The NLW has gone up £1 to £11.44 an hour. This increase is about 10%. Also, NLW coverage has widened to cover 21 and 22 years olds. (Originally, back in 2016, this higher rate was limited to the over 25s.) The government’s “target” is to have the NLW at 2/3 of median wages by 2024.
We still have youth sub-minimums: 18-20 MW is £8.60 (15% increase), 16-17 and apprentices is £6.40 (20% increase). Such sub-minima reflect official concern over employment prospects for the young and less productive if they are “priced out” of jobs.
Wage increases such as this may have unemployment consequences. Yet the evidence from the Low Pay Commission’s impressive research is that these consequences are slight at the current levels. We have to be wary about this research because it relies on the Labour Force Survey which is increasingly unrepresentative (25,000 interview post-covid compared to 100,000 before). Also, small firms might be most affected. So the youth sub-minima is important.
A further worry is whether the UK is over-regulated. The Centre for Business Research’s interesting Growth Budget estimates that the high minimum wage reduces the UK’s GDP/capita growth by as much as 0.3 percentage points per year. Certainly our low productivity growth rate needs addressing.
