Low Pay Commission prepares to reduce the age-related pay gap

The Low Pay Commission is preparing to reduce the pay gap between 18-20-year-olds and those aged 21 and over as part of its new government remit.

In a statement released today (5 September), the LPC outlined the factors and evidence it will consider to help employers, workers and representatives get ready for the changes to be implemented in April 2025.

The independent public body, which advises the government on the national minimum wage for 18-20 year-olds and the national living wage for those aged 21 and over annually, was given a new remit by Labour in July.

The government aims to abolish the rate for 18 to 20-year-olds so the NLW will apply to all adults and suggests the LPC should do this gradually by “taking steps year by year”.

The LPC says its goal for 2025 is to further shrink the gap between the rate for 18 to 20-year-olds and the NLW.

The remit also proposes the next NLW increase considers factors such as the cost of living and expected inflation to March 2026, indicating it should not drop to less than two-thirds of median hourly earnings. These will act as a “floor” to its recommendations, according to the LPC.

The commission highlighted that the remit stated the importance of boosting low earnings, noting there is “scope to recommend increases above the ‘floor’ if the economic evidence supports this, i.e. taking into account the impacts on business, competitiveness, the economy and wider labour market”.

It added that it would only recommend an NLW below the floor “if this was necessary to avoid substantial negative outcomes, such as significant job losses among low-paid workers”.

The LPC plans to continue gathering evidence until the end of October 2024, when its recommendations will be submitted to the government.

This includes a range of evidence to examine the effects on business, competitiveness, the labour market and the wider economy. It also expects to receive the Annual Survey of Hours and Earnings (ASHE), to help calculate its final central estimate and ranges of the rate required to ensure it stays at two-thirds of median earnings.

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