National Living Wage increase raises income of low-paid workers

wage slip with pound coins, national minimum wageAs of 1st April 2020, the National Living Wage rate has increased to £8.72, giving a pay rise to thousands of workers across the country, in particular those on the frontline of the UK’s COVID-19 response.

The rise, which has come at the recommendation of the Low Pay Commission (LPC), means the rate has reached the target of 60 per cent of median earnings, which was originally set by the Government back in 2015. In the new 11 March Budget, the Government noted its new target of the NLW reaching two-thirds of median earnings by 2024. In October, the LPC will advise on whether economic evidence justifies the increases and will make their recommendations for the 2021 National Minimum Wage rates.

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 released a new report which details how the NLW reached the 60 per cent target and outlines how we will approach the new two-thirds target. Given current circumstances, it is unclear how this target will be met, due to the current and future state of the labour market.

Alongside the NLW rate increase, National Minimum Wage rates have also risen up to 6.5%. Further changes are already on the horizon, such as the age threshold for the NLW reducing from 25 to 23 in 2021, and then further to 21 by 2024, following recommendations made by the LPC last autumn.

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