Resolution Foundation welcomes Chancellor’s hugely ambitious plan to eliminate low pay

The Chancellor’s plan to eliminate low pay over the next five years – by raising the National Living Wage (NLW) to reach two-thirds of typical hourly pay – is hugely ambitious and will need to be implemented carefully, the Resolution Foundation said today (Monday) in response to the Chancellor’s speech to the Conservative Party conference.

The Foundation says that achieving this would mark a dramatic turnaround for Britain’s low pay landscape. Before the introduction of the National Living Wage (in 2016), over one in five workers across Britain (20.7 per cent, or 5.5 million workers in total) were in low-paid work, a figure which has now fallen to 17.1 per cent (or 4.7 million workers). Aiming to abolish low pay entirely represents a significant increase in ambition.

Raising the NLW to £10.50 in 2024 would see a worker (aged 25+) on the wage floor earn around 70p an hour more than they would have done if the previous plans for the NLW had been maintained – equivalent to an extra £1,400 a year for a full time worker.

The Foundation welcomes this bold ambition for the UK’s wage floor, which builds on the success of the National Minimum Wage over the last 20 years. However, it says that the Chancellor should take a measured approach to achieving this target – by closely involving the Low Pay Commission and monitoring progress for any employment effects.

The Chancellor also announced an extension of coverage of the National Living Wage to everyone aged 21 and over in 2024, down from the current age threshold of 25 (after being extended to those aged 23+ in 2021). The Foundation notes that there were 605,000 people between the ages of 21 and 24 who were low-paid last year, including 175,000 who were paid below the NLW, so today’s plans will deliver a major pay boost to many younger workers.

Nye Cominetti, Economic Analyst at the Resolution Foundation, said:

“The introduction and ramping up of a minimum wage in the UK over the past two decades is one of our big policy success stories. But over four million workers remain low paid – one of the highest shares in Europe. So the Chancellor’s announcement today to eliminate low pay by the middle of the decade is hugely ambitious, and hugely welcome.

“However, announcing the policy is the easy part. Eliminating low pay over the next five years without any significant employment effects is not without risks. The Chancellor must match his boldness with a measured approach towards hitting his goal, by closely involving the Low Pay Commission.”

Notes to Editors

The Resolution Foundation explored the future of the minimum wage, including setting it at the Low Pay threshold, in its recent Low Pay Britain report, which is available here.

For more information contact Rob Holdsworth on 020 3372 2959 or 07921 236 972.