Are you due a pay rise?

Here’s what you need to know about wages

Today the Low Pay Commission (LPC), the body that recommends the rates of the National Minimum Wages (NMW), including the National Living Wage (NLW), launches its detailed annual assessment of the labour market and explains the rationale for its recommendations. 

The Government has accepted all of the LPC’s recommendations, including for the largest increases in a decade for the rates that apply to 18-20 and 21-24 year olds. 

On 1 April next year (2018) these rates will increase by 4.7 per cent and 5.4 per cent respectively. These are greater percentage increases than both that of the National Living Wage, which will increase by 4.4 per cent, and forecast average earnings growth of between 2.5 and 3 per cent. (See table below for full details of the current and future rates). 

The new rates will boost the earnings of between 260,000 and 360,000 young workers directly, and many more young workers will benefit. This is for two reasons: firstly, these increases lead to ‘spillover’ effects further up the pay distribution; secondly, even though they are not entitled to it, some young workers benefit from increases in the National Living Wage. We estimate that up to 45 per cent of 18-24 year old workers – or 1.3 million young people – could receive a higher pay increase than they would have done in the absence of the NLW.

In the years following the recession the LPC recommended lower increases in the NMW for young people to protect their employment position. This is because young people are more at risk of unemployment than older workers in the event of an economic downturn. Periods out of work can cause ‘scarring’ effects for young people, whereby their earnings and employment chances are still affected years later.