The age from which workers become eligible for the national living wage will reduce to 23, the government has confirmed as it announced April 2021 increases to statutory minimum wage rates.
In his comprehensive spending review today, Rishi Sunak confirmed that the national living wage (NLW) will increase 2.2% to £8.91 from 1 April 2021 and will become available to people aged 23 and above, down from the current age of 25.
National living wage 2021
Workers aged 23-24 years old will receive a substantial pay rise of almost 9%. Some commentators had expected the reduction in minimum age for the national living wage to be postponed.
Accepting “in full” the Low Pay Commission’s recommendations, the chancellor also announced that that the full national minimum wage rate, which from April 2021 only apply for those aged 21-22, will also increase. It will rise by 2.0% to £8.36.
Sunak said: “Taken together, these minimum wage increases will likely benefit around two million people. A full-time worker on the national living wage will see their annual earnings increase by £345 next year. Compared to 2016, when the [NLW] policy was first introduced, that’s a pay rise of over £4,000.”
Bryan Sanderson, chair of the Low Pay Commission, said: “Recommending minimum wage rates in the midst of an economic crisis coupled with a pandemic is a formidable task. The difficulty in looking forward even to next April is daunting.
“There are strong arguments concerning both low-paid workers – many performing critically important tasks – and the very real solvency risks to which small businesses are currently exposed. In these unprecedented conditions, stability and competence are prime requirements.”
After much debate, the recommendations had the support of the business, trade union and academic representatives who make up the Low Pay Commission.
“We have opted for a prudent increase which consolidates the considerable progress of recent years and provides a base from which we can move towards the government’s target over the next few years.”
In the 2020 Budget, the government set a new target for the NLW to reach 66.7% of median earnings by 2024. It currently stands at 60%.
In its report, the LPC said its approach this year was to recommend rates that minimise any ‘significant risk’ to employment prospects, as per its remit. “This led us to recommend a 2021 NLW rate of £8.91. This is lower than our best estimate of the on-course rate of £9.06, but is modestly higher than the increase in prices, meaning low-paid workers’ living standards should be protected.”
The TUC believed today’s announcement put the 2024 target at risk. Frances O’Grady said: “Workers expecting a national minimum wage increase – not least the two million who are key workers – have been let down by the government’s decision to row back on the full rise they were promised.”
Earlier this month the ‘real’ Living Wage – the voluntary hourly rate of pay recommended by the Living Wage Foundation – increased to £9.50 across the UK and £10.85 in London.