Professor Tony Dobbins reacts to the announcement that the government is increasing the minimum wage.
“As part of Labour’s Plan To Make Work Pay, the Chancellor has announced that in the Budget on October 30th the ‘National Living Wage’ (controversially rebadged from the National Minimum Wage in 2016) will rise by 6.7% in April 2025. The NLW applies to those aged 21 and over. It will rise from the current rate of £11.44 per hour to £12.21 in 2025*.
Lower rates apply to those in younger age brackets, although Labour is gradually looking to bring rates for 18-20 olds in line with older workers (i.e. a single adult rate). In view of this, for 18 to 20-year-olds, the minimum wage will rise from £8.60 to £10 – a substantial 16% uplift.
In its Plan To Make Work Pay policy document, Labour states that it will ‘write to the Low Pay Commission to change its remit requiring it to take account of the cost of living’.
Presently, the statutory legal National Minimum Wage/NLW is distinct from the voluntary Real Living Wage (calculated against essential living costs), whereby employers are accredited by the Living Wage Foundation. New real living wage rates have recently been announced: £12.60 (outside London) and £13.85 (London rate).
While the minimum wage increases are above the current rate of inflation, many lower-paid workers continue to struggle with the rising cost of life’s essentials. Minimum/living wages are only one side of the liveability coin for lower-paid workers.
The social wage* is also vital in affecting liveability. In the UK, many elements of the social wage have been privatised in recent decades. Arguably, one of the negative effects of the privatisation of essential utilities and services has been rising prices (housing/rent, energy, water, rail, buses), as well as chronic underinvestment as profits have been funnelled to executives and shareholders. Making work pay is a laudable policy goal, but essential public goods and services need to be returned to public ownership and accountability if the cost of liveability for lower-paid workers is to be reduced.”
*NLW rates are pegged to two-thirds of median earnings, which informs recommendations by the Low Pay Commission.
*The social wage is the benefits and services that a state provides to its citizens collectively. It is paid for through taxation and is distinct from other types of wages paid directly by employers. The social wage is a way to improve standards of living by increasing state support for households.
Professor of Work and Employment Relations
Staff profile for Professor Tony Dobbins, Professor of Work and Employment Relations at the Birmingham Business School, University of Birmingham.
