National Living Wage to increase

January 2, 2020

The National Living Wage is set to increase in April 2020, following recommendations from the Low Pay Commission (LPC).

The LPC has published its recommendations on the National Living Wage (NLW) and National Minimum Wage (NMW) and a summary of its 2019 findings, covering analysis of the impact of the 2019 rates and the evidence for recommendations for rates from April 2020.

The acceptance of the LPC’s recommendations means achieving the goal originally announced by the Government in 2015, of raising the NLW to 60% of median earnings. The Chancellor has indicated he will set a further target of two-thirds of median earnings by 2024.

Bryan Sanderson, Chair of the Low Pay Commission, said, 'The NLW has been an ambitious long-term intervention in the labour market. The rate has increased faster than inflation, faster than average earnings and faster than most international comparators. This has raised pay for millions without costing jobs, although employers have had to make a variety of other adjustments to deal with the increases.

'Our recommendations on the NLW are conditioned on sustained economic growth, and this bar was more narrowly reached than in previous years. Nevertheless, the economy has continued to grow and the labour market has performed well overall.

'The Chancellor’s intentions for the next phase of the NLW will mean further ambitious increases. We will continue to keep a close eye on the evidence and to report to the Government on the challenges this involves.'

The LPC recommended that the National Living Wage increase to £8.72 from £8.21 - a 6.2% increase on the 2019 rate.

The April 2019 increase in the NLW directly raised pay for around 1.6 million workers in 2019.

While in recent years NLW workers have done better in terms of pay increases than their counterparts paid above the rate, this year there was strong pay growth across the bottom two-fifths of the distribution. This suggests employers have taken measures to preserve pay differentials, changed their workforce structures or simply raised pay to compete with other firms.

Average weekly pay for NLW workers grew faster than for most other groups between 2018 and 2019, as these individuals typically worked more hours. This marks a change from previous years, when increases in the NLW had a weaker effect on workers’ weekly pay and therefore on living standards.

This year’s recommendations for younger workers are higher than in 2018, reflecting the strong pay growth and stable overall employment levels for these groups. This will be the final year in which the NLW will apply to workers aged 25 and over, with the age threshold coming down to 23 in 2021 and to 21 by 2024.

In response to the announcement regarding the National Living Wage increase, President of the Association of Directors of Adult Social Services (ADASS), Julie Ogley, said, 'We welcome the Government’s announcement of an increase in the wages of the lowest paid workers. This recognises the skilled and compassionate work that care workers undertake each and every day to support some of the most vulnerable members of our communities.

'The Government will clearly need to fund this significant commitment and adjust the funding available to local government and social care accordingly. If Government does not provide additional funding, then this will further destabilise already fragile care markets with a clear impact on those of us who need care and support.

'Prior to this announcement, our autumn survey found that nearly all Directors (94%) say that have little or no confidence that they will be able to deliver their statutory responsibilities for care market sustainability by the end of 2020/21. Any further hole in the finances would make the task even more difficult.'

The Independent Care Group (ICG) says the Government’s plan to increase the national living wage for over-25s is very welcome. The Group’s Chair, Mike Padgham said, 'These increases are very good news for lower-paid workers and we would like to see rates of pay even higher.

'However, we have to add the caveat that these increases will add further pressure, especially to those who are providing publicly-funded care. It will also increase prices for those paying for their own care.

'The Government will need to better fund local authorities so that they can, in turn, increase their fees to providers to allow for increased wages, otherwise it will just heap greater pressure on those already struggling to survive.

'In an ideal world everyone across social care would like to pay their staff more but they all need greater support to be able to meet the demands of increased wages and all the other pressures providers face.

'As a country, we have to get greater funding into social care so that we can provide a better care service, meet the needs of the 1.5 million who currently aren’t getting the care they need and properly reward and recognise the amazing staff who work in care.'

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