The national living wage is forecast to reach £11.08 an hour in 2024, which is expected to be two-thirds of median earnings, but the actual rate could vary by 27 pence either side.
This is according to the Low Pay Commission, which says that the actual NLW rate, which by April 2025 will also apply to people aged 21-22 as well as those aged 23 and over, will depend on how inflation progresses.
The body has been tasked with ensuring the NLW reaches two-thirds of median hourly earnings by 2024. The Low Pay Commission’s report for 2022 projects that the median earnings of those aged 21 and over will be £16.62 in October 2024 – the point used by the LPC to ensure the target is achieved based on average earnings over the whole year – meaning the NLW needs to rise by 6.3% to £11.08 in April 2024 to reach this target.
The national living wage rate in April 2023 will reach £10.42, up 9.7% on the rate of £9.50.
The report says the next two NLW rises are expected to be higher than forecast inflation, with the real value of the NLW set to be at its highest ever in 2024.
It says national living wage projections have evolved in response to changing economic circumstances, including higher inflation post-pandemic and the tight labour market.
The LPC admits that the current NLW rate represented a real-terms fall in earnings at the time it was implemented in April 2022. The report says: “When we made our recommendation for 2022 in October 2021, most forecasters expected inflation to peak at just over 4% in the autumn of 2021. However, inflation reached 9% in April 2022, meaning the 6.6% increase in the NLW in April 2022 amounted to a real-terms fall.”
It estimates that 9.6% of workers will be paid the minimum rate in 2023, however, a different method of calculation puts this proportion at 7.0%.
The report also finds that:
Strong pay growth for low-paid workers of all ages led in part to the number of minimum wage jobs falling between 2019 and 2022. The number of NLW jobs has fallen by 15%
Recruitment and retention difficulties have affected employers’ response to the NLW. Compared with 2019, fewer said they were reducing overtime or bonuses; reducing headcount through redundancies or reduced recruitment; reducing pay growth for the wider workforce; or cutting hours in response to the NLW
Employers are concerned about shrinking pay differentials between minimum wage workers and those in more senior positions
Most support bringing 21- and 22-year-olds into the NLW’s remit, with the LPC recommending this change should be implemented by 2024.
The LPC has also recommended that seafarers be exempt from the accommodation offset while on board a ship to prevent employers from deducting accommodation costs from their pay below the minimum rate.
The recommendation was supported by RMT general secretary Mick Lynch, who said:
“We are pleased that the Low Pay Commission has listened to the RMT and acknowledged the unique position of seafarers and the inherent unfairness of employers charging crew for the cost of sleeping on the vessels where they work. We know that some crewing agents and operators, especially in the offshore energy supply chain are deducting accommodation costs from seafarers’ pay and the LPC has acted on that evidence in the interests of seafarers.”