Highest ever National Living Wage increase

The biggest ever increase to National Living Wage (NLW) has come into effect this week, with 1.8m workers receiving an additional £690 over the year from 1 April

The NLW increases by almost 5% to £8.21 an hour, meaning full-time workers will be more than £2,750 better off a year compared to 2015, when the rate was first announced.

The National Minimum Wage (NMW) is also increasing. This includes £7.70 per hour for 21 to 24-year olds, providing an additional £580 over the year for full-time workers, and £6.15 for 18 to 20-year olds, providing full-time workers with an additional £455 over the year.

The government says this means that overall 2.1m people will be receiving a pay increase from today, with almost 800,000 workers in the retail and hospitality sectors due to benefit the most. Chancellor of the Exchequer, Philip Hammond, said: ‘This government is committed to raising productivity performance across the income spectrum, so that the wages of the lowest paid can increase sustainably over time.

‘While the proportion of low paid jobs is now at its lowest level for 20 years, we are going further by asking Professor Arindrajit Dube, a world-leading expert in the field, to undertake a review of the international evidence of minimum wages on productivity and employment.’

The government is committed to ensure the NLW reaches 60% of median earnings by 2020, subject to economic growth. The latest NLW rate of £8.21 represents 59.8% of median earnings, putting the UK on track to achieve this.

Since 2015, the UK’s minimum wage has grown faster than those of most countries with similar or higher minimum wages, including France, Belgium, Germany, Ireland, Luxembourg and Australia. Only New Zealand has seen faster growth.

On the 20th anniversary of the National Minimum Wage, a Low Pay Commission (LPC) report shows its introduction has reversed the pre-1999 trend of pay growth inequality.

Last year the lowest-paid workers earned £2.70 per hour more in real terms than if there had been no minimum wage, equivalent to £5,000 a year for a full-time worker.

The report found 30% of workers have benefited either directly or indirectly from the minimum wage, with up to 7m individuals a year feeling the benefits, while the LPC did not identify significant negative effects on employment from raising the minimum wage.

Between 1999 and 2018, the LPC estimates that the total benefit to workers of minimum wage increases has been £60bn. This is calculated by working out the difference between two figures: first, the sum of the real increases in hourly pay since 1999 for the bottom 30% of jobs held by workers aged over 25; second, an estimate of what they would have earned in the absence of the minimum.

National Minimum Wage and National Living Wage rates

20 years of the National Minimum Wage

Report by Pat Sweet

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Very informative. Thanks