Increase to the National Living Wage & National Minimum Wage
The Government has announced an increase to the National Living Wage (NLW) and National Minimum Wage (NMW) rates following the recommendations of the Low Pay Commission published in December 2020. The Low Pay Commission is an independent public body that advises the Government. The rates will come into force from April 2021. The NLW will become available to people aged 23 and over (the current age eligibility is 25).
Young workers in hospitality and retail have been hit hard by the ‘Lockdown’ measures brought in during 2020-21. Around 2 million of the UK’s lowest-paid workers expected to benefit from increase in National Minimum Wage and National Living Wage
National Living Wage Age Threshold Lowered
The LPC made it’s recommendation to lower the National Living Wage age threshold was based on the findings below:
"The use of the 21-24 year old rate amongst that age group is low; fewer than 100,000 workers aged 23-24 have a stated hourly rate below the NLW;
Moving this age group up to the NLW would result in reasonable bites (defined as the ratio of the minimum wage to median hourly pay for that age group);
23-24 year olds are similar to 25 year olds across a range of indicators. This is true in terms of the ways they have been affected by the lockdown – including the proportion furloughed or working no hours, and the rates at which they are returning to work. However, their unemployment is increasing at a faster rate than older workers;
Stakeholders agreed that the NLW age threshold should be lowered;
Research evidence supports the change. The last time the age threshold of the adult rate was lowered in 2010, econometric analysis found no significant negative employment effect. This is particularly relevant as the change took place in the aftermath of the financial crisis;
Demographic changes over the next few years are also likely to reduce the risk. The size of the 21-24 year old age group will get smaller; and
Record high employment and a tightening labour market were likely to offer protections to young workers. Although this argument has not stood the test of this year, and the position of 23 and 24 year olds has weakened in the pandemic, the LPC decided that on balance, the majority of arguments made in the youth review continue to support the change."
Business Secretary Alok Sharma said:
“While this has been an extraordinarily difficult year for millions of people, this government remains absolutely committed to putting more money in the pockets of the UK’s lowest-paid workers.
“This measured rise strikes the right balance between supporting hard-working families through this tough time, while protecting firms as they recover from the impacts of COVID-19.”
Chancellor of the Exchequer, Rishi Sunak, said:
“I know people are struggling, and that they are worried about the months ahead. This above-inflation pay rise will help to protect the lowest paid and put more money in the pockets of hard-working families.”
The Low Pay Commission, is an independent body made up of Commissioners from business, worker and academic backgrounds, which advises the government on the National Minimum Wage and the National Living Wage.
