noticed minimum wages creeping up to their own earnings. Partly, this is social status anxiety. The image of minimum-wage jobs has long been associated with the low-skilled and the young – not office jobs and graduate roles, which have now been caught up. But there are also economic implications. If the minimum wage is catching up with your income, labour-intensive services you consume become harder to afford. Things like a cleaner or childcare become relatively more expensive, as do hospitality and other businesses where wages make up a large share of the cost.
We often tend to think of the squeezed middle in terms of rising costs. Rents and mortgages are rising, energy prices are increasing, and taxes are rising, all chipping away at available income. The other side of the ledger often gets neglected, but it may be what’s hurting Britain most. Wages have been stuck for nearly two decades, never quite recovering from the financial crisis, and the pain has been concentrated on those in the middle. The lowest decile, and those on minimum wage, have seen growth that has far outstripped that of median and upper-percentile earners.
This should be a priority for the Conservative Party.
At conference, the party was right to embrace fixing some of the issues facing higher earners, like the absurd tax cliffs that hit at the £100,000 threshold. A centre-right party that cannot win higher earners’ votes has no purpose. But equally important is growing the pool of better-paid workers and ensuring wages start to track upwards once more. When middle managers earn little more than the people they manage, and promotion brings longer hours, more responsibility and a bigger tax bill but not much more money, people stop reaching for the next rung. The wage compression they feel is equally damaging for a party of aspiration.
Wage compression is slow poison for an economy. People are discouraged from training, moving on and taking harder jobs. Their relative spending power diminishes, especially as other costs rise. It spreads a sense of misery, and it feels like getting on isn’t worth it. The shop worker who becomes a store manager, or the junior who qualifies as an accountant, is asked to carry more and finds the reward thinner than it was for the person before them. Multiplied by millions of examples you get a country that works hard but no longer expects to get ahead, spreading disaffection and disengagement.
Answers lie in boosting productivity.
Make Britain more competitive and increase the value each worker delivers. Policy-makers have plenty of ideas, but they’ve lacked the political message to sell them. Productivity itself is the dry metric of the bean-counter. The Conservatives should harness it with a proper campaign about rising wages and making people better off. It gives a persuasive narrative for otherwise difficult sells around planning, energy, and fiscal reforms. It also returns to the classic message that has always helped the party win power – voting Conservative will make you better off.
For years, successive Chancellors have raised the floor of what people can earn – Conservative ones included. That has done well for those in the lowest-paid employment, but combined with stagnating productivity, those above have been compressed. Middle and higher wages have struggled to increase, and household disposable income has barely grown. It is the unacknowledged factor in much discussion of both the cost of living and political alienation. Pushing up the wages of middle earners and allowing more people to become higher earners should be the next Conservative mission.