Chancellor Rachel Reeves has announced a significant pay rise for millions of low-paid workers across the UK, confirming that minimum wage rates will increase next year in a move designed to tackle the enduring cost of living crisis.
Who Benefits from the Pay Rise?
The government has accepted the Low Pay Commission's recommendations in full, leading to a series of wage increases set for April. For over-21s, the National Living Wage will rise from £12.21 to £12.71 per hour, a 4.1% increase. This change is projected to boost the annual earnings of approximately 2.4 million workers by £900.
Younger workers are set for even larger percentage increases. The minimum wage for 18- to 20-year-olds will jump by 8.5% to £10.85 an hour, a move that narrows the pay gap with older colleagues. Furthermore, the rate for 16- to 17-year-olds and apprentices will increase by 6% to £8.00 an hour.
Acknowledging the Pressure on Households
Announcing the decision, which was made during a visit to a Primark in central London, Chancellor Reeves stated that the cost of living remains the primary concern for many voters. "I know that the cost of living is still the number one issue for working people and that the economy isn’t working well enough for those on the lowest incomes," she said.
"Too many people are still struggling to make ends meet and that has to change. That’s why I’m announcing that we will raise the national living wage and also the national minimum wage, so that those on low incomes are properly rewarded for their hard work," Reeves added, emphasising that the changes would particularly benefit young people entering the workforce.
Balancing Wages with Employment Concerns
The decision to implement these rises, however, is not without its critics and concerns. The Treasury had reportedly been worried that a sharp increase in youth rates could price younger workers out of entry-level jobs.
This concern is echoed by external analysis. The Resolution Foundation recently highlighted a worrying trend, noting that the number of 16- to 24-year-olds not in education, employment, or training (Neet) has risen by 195,000 in two years, reaching 940,000. With youth unemployment now at 14.5%, some fear that higher wage floors could hinder job opportunities for the young.
Business groups have also expressed unease, citing the combined pressure of last year's national insurance rise, the escalating minimum wage, and new employment rights from the Labour government.
Despite these concerns, the government maintains it has struck the right balance. The increases will benefit a total of 2.7 million workers, and the move is supported by unions. Paul Nowak, TUC General Secretary, welcomed the announcement, stating: "With living costs stubbornly high, an above-inflation pay rise will make a real difference to the lowest-paid." He also strongly endorsed the plan to eventually scrap lower youth rates, affirming that "young workers have bills like everyone else and deserve a fair day’s pay for a fair day’s work."
