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Friday, 28 January 2022

National living wage to rise by 6.2% in April

National living wage to rise by 6.2% in April
National living wage to rise by 6.2% in April

The national living wage is to rise by 6.2% in what the government says is "the biggest cash increase ever".

The rise is more than four times the rate of inflation and takes hourly pay for people over 25 to £8.72 from April.

Prime Minister Boris Johnson said: "For too long, people haven't seen the pay rises they deserve."

But businesses warned that a sharp increase in wages would put pressure on companies and urged the government to reduce costs elsewhere for firms.

Hannah Essex, co-executive director of the British Chambers of Commerce, said that many companies "have struggled with increased costs in a time of great economic uncertainty".

"Raising wage floors so far above the rate of inflation will pile further pressure on cash flow and eat into training and investment budgets," she said.

"For this policy to be sustainable, government must offset these costs by reducing others."

From April 2020, the new rates are:

The National Living Wage for ages 25 and above - up 6.2% to £8.72

The National Minimum Wage for 21 to 24-year-olds - up 6.5% to £8.20

For 18 to 20-year-olds - up 4.9% to £6.45

For under-18s - up 4.6% to £4.55

For apprentices - up 6.4% to £4.15

An independent report published this year said there has been little or no evidence of job losses as a result of rising minimum wage levels, which are currently set at £8.21 for people aged 25 and over and £7.70 for 21 to 24-year-olds.

Professor Arindrajit Dube, an academic in the US and an expert on the subject, said there was "room for exploring a more ambitious national living wage" in the UK in the coming years.

He stressed, however, that because there is relatively little evidence available, the independent Low Pay Commission should be able to review the effect on jobs as pay increased.

Labour has called for a £10-an-hour minimum wage and said the government had not gone far enough to help those on the lowest pay.

"This announcement falls short on what is needed to help workers and comes against a backdrop of an economy created by Conservative governments over the past decade that has left millions of people trapped in low paid, insecure work and underpayment of the minimum wage on the rise," said shadow work and pensions secretary Margaret Greenwood.

Frances O'Grady, general secretary of the Trades Union Congress, said workers needed a national living wage of more than £10 "now, not in four years' time".

"This is a long-planned raise, but it's also long overdue. Workers are still not getting a fair share of the wealth they create. And in-work poverty is soaring as millions of families struggle to make ends meet," she said.

The Resolution Foundation, a think tank which focuses on the living standards of low and middle-income people, welcomed the plan but its economic analyst, Nye Cominetti, said it was "not risk-free" in terms of inflation.

He said: "It should be matched by a renewed commitment to swiftly evaluating evidence of the impact of such large and sustained minimum wage rises and acting on that evidence if problems emerge."