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The Government has asked the Low Pay Commission to consider the cost of living in its recommendations for the rate of minimum wage for the first time.
The Secretary of State for the Department of Business and Trade has written to the Chair of the Low Pay Commission as part of the Government’s Plan to Make Work Pay agenda for guaranteeing workplace rights, reducing the numbers of people not in work, and improving productivity.
Under the changes, the Low Pay Commission will consider average living costs in calculating the minimum wage for the first time since the National Minimum Wage came into effect in 1999, alongside its previous considerations: the impact of wage costs business, competitiveness, the state of the labour market, and the wider economic picture.
The new remit for the Low Pay Commission will also include ensuring parity of pay for workers of all ages, and begin narrowing the gap between the National Minimum Wage, for 18–20-year-olds, and the National Living Wage.
Currently the National Living Wage paid to those 21 and over is £11.44 per hour, while those aged 18-20 are entitled to £8.60 per hour. Under 18s and those in their first year of an apprenticeship must be paid a minimum hourly wage of £6.40.
Changes to the Low Pay Commission’s remit have been welcomed by the Living Wage Foundation, which sets annually a voluntary Living Wage for employers to pay staff calculated in reference solely to the cost-of-living. Katherine Chapman, Director of the Living Wage Foundation, said:
“It’s great to hear that the minimum wage will, for the first time, take into account living costs. We look forward to working with the Low Pay Commission and Government on how this can be taken forward and effectively work alongside our real Living Wage rates. The real Living Wage remains the only wage rate based solely on the cost of living, and we encourage all employers who want to show leadership on low pay to join the growing movement of over 15,000 Living Wage Employers.”
Representing UK businesses, the Confederation of British Industry (CBI) has also welcomed the announcement, but also cautioned the government that other factors beyond pay need addressing in order to improve living standards. Matthew Percival, CBI Future of Work and Skills Director, commented:
“The National Living Wage can only ever be part of the plan for addressing cost of living challenges. It is an effective tool for protecting the incomes of the very poorest, but it is not a substitute for the wider policy changes required to boost investment, output and living standards. Instead, responding to the cost-of-living crisis requires a coordinated plan across government departments, as well as government partnering with business to ensure its workplace reforms achieve their intended aims.
“Business has long supported the consensual, tripartite policy making of the Low Pay Commission and hopes that this new remit will allow the Commission to independently make recommendations that reflect both the needs of workers and the economy.”