The Low Pay Commission (LPC) has published its advice to the government on the future of the National Minimum Wage (NMW), with recommendations including considering the case of reducing the NLW age of eligibility, reducing the gap between adult and youth rates and reforming the treatment of apprentices.
The report comes as the National Living Wage (NLW) is set to reach the long-standing target of two-thirds of median hourly earnings, for workers aged 21 and over. Since 2016, the LPC has set the NLW with reference to a target. In this period, the NLW has risen far quicker than before the target was introduced and become one of the highest minimum wages in the world.
“Achieving the two-thirds target is a significant milestone,” Baroness Philippa Stroud, chair of the Low Pay Commission, said.
“The target has boosted the incomes of low-paid workers in especially turbulent times. And whilst it has posed real challenges for employers, in already difficult circumstances, but the evidence suggests the increases to date have been implemented steadily and carefully so as not to damage employment opportunities.
“Our report reflects on the scale of this change and considers the way forward. There are various possible models for setting the minimum wage. In choosing the National Minimum Wage’s future direction, we stress the importance of clarity over the aims of the policy; and preserving the consensus-based social partnership model which ensures both worker and employer voices are heard.”
The government has confirmed that it intends to maintain the two-thirds median earnings relation to National Living Wage rates for 2025 and has asked the LPC to make recommendations on that basis.
For the next phase of the NMW, the LPC advocates the government should adopt either a further target or return to a principle-based approach. If the government wants further ambition and reductions in inequality then a target is likely best, but if the aim is to instead protect the progress made so far and be more responsive to economic conditions then a principle-based remit may be best suited, the commission added.
Noting that the gap between the youth rates and the NLW has widened in recent years, the LPC said this should be addressed as the gap is large by historical and international standards, and regarded as excessive and unfair by many stakeholders. There is scope to reduce the gap without negative employment consequences and, if the evidence continues to support it, move towards an adult rate that begins at 18, it said.
Responding to the publication of the LPC’s new remit for 2024, the Association of Convenience Stores (ACS) called for the LPC to have more discretion over wage recommendations to account for economic shocks and changes in the labour market and business confidence.
“We welcome ongoing dialogue with the Low Pay Commission and government on how wage rates should be set in the future, as these decisions directly impact wage budgets for convenience retailers. Our preference is the LPC to have more discretion and flexibility over setting wage rates to account for economic shocks, changes in the labour market and business confidence,” ACS chief executive James Lowman said.
“The convenience sector offers local, secure and flexible work that benefits employees and retailers. We want to see more done to promote the sort of good work we offer in our industry, but we must ensure that further regulation as suggested by the LPC does not inadvertently damage genuinely flexible employment opportunities with responsible employers.”
The Low Pay Commission is set to make its recommendations for minimum wage rates by October ahead of new rates coming into force the following April.
