National Living Wage and National Minimum Wage rates – 2016 Evidence

The Low Pay Commission (LPC) has been asked to recommend to the Government in October of this year (2016) the level of the UK’s minimum wage rates to apply from April 2017- 2018 and they have opened a consultation, which runs until 29 July.

There are now five minimum wage rates in total - the:

Adult NLW 21-24 Year Old Rate 18-20 Year Old Rate 16-17 Year Old Rate Apprentice Rate

These are all being aligned to run on the same calendar from April 2017. This means that there will e a review this October with a further change in April 2017 and every April following.

The NLW has two key differences from the other rates:

it is subject to a target of 60 per cent of median earnings by 2020 it has been established with somewhat greater tolerance of negative employment consequences

The Office for Budget Responsibility (OBR) estimates job losses of 20,000-120,000 by 2020, whereas the other rates have traditionally been set with a view to avoiding any employment detriment.

The Low Pay Commission (LPC) has launched a consultation on the level of the UK’s minimum wage rates to apply from April 2017- 2018, on which they have been asked to make recommendations.

For the rates affecting those aged under 25 and apprentices, the LPC are asked to continue to make recommendations on their traditional basis of ‘helping as many low-paid workers as possible without damaging their employment prospects’. All the rates are being aligned to run from April.

On the National Living Wage, the LPC are particularly interested in:

evidence on the effect of the introductory rate of £7.20 on workers, employers, the labour market and the economy - including how firms are adjusting and impacts on pay, terms and conditions, income, hours, employment and competitiveness; views of the projected ‘on target’ rate for April 2017. The figure will change between now and the autumn as new pay data and forecasts are published but the LPC currently estimate it to be around £7.60 in April 2017, rising to just over £9 by 2020. views on the LPC’s proposed approach to making recommendations on the NLW which, in summary, the LPC propose a path tracking the relative value or ‘bite’, with a starting point each year of identifying the rate to keep the NLW on course for the 2020 goal. They will then draw on evidence to decide whether to depart from this level by varying the profile. In the absence of economic shocks or other strong evidence of economic impacts, their default is likely to be a straight line path to 60 per cent.

On the other minimum wage rates, they are particularly interested in:

evidence on the impact of the rates on younger workers’ employment prospects including evidence on how widely the new 21-24 Year Old Rate is used, and whether the NLW has affected the employment prospects of workers aged under 25. views on how they adjust the level of the recommendations given that an April 2017 increase will come six months after the forthcoming October 2016 increases. This reflects the fact that the NLW was introduced on a different calendar to the other rates, whose schedule is being revised to align with it. The consequence is two increases in 18 months rather than the 24 that would otherwise apply.