The National Living Wage (NLW) will increase today (Wednesday 1 April) to £8.72, giving a pay rise to thousands of workers at the frontline of the UK’s response to Covid-19.
This rise follows recommendations made to the Government by the Low Pay Commission (LPC) in the autumn. It means the rate reaches the target of 60 per cent of median earnings, originally set by the Government in 2015.
In the 11 March Budget, the Government confirmed its ambition for the NLW to continue increasing towards a new target of two-thirds of median earnings by 2024. It asked the LPC to advise on whether the economic evidence warranted these increases. The LPC will make its recommendations to Government on the 2021 National Minimum Wage rates in October.
Bryan Sanderson, Chair of the Low Pay Commission, said: “Many of the nation’s key workers – in, for example, the care sector, agriculture, transport and retail – are low-paid, are continuing to work in very difficult conditions and will benefit from today’s increase.
“At the same time, the Government has introduced a comprehensive package of support for employers to lessen the impacts of these extraordinary circumstances.
“Under our new remit, the Government asks us to monitor the labour market and the impacts of the National Living Wage closely, advise on any emerging risks and – if the economic evidence warrants it – recommend that the government reviews its target or timeframe.
“This is what the Government refers to as the ‘emergency brake’. The ongoing Covid-19 pandemic clearly represents a very challenging set of circumstances for workers and employers alike, and will require us to review whether the emergency brake is required when we next provide our advice to the Government. This advice will be crucially dependent as always on the economic data we receive.”
The LPC has published a short report looking at the NLW’s path to the 60 per cent target and outlining how we will approach the new two-thirds target. This report does not set out a pathway to the new target, given the uncertainty over the current and future state of the labour market.
The other rates of the National Minimum Wage will also increase alongside the NLW:
| Previous rate | Current rate from 1 April 2020 | Increase | |
|---|---|---|---|
| National Living Wage | £8.21 | £8.72 | 6.2% |
| 21-24 Year Old Rate | £7.70 | £8.20 | 6.5% |
| 18-20 Year Old Rate | £6.15 | £6.45 | 4.9% |
| 16-17 Year Old Rate | £4.35 | £4.55 | 4.6% |
| Apprentice Rate | £3.90 | £4.15 | 6.4% |
| Accommodation Offset | £7.55 | £8.20 | 6.4% |
New research shows overwhelming support for further increases in order to tackle low pay.
The report, based on a large-scale representative survey of adults across the UK and focus groups with low paid workers, found that two in three adults (66%) thought that the wage floor was too low, and that it should be increased, with just one in fifty (2%) saying it was too high. Support for boosting the minimum wage was highest among young adults, low income households, and those in lower socio-economic groups.
The National Living Wage – the mandatory minimum wage for workers aged 25 and over – increases by 51p to £8.72.
The largest cash boost to the minimum wage since its introduction comes at a difficult time for the economy and household incomes, with many businesses and workers deeply affected by the coronavirus crisis.
The increase was announced in December, when employment stood at a record high, and when there was no indication of the scale of the damage coronavirus would cause.
Even before the current crisis, half (48%) of adults surveyed agreed that government should take a cautious approach to setting the wage floor to avoid an increase in unemployment; while one in three (37%) said government should take a more ambitious approach to increasing the minimum wage, even if it risked a small increase in unemployment.
There was however strong support for the government’s long-term plan to increase the National Living Wage to two thirds of median pay by 2024 – forecast to be £10.50 – and extend it to all workers aged 21 and over. Nearly seven in ten adults (66%) supported the proposal and fewer than one in ten (9%) opposed.
Despite the increase in the minimum wage in recent years, the number of adults in in-work poverty had grown, even before the coronavirus crisis. Low paid workers described the impact poverty has on their lives; from being unable to afford the basics and getting into debt, to having to work multiple jobs.
While low paid workers supported a higher minimum wage, many were sceptical about the extent to which it will benefit them. Low paid workers felt that increases in pay as a result of a higher minimum wage would be offset by lower Universal Credit income, leaving them little better off.
Low paid workers were also pessimistic about how businesses would respond to a higher wage floor, with many fearing their employer would cut back on other benefits, or reduce hours or staffing in response.
The report is the first in a programme led by Learning and Work Institute and Carnegie UK Trust, exploring the impact of a higher minimum wage on workers, employers and the economy. The programme will set out how a higher wage floor could be part of a broader strategy to tackle low pay and in work poverty and promote good work.
Joe Dromey, deputy director of research and development at Learning and Work Institute said; “The minimum wage has helped tackle extreme low pay without costing jobs. While this increase comes at a difficult time, it will mean a welcome pay rise for millions of workers.
“There is overwhelming support for future increases in the minimum wage – particularly among low paid workers. With the economy likely to take a big hit from coronavirus, the government will need to think carefully about how this can be delivered, but it should remain focused on both tackling low pay and in-work poverty.”
Douglas White, Head of Advocacy at the Carnegie UK Trust, said; “Decent pay is a critical aspect of good work, vital to help workers provide for themselves and their families, and clearly maintaining incomes is at the forefront of people’s minds at this time of crisis.
“National Minimum Wage policy is not the only route to supporting the living standards of workers – Government has also taken significant steps in recent weeks to maintain people’s incomes through the Coronavirus Jobs Retention Scheme and the social security system.
“However, we welcome this week’s uprate in the Minimum Wage, and we encourage the UK Government to continue their commitment to an ambitious minimum wage policy. Our research demonstrates that even before this current crisis, far too many workers feel that wages do not cover the cost of living and that despite working hard they are being pushed in poverty.”
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