Chancellor of the Exchequer Sajid Javid has pledged that the government will increase the national living wage – currently £8.21 – by 27% over the next five years, also lowering the age at which workers are entitled to it from 25 to 21.
For the national living wage to reach £10.50 by 2024, workers on this rate of pay would see their hourly rate increase by roughly 5% each year until then. It is not known whether younger workers who earn the national minimum wage would receive pay rises at the same rate.
In his speech at the recent Conservative Party conference, Javid said: “Over the next five years, we will make the UK one of the first major economies in the world to end low pay altogether. To do that, I am setting a new target for the national living wage: raising it to match two-thirds of median earnings.
“That means, on current forecasts, this ambitious plan will bring the national living wage up to £10.50, giving four million people a well-earned pay rise.”
The national living wage is currently on target to reach 60% of median earnings by 2020, but Javid plans to increase this to 66% by 2024. Without this increase, the national living wage would be forecast to reach £9.55 by 2024.
The age threshold for the national living wage will be reduced in two stages. From 2021, it would drop from 25 to 23; and in 2024 those aged 21 and over would qualify. This would require legislative change.
Javid said lowering the age threshold for the national living wage from 25 to 21 would “help the next generation of go-getters get ahead” and “reward the hard work of all millennials”.
CBI director-general Dame Carolyn Fairbairn said pay rises would only be sustainable if productivity is increased: “The success of the independent Low Pay Commission has been its evidence-based approach to increasing wages without damaging job prospects. The Commission will work best if it retains the ability to judge the pace and affordability of any future wage rises.”
The voluntary Living Wage, set by the Living Wage Foundation, is currently £9 an hour, or £10.55 in London.