The National Living Wage increases in April

In April 2020, the National Living wage (NLW) will increase by 6.2% to £8.72 an hour – that is £15,870 a year, based on a 35-hour week.  In his 2015 Summer Budget George Osborne set a goal for it to match 60% of median earnings by 2020.  Sajid Javid, the new Chancellor, has set a revised target of the NLW reaching two thirds of median earnings (66.66%) by 2024.

Pushing up minimum earnings is a two-edged sword for the Treasury. It ought to mean a reduced government outlay on in-work benefits and increased tax and NIC income, but it also adds to the government’s costs as an employer, placing pressure on all wages, not just those at the minimum level.

The NLW will have to rise faster than earnings to move from 60% to 66.66% of median earnings over the next four years. It is thus quite likely that, as in the past four years, the NLW’s growth will outpace earnings.