Low Pay Commission recommendations for National Minimum Wage rates

24 November 2016

The Low Pay Commission (LPC), an independent body that advises the Government on the level of the minimum wage, welcomed the acceptance of its recommendations which were published in full shortly after the Autumn Statement had been delivered in Parliament.

LPC Chair Sir David Norgrove said:

“The LPC is required to make recommendations on the pace of increase in the National Living Wage such that it reaches 60 per cent of typical earnings by 2020, subject to sustained economic growth. The key challenge this year has been uncertainty in relation to the economic outlook following the decision to leave the EU, and whether we needed to go more slowly than our previous intention of straight line increases in the relative value of the rate.

The 4.2 per cent increase keeps the National Living Wage on course for the 2020 goal. The recommendation was a finely balanced decision. On the one hand, it is a significant increase at a time of average pay growth of around 2 per cent and should help protect low-paid workers from the higher inflation likely to result from the depreciation of sterling. On the other hand, it is lower than we previously projected and should help manage risks to employment.

The adjusted level reflects the fact that pay growth and forecasts have been weaker than expected and a relative target automatically moves in line with them. A material worsening in economic performance and prospects would lead us next year to consider whether to recommend slower increases than needed to stay on a straight line path.

Looking ahead, the cash figure for 2020 is inevitably very uncertain. However, using October 2016 data, we estimate 60 per cent of median earnings will be £8.61, within a range of £8.50 to £8.73. This is down from £9.16 in the spring."