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The rise (and rise) of the National Living Wage

On 2 October, the Chancellor announced a surprise rise in the National Living Wage (NLW) during his Conservative Party Conference speech. 

Although the exact figure has not yet been confirmed, the Chancellor confirmed that he will accept the recommendations of the Low Pay Commission (LPC) which are due to be announced in November.  This should see the NLW rise to over £11 an hour from April 2024. 

Separately, the LPC have recently published a report showing that the NLW has had positive impacts on both workers’ earnings and the labour market since its introduction in April 2016. 

This report follows detailed research by the LPC, in which they used geography, gender and age to categorise workers into 320 different groups. Some of these groups were identified as more affected by the introduction of the NLW than others, based on how many workers were previously paid less than the NLW and how their wages compared to the UK average. 

The research showed positive effects for workers of the NLW being introduced, including: 

  • Significant increases in the average hourly wage across all groups. 

  • Faster average wage increases in those groups most affected by the NLW. 

  • Highest increases amongst the lowest paid workers in each group. 

Reassuringly, these benefits do not appear to have been achieved at the expense of the wider labour market.  The research showed no evidence of significant negative impacts on employment rates or hours worked as a result of the NLW coming into force.  Instead, the LPC note that the NLW may have increased labour market participation, as inactivity was significantly reduced with no corresponding increase in unemployment.  

 

This article reflects the position at the date of publication (18 October 2023). If you are reading this at a later date you are advised to check that that position has not changed in the time since.    

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