On Tuesday, 21 Nov 2023, the government announced an increase to the National Living Wage and a welcome reduction of the National Living Wage age threshold from 23 to 21 years. Alec Haglund, IF Researcher, explains why this is an important step in the right direction to secure a better deal for young people.
IF believes in fair pay for all – independently of age
Young people in work face the same, or sometimes greater, financial pressures as their older counterparts. Living through a housing crisis and a cost-of-living crisis, young people should not be further disadvantaged by minimum-wage rates that discriminate by age.
IF responded to the Low Pay Commission’s consultation in May 2023, arguing that the National Living Wage (NLW) should be raised by at least 10%, in line with inflation figures over the year. In addition, IF also argued that the apprenticeship rate and the National Minimum Wage (NMW) rate should be closer aligned to the NLW, and that age eligibility criteria for receiving the NLW should be removed for all workers above the age of 18.
In a rare victory for young employees, the government has committed to the majority of calls made by the Low Pay Commission and IF.
Increases to the National Living Wage and National Minimum Wage
The Chancellor, Jeremy Hunt, has announced that the NLW rate will increase from £10.42 to £11.44 an hour in Spring 2024. This represents an increase of 9.8%, which will be welcomed by workers who receive the NLW, many of whom are young employees.
Additionally, the NMW rate will also increase from £7.49 to £8.60 an hour. Although the NMW rate remains substantially lower than the NLW rate, the 14% increase will provide much needed help to those young people receiving the NMW.
IF strongly believes that minimum wage protections must ensure that wages for all workers, whether they are old or young, are adequate to ensure a decent standard of living for all.
Reduction of the age eligibility criteria for receiving the NLW
High levels of inflation and the rising cost-of-living has disproportionately affected young people and those on low incomes. It is both unfair and unjust on intergenerational fairness grounds that laws regarding pay discriminate against workers solely based on age.
Before the announcement, employees aged 23 years or older were entitled to the NLW rate of £10.42, while employees aged 21 to 22 were entitled to £10.18 an hour, and those aged 18 to 20 just £7.49 an hour. Meanwhile, working under-18-year-olds as well as apprentices were only entitled to £5.28 an hour.
Going forward, the new uprating guarantees everyone who is 21 years of age or older the NLW, thereby improving pay conditions for many young people. While everyone above the age of 18 should be guaranteed the NLW, it is nonetheless a big step in the right direction. The minimum pay rate for those below 18 years of age, or undertaking apprenticeships, still lags too far behind the NLW rate, but the recent announcement guaranteed a pay increase of 21% at £6.40 an hour.
Young people suffer disproportionately from low pay
As previous IF research has shown, young people have suffered from falling real wages while having to spend a larger proportion of income on essentials than any other age group, largely due to skyrocketing housing costs. Young people face a tough economic reality, and discriminatory laws on minimum wages have contributed to their financial woes.
Despite falling levels of inflation, the Bank of England has signalled that interest rates will not be cut until well into 2025, which may impact young people in terms of job prospects and housing costs. Additionally, the freezing of income tax thresholds further squeezes young people’s disposable incomes.
The improvement to legislation on minimum wages will not eradicate all the hardships young people face, but it will provide welcome help for all young employees on minimum wages.
Next steps for fair pay
The reduction in the age eligibility criteria and the increases in both the NLW and NMW should certainly be seen as a welcome development, but there is still some way to go.
It remains an intergenerational injustice that younger workers can be discriminated against solely on their age when it comes to pay. IF has long called for all age criteria to be removed from the eligibility criteria for receiving the NLW, and we will continue to campaign for this policy reform to become law.
In the meantime, we should also celebrate the victories IF and other campaigners have achieved in terms of lowering the age threshold for the NLW from 25 years in 2021 to 21 years by 2024, along with the real-terms increases in the NMW and apprenticeship rate which will have a significant positive impact on the lives of many young people.
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