Minimum wage boost won't end in-work poverty

Increases to the National Living Wage and National Minimum Wage welcomed, but experts say organisations must do more to support employees on low pay

Almost two million workers earning the National Living Wage (NLW) will receive an additional £690 over the year from today thanks to a rise in the statutory rates.

Workers aged 25 and older will receive £8.21 an hour from Monday 1 April, up 4.9% from £7.83. This will affect 1.8 million working adults.

The National Minimum Wage (NMW) has also increased to £7.70 per hour for 21- to 24-year-olds, providing an additional £580 over the year for full-time workers, and £6.15 for 18- to 20-year-olds, providing full-time workers with an additional £455 over the year.

The government has pledged to end low pay and later this year will announce the independent Low Pay Commission’s remit after 2020. In the Spring Statement the government also announced that academic professor Arindrajit Dube will lead an international review of the impact of minimum wages on workers.

The pay rate differs to the real living wage, as set by the Living Wage Foundation, which is an independently-calculated rate designed to reflect what people need to spend to feed, clothe and house themselves. It currently stands at £10.55 in London and £9 an hour elsewhere.

Women represent an estimated 60% of those benefitting from the NLW increase. Workers in the hospitality and retail sectors are the most likely to be on the lowest pay, with nearly 200,000 of them receiving the latest pay rise.

Parliamentary under-secretary in the Department for Business, Energy and Industrial Strategy Kelly Tolhurst said: “Since the National Living Wage was announced in 2015 it has helped protect the lowest paid – increasing faster than inflation and average earnings. Our minimum wage rates are among the highest in the world and, through our modern Industrial Strategy, we are determined to end low pay and workers get a fair day’s pay for a fair day’s work.

"Today is particularly significant as it also marks 20 years of the National Minimum Wage. Over the past 20 years the NMW and more recently the NLW have achieved their goal of raising pay without significant negative effects on employment."

However, TUC general secretary Frances O'Grady said that as the costs of living rise many are still at risk of in-work poverty: “Unions played a key role in winning the minimum wage at a time when many were warning that it would bankrupt the country. But as we mark its 20th anniversary today we can see there’s still more to be done," she said.

“Young workers are still getting a raw deal on pay. Their bills aren’t any cheaper but they have to make ends meet with less. That’s just not fair. And with in-work poverty rising we need to make the minimum wage fit for the future by raising it to £10 as soon as possible.”

The TUC wants all workers aged between 21 and 24 to receive the same as those aged 25 and older, and for them all to receive £10 an hour.

Heather Carey, deputy director at The Work Foundation, welcomed the NLW and NMW increases but agreed that there is more organisations can do to support employees struggling with low pay. "With poverty affecting four million workers and nearly three-quarters of children in poverty having working parents, the increases in the National Living Wage and National Minimum Wage announced today will provide a welcome boost," she told HR magazine.

"But with a growth of employment rates alongside in-work poverty, we must go further to improve the quality of work and enable in-work progression. The implementation of the government’s Good Work Plan will prove vital. We also need more businesses to look at how they can improve working practices and offer greater support to low-earners among their workforce. This can make the difference between whether these individuals are getting by and working towards a brighter future; or struggling every day to make ends meet."

Speaking to HR magazine, senior HR business partner at Head Resourcing Sarah Prasad emphasised the benefits of going beyond statutory rates to pay the real living wage set by the Living Wage Foundation. Paying this has contributed to increased productivity at the firm and lets staff know their efforts are valued, she said.

“At Head Resourcing we are proud to be a living wage-accredited employer. We see this as a long-term investment in our employees and a recognition of the valuable contribution they make to our business. It aligns with our company values and contributes to the motivation and increased productivity of our team," she said.

"Twenty-one per cent of workers in the UK still don’t receive the living wage. We want to play our part in helping the Living Wage Foundation change this, coming together with other companies that are also committed to ensuring more families earn a wage they can actually live on."