Labour market
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Low pay
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Pay
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Cities and regions

Paved with gold? Low pay and the National Living Wage in Britain’s cities

Adam Corlett
Adam Corlett

The National Living Wage (NLW) will come into effect in April and is set to rise considerably over the rest of the parliament. This will mean a welcome pay rise for six million employees, but as an ambitious labour market policy it will present challenges. This short briefing focuses on the impact of the NLW in 11 large city regions. Together these sub-regional labour markets include nearly half of Britain’s jobs and there is an ongoing devolution of economic powers from central government to city leaders, including directly elected mayors. They therefore have an increasingly crucial role to play in ensuring the NLW is as successful as possible.

Key findings

  • The prevalence of low pay varies significantly between cities. The proportion of employees on low hourly pay relative to the national median ranges from 12 per cent in London – with Glasgow and Bristol also faring well – to 25 per cent in the Sheffield, Birmingham and Nottingham city regions.
  • Workers in Sheffield are most likely to receive a pay rise as a result of the NLW, with 28 per cent of employees expected to gain in total. This is twice the proportion in London (14 per cent).
  • But this means the challenge of adapting to the NLW will also vary between cities. In London, by 2020 the legal wage floor will be 47 per cent of the local median, compared to 71 per cent in the Sheffield and Nottingham city regions.
  • Implementing the NLW will be a key test of city regions and recent devolution deals. City leaders must act by helping businesses prepare; raising productivity, particularly in the dominant local industries; providing feedback to national government on how local employers are reacting; and encouraging businesses to go beyond the legal minimum, including through the voluntary Living Wage.

Further reading

Calculating the Real Living Wage for London and the rest of the UK: 2024
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Nye Cominetti, Louise Murphy
Labour Market Outlook Q3 2024
The Growth and Skills Levy
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Sofia Corcoran, Louise Murphy
Low Pay Britain 2024
Examining the Government’s proposed employment reforms
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Nye Cominetti
Adam Corlett
Adam Corlett Principal Economist