An extension of the national living wage to all adults should be phased in “year by year” and the NLW rate should rise at least in line with median earnings after the government updated the Low Pay Commission’s remit.
In a written statement to Parliament, business secretary Jonathan Reynolds said he had written to LPC chair Baroness Stroud to set out an updated remit, which asks the commission to consider the cost of living for the first time, while also considering the impact on business, the labour market and the wider economy.
But the government has chosen what has been described as a “one-year holding position” for the 2025 national living wage (NLW) – the rate for people aged 21 and over – after the government asked the LPC to preserve its value relative to typical wages.
The remit says the LPC should ensure the rate does not drop below two-thirds of UK median earnings for workers aged 21 and over, a recognised measure of low hourly pay.
2025 national living wage
The Resolution Foundation think tank says the remit marks a slowdown in the rate of growth in the minimum wage compared with the approach taken by governments since 2015 when the minimum wage rose faster than typical wages.
Over this period, it said the “bite” of the national living wage – its value compared to median earnings – increased from 52.4% to 66.7%.
Reynolds said: “We are ambitious in developing a path towards a genuine living wage, but we know that this path must be backed by evidence and consistent with delivering inclusive growth for workers and businesses.”
He has asked that the LPC recommend a national minimum wage rate that continues to apply to 18 to 20-year-olds from April 2025.
“This should continue to narrow the gap with the national living wage, taking steps year by year in order to achieve a single adult rate,” he said.
“We are committed to achieving a single adult rate, and we will ensure that any impacts on youth employment or participation in education and training are considered carefully, as we move towards this.”
Chancellor Rachel Reeves said: “Economic growth is our first mission, and we will do everything we can to ensure good jobs for working people. But for too long, too many people are out of work or not earning enough.
“The new LPC remit is an important first step in getting people into work and keeping people in work, essential for growing our economy, rebuilding Britain and making everyone better off.”
Nye Cominetti, principal economist at the Resolution Foundation, said: “During the election, Labour pledged to make the minimum wage a genuine living wage. What that means in practice remains unclear, with today’s announcement more of a one-year holding policy. Indeed, the LPC’s new remit is unlikely to produce a different minimum wage in 2025 than would have been reached under the previous government’s plans.
“The big policy change is reserved for younger workers, with the UK set to move towards a single rate for all adults – by putting the rate for 18 to 20-year-olds on a path to converge with the adult rate.
“This relative lack of action on minimum wages suggests that the new government’s initial focus when it comes to improving low-paid work will be through stronger employment rights in areas such as sick pay and zero-hours contracts, and better enforcement of those rights.”
TUC general secretary Paul Nowak said: “Hard work should pay for everyone. These are significant first steps towards making the minimum wage a real living wage and will make a difference to millions. We welcome the government’s decision to ask the Low Pay Commission to be more ambitious next year and into the future.
“We also support the Government’s commitment to ending discriminatory age bands for minimum wage workers. Young people face the same cost of living pressures as other adult workers and will welcome their pay being brought into line.”
How much will the 2025 national living wage be?
The Resolution Foundation notes that the Labour government’s plan for next year’s national living wage is broadly the same as that set out by the previous government in March 2024.
In March, the LPC said that it expected the NLW rate to reach between £11.61 and £12.18, with a central estimate of £11.89 in April 2025 – up 3.9% on the current NLW of £11.44 – in order to remain at two-thirds of median hourly pay.
The current national minimum wage for people aged 18 to 20 years old, is currently £8.60 and would need to increase by one third to match the current NLW.
The “real” Living Wage, the voluntary, independently set rate which accounts for the cost of living, is currently £12.00 per hour, or £13.15 in London.
The LPC will make its recommendations on the 2025 national living wage rate in October.
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