The Low Pay Commission’s 2018 Report, published yesterday, finds that increases to the National Living Wage (NLW) has raised the pay of up to 5 million workers this year.
Chair of the Low Pay Commission Bryan Sanderson said: “That 5 million workers received higher pay rises in April than they would have done without the NLW shows how significant an intervention it has been in the labour market.
“So far, the evidence suggests the NLW has been successful in raising pay without causing unemployment, but employers have had to adjust in various ways.
“Our 2018 Report contains definitive analysis of the NLW so far, and the detailed evidence which underpins our 2019 rate recommendations.”
As many as 5 million people benefited from the increase to the NLW in April 2018 – fewer than in 2017 but still a fifth of workers aged 25 and over. The 4.4% increase in the NLW pushed pay up faster than average not only for those on the rate, but also for the bottom 20% of earners (those earning up to £9 per hour). This is because employers have sought to maintain a gap between job grades, or have kept their pay rates above the NLW.
In total, 1.6 million people were paid at or below the NLW, equivalent to 6.5% of all workers aged 25 and above; roughly the same proportion as in 2016 and 2017. Almost two thirds of those paid the NLW, a million workers, were women.
Following the 2018 increase, more workers than ever before were paid at a rate just above the NLW. 1.6 million people were paid between 5p and 50p per hour more than the rate, with almost half a million of these paid at £8 per hour. In 2017, 1.4 million were paid between 5p and 50p above the NLW, and a quarter of a million were paid £8 per hour.
The LPC heard from employers how they have had to adapt to NLW increases: accepting lower profits, increasing prices where possible, restructuring workforces and narrowing the gaps between pay bands. Stakeholders thought improving productivity would be the key to managing future cost increases.
However, the LPC’s analysis and research did not find clear evidence of any negative effects on employment from the increased NLW.
The Government announced the NLW and National Minimum Wage (NMW) rates to apply from 2019 in this October’s budget, accepting in full the LPC’s recommendations. The NLW will rise to £8.21 in 2019, on course to its target of 60% of median earnings in 2020 (currently forecast to be £8.62).
The LPC’s rate recommendations comprised:
| Current rate | Future rate (from April 2019) | Increase | |
|---|---|---|---|
| NLW | £7.83 | £8.21 | 4.9% |
| 21-24 rate | £7.38 | £7.70 | 4.3% |
| 18-20 rate | £5.90 | £6.15 | 4.2% |
| 16-17 rate | £4.20 | £4.35 | 3.6% |
| Apprentice rate | £3.70 | £3.90 | 5.4% |
| Accommodation offset | £7.00 | £7.55 | 7.9% |
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