Chancellor Rachel Reeves has announced a 4.1% increase in the national living wage, raising it from £12.21 to £12.71 an hour from April for workers aged 21 and over. The government says the change will boost annual earnings for approximately 2.4 million low-paid workers by £900.
The minimum wage for 18- to 20-year-olds will rise by 8.5% to £10.85 an hour, narrowing the gap with older workers as part of the government's commitment to 'raise the floor' on wages. The rate for 16- to 17-year-olds and apprentices will increase by 6% to £8 an hour. Reeves said the changes aim to ensure that 'those on low incomes are properly rewarded for their hard work.'
However, the Treasury had concerns about the youth rate increases, with some officials fearing young people could be 'priced out' of entry-level jobs. The Resolution Foundation warned that the number of 16- to 24-year-olds not in education, employment or training (Neet) has risen by 195,000 over two years to 940,000, and could hit 1 million. The foundation called the increase for 18- to 20-year-olds 'unnecessarily big' and urged a rethink of the wage-setting process.
Businesses have also expressed concerns over the combined impact of the minimum wage rise, the recent national insurance increase, and Labour's employment rights package, saying it makes it harder to take on workers. Critics note the minimum wage has risen 40% over five years, from £8.72 in 2020, while average wages have stagnated.
The government argues the increases will benefit 2.7 million workers and strike the right balance between worker needs, business affordability, and employment opportunities. TUC general secretary Paul Nowak welcomed the rise, saying it 'will make a real difference to the lowest-paid' and that sticking with plans to scrap youth rates is 'absolutely the right call.'
