The new government has confirmed two major changes to how the minimum wage is set.
Jonathan Reynolds, the new business secretary, has ordered the Low Pay Commission (LPC) to change its remit so the body must in future factor in the cost of living when deciding the rate of the minimum wage and national living wage.
The measure is likely to further blur the difference between the minimum wage and the national living wage – long reflecting unhappiness in the labour movement about the latter.
The minimum wage, introduced by the last Labour government in 1999, is legally enforceable.
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The national living wage, introduced by the Conservatives in 2016, is calculated according to the basic cost of living – but is not legally enforceable and the decision on whether or not to pay it is left up to the employer.
The second change announced today is that the LPC has been ordered to narrow the gap between the minimum wage rate for 18 to 20-year-olds and the national living wage.
Ministers aim eventually for 18 to 20-year-olds, who are currently on the national minimum wage rate of £8.60 per hour, to receive the national living wage – currently set at £11.44 an hour.
The move builds on changes made by the last government – which in 2021 reduced the age threshold at which a worker qualifies for the national living wage from 25 to 23 and then, in April this year, reduced the threshold from 23 to 21.
The two measures have been welcomed by the unions.
Paul Nowak, general secretary of the Trades Union Congress, said: “Hard work should pay for everyone. These are significant first steps towards making the minimum wage a real living wage and will make a difference to millions.”
Mr Nowak said polling suggested that seven in 10 voters, of all parties, support removing a lower rate for young…
