National Living wage: what is it, how much is it and who gets a pay rise?

About 1.3 million workers will get a pay rise on April 1

Hazel Sheffield
Friday 01 April 2016 08:45
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The Living Wage is currently £9.15 an hour in London and £7.85 in the rest of the UK
The Living Wage is currently £9.15 an hour in London and £7.85 in the rest of the UK

What is the national living wage?

On April 1, UK workers over the age of 25 will get a pay rise of 50p on the minimum wage of £6.70 per hour, taking hourly pay to £7.20 an hour.

The living wage is set to rise again to £9 by 2020.

The minimum wage for those under 25 remains at £6.70 an hour, £5.30 for under 21-year-olds and £3.87 for under 18s.

That’s great! Right?

About 1.3 million people are expected to get a pay rise on April 1.

Economists have warned that the policy may harm those it is trying to help.

Some have warned it will cost lower-skilled workers their jobs.

“I think it is going to be a threat. There are going to be job losses,” Sir Christopher Pissarides, who was awarded the Nobel prize for economics in 2010, told The Independent.

About 60,000 jobs could go by 2020, according to the Office for Budget Responsibility.

Wait, why will it cost jobs?

It will cost employers more to pay Osborne’s living wage.

The increase in the cost of wages for businesses will lead to cuts in hours available of 0.4 per cent. That equates to 4 million fewer working hours per week in the UK. Those cuts will hit people in lower paid jobs the hardest.

Won’t higher pay be better for everyone?

Yes, except that not everyone will benefit.

Under 24s are excluded from Osborne's so-called living wage, which could create a “two tier” welfare and wage structure where the youngest and the poorest miss out.

Apprentices aged 16 to 18 and those aged 19 or over who are in their first year will still only be entitled to a minimum of £3.30 an hour.

That's almost £5 less than the current UK living wage, which is calculated by the Living Wage Foundation as the minimum needed to live on in the UK, at £8.25 an hour.

What’s the difference between that living wage and the National Living Wage?

Even though the Government is calling it a National Living Wage, the higher rate that comes in on April 1 is simply a statutory minimum wage.

Before George Osborne used that language in when he introduced the policy in the Budget, the living wage was better known as an hourly rate, set independently and based on the cost of living.

Calculated in this way, the living wage is a minimum hourly wage of £8.25, and £9.40 in London - significantly higher than the new national minimum wage of £7.20.

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