GovWire

The National Living Wage (NLW) increases on Saturday 1 April by 9.7 per cent to 10.42, providing a pay rise to millions of workers aged 23 and over across the UK. 21-22 year olds will see their pay increase by 10.9 per cent to 10.18 per hour while pay for younger workers and apprentices will also rise by 9.7 per cent.

These increases follow recommendations made to the Government by the Low Pay Commission (LPC) in the autumn. The NLW increase means another significant step towards reaching the Governments target of two-thirds of median earnings by 2024. The increase is also expected to boost the real value of the NLW, restoring most of the real value lost since April 2021.

The LPC is now consulting on National Minimum Wage (NMW) rates for April 2024 and beyond and will make its recommendations to the Government in October. The consultation will run from 23 March to 9 June 2023. For more information, including how to submit responses, click here.

Bryan Sanderson, Chair of the Low Pay Commission, said:

From April, millions of workers will benefit from these increases to the NMW and NLW. Despite turbulent economic conditions, the labour market has remained strong and unemployment is low. We remain confident that this increase is unlikely to have a detrimental impact. Indeed, the high levels of inflation are felt more acutely by those on low pay who spend a higher proportion of their income on energy and food.

The new NLW rate keeps us on track to reach the Governments target of two-thirds of median earnings by 2024. We estimate the NLW will need to rise next year to between 10.90 and 11.43 to meet this target. We also remain committed to lowering the NLW age threshold to 21 years of age in 2024.

In our consultation this year we are also looking beyond 2024, and inviting evidence and views on the future of minimum wage policy once the two-thirds target is achieved. The NMW is a central feature of the UK labour market and workers and employers alike will want to contribute to the debate about its future.

The LPC has published a short report which looks ahead at what the new rates will mean, and sets out an updated path of the NLW to its target of two-thirds of median hourly earnings by 2024. Estimating the forward path of the NLW is very challenging as earnings growth is difficult to measure and predict in the current economic climate. Our central estimate of the on-course rate of the NLW for 2024 is 11.16, within a range of 10.90 to 11.43.

Notes for editors

1. Increases in the National Minimum Wage rates, including the National Living Wage, are not directly influenced by the level of inflation. This years large increases reflect the inherent ambition of the two-thirds NLW target, strong pay growth, and the relative strength of the labour market for workers of all ages.
2. The real value of the NLW has fallen since April 2021. The 2.2 per cent increase in April 2021, during the pandemic, led to the rate reaching its highest ever real value, but this was eroded 0sharply by inflation in the year that followed. The 6.6 per cent increase to 9.50 in April 2022 helped restore some of this lost value but that was also soon eroded. The latest inflation data and both OBR and Bank of England forecasts suggest the NLWs real value continued to fall until March 2023. We expect the rise in the NLW to 10.42 to mean that the real value (adjusted for inflation) of the NLW is higher in April 2023 than April 2022, recovering much of its lost real value but remaining slightly lower than its all-time high in April 2021.
3. The LPC originally submitted its recommendations in October 2022. The Government subsequently announced its acceptance of those recommendations on 17 November 2022. The LPCs 2022 Report, which sets out the evidence underpinning its recommendations, was published in January 2022.
4. The National Living Wage (NLW) is the statutory minimum wage which will apply as of 1 April for workers aged 23 and over. Different minimum wage rates apply to 21-22 year olds, 18-20 year olds, 16-17 year olds and apprentices aged under 19 or in the first year of an apprenticeship.
5. Since 2020 the Government has had a target for the NLW to reach two-thirds of median earnings by 2024. However, the Government has recommended that if the economic evidence warrants it, the Low Pay Commission should advise to review the target or its timeframe. This emergency brake will ensure that the lowest-paid workers continue to see pay rises without significant risks to their employment prospects.
6. The Government is yet to publish its remit to the LPC for 2023.
7. Unlike the NLW (where the possibility of some consequences for employment have been accepted by the Government), the LPCs remit requires us to set the rates for younger workers and apprentices as high as possible without causing damage to jobs and hours. The lower rates for younger workers reflect lower average earnings and higher unemployment rates for these age groups. International evidence also suggests that younger workers are more exposed to employment risks arising from the pay floor than older workers.
8. It is the Governments intention that the age threshold for the NLW is reduced to 21 by 2024. This follows the LPCs review of the structure of the National Minimum Wage youth rates and its recommendations in 2019.
9. The Accommodation Offset is an allowable deduction from wages for employer-provided accommodation, applicable for each day of the week. In April 2023 it will increase to 9.10 per day.
10. The National Living Wage is different from the UK Living Wage and the London Living Wage calculated by the Living Wage Foundation. Differences include that: the UK Living Wage and the London Living Wage are voluntary pay benchmarks that employers can sign up to if they wish, not legally binding requirements; the hourly rate of the UK Living Wage and London Living Wage is based on an attempt to measure need, whereas the National Living Wage is based on a target relationship between its level and average pay; the UK Living Wage and London Living Wage apply to workers aged 18 and over, the National Living Wage to workers aged 23 and over. The Low Pay Commission has no role in recommending the UK Living Wage or the London Living Wage.
11. The Low Pay Commission is an independent body made up of employers, worker representatives and experts whose role is to advise the Government on the minimum wage. The rate recommendations introduced today were agreed unanimously by the Commission.
12. The current Low Pay Commissioners are: Bryan Sanderson, Professor Patricia Rice, Professor Jonathan Wadsworth, Kate Bell, Simon Sapper, Matthew Fell, Louise Fisher and Martin McTague.
13. Bryan Sanderson can be contacted via the Low Pay Commissions press office (0207 211 8132).