A rise in the National Living Wage would be very welcome – but won’t compensate for the cut to Universal Credit 25 October 2021 In response to today’s announcement that the National Living Wage is expected rise to £9.50 in April 2022, Nye Cominetti, Senior Economist at the Resolution Foundation, said: “A rise in the National Living Wage to £9.50 would be very welcome – especially given that low earners have been the hardest hit by the crisis, both by job loss and reduced hours, and through the direct health consequences of Covid-19. “This 6.6 per cent rise would continue the trend of above-inflation rises in the National Living Wage (NLW), as it moves to its target of two-thirds of median earnings by 2024. These have already pushed the proportion of employees in low pay to its lowest level in four decades, and helps drive momentum for the Prime Minister’s plan for a high-wage economy. “However, the high headline increase would in fact be a smaller real rise than some recent years, given that inflation is likely to be over 4 per cent by April 2022. “Importantly, a NLW rise will not remotely compensate for the £20 a week cut to Universal Credit (UC). Most NLW workers receiving UC will lose over 60 per cent of any rise in wages to the taper in UC. More importantly, there are 4.4 million families who have lost from the cut to UC, compared to 2 million workers on the NLW. With the UC cut having already hit incomes hard, and the NLW rise over 5 months’ away, there will be little protection for low income families from the cost of living crisis facing them this winter.” Notes: A full-time worker (35 hours a week) receiving the NLW and receiving UC would see pre-tax pay rise by £1,074 if the NLW was increased to £9.50 an hour, but they would see take-home pay go up by just £265 a year, thanks to the taper in UC, and payments of income tax and the higher rate of National Insurance contributions.
