An emergency “brake” could be pulled to prevent further increases in the National Living Wage from overheating the economy during the coronavirus crisis.
The NLW goes up today (1st April) April to £8.72, giving a pay rise to thousands of workers, many of whom are at the frontline of the UK’s response to COVID-19.
The 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% of median earnings, originally set by the Government in 2015.
In last month’s Budghet, Chancellor Rishi Sunak confirmed its ambition for the NLW to continue increasing towards a new target of two-thirds of average earnings by 2024.
But it has asked the LPC to advise on whether the economic evidence warranted these increases – and the escalation in deaths and economic uncertainty caused by COVID-19 has cast another dimension on the government’s plans.
NATIONAL LIVING WAGE
INCREASE FROM APRIL 1 2020
Bryan Sanderson, Chair of the Low Pay Commission, said that 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.
He said that at the same time, the Government has introduced a “comprehensive” package of support for employers to lessen the impact of the extraordinary circumstances brought about by coronavirus.
But Sanderson said: “Under our new remit, the Government asks us to monitor the labour market and the impacts of the NLW, advise on any emerging risks and – if the economic evidence warrants it – recommend that the government reviews its target or timeframe.”
Sanderson said the LPC will give the government its advice based on the economic data it receives.
A so-called “emergency brake” may have to be applied, depending on how the coronavirus crisis plays out.
The other rates of the National Minimum Wage (NMW) will also increase alongside the NLW.
The NLW is the statutory minimum wage for workers aged 25 and over. Different minimum wage rates apply to 21-24 year olds, 18-20 year olds, 16-17 year olds and apprentices aged under 19 or in the first year of an apprenticeship.
The age threshold for the NLW will be reduced from 25 to 23 in 2021, and then further to 21 by 2024. This follows a review of the structure of the National Minimum Wage youth rates and recommendations made by the LPC last autumn.
The NLW was introduced in April 2016 and had a target of 60% of median earnings by 2020, subject to sustained economic growth.
The National Living Wage is different from the UK Living Wage and the London Living Wage calculated by the Living Wage Foundation.
The LPC will make its recommendations to Government on the 2021 NMW rates in October.