Government Commits to a Genuine Living Wage for Working People
In a significant step towards increasing the earnings of working individuals, the government has announced a major overhaul of the Low Pay Commission (LPC) remit on Tuesday, July 30th. This reform marks the beginning of the government’s commitment to ensuring a genuine living wage for all workers.
The updated remit will now require the LPC to consider the cost of living when recommending minimum wage rates, ensuring that wage levels better reflect the economic realities faced by workers. Additionally, the plan to eliminate discriminatory age bands is set to ensure that all adults benefit equally as the government moves forward with its “Make Work Pay” initiative.
This overhaul represents a crucial first step in delivering on the promise of a fairer and more inclusive wage policy, aimed at putting more money into the pockets of working people.
In a written statement to Parliament, Business Secretary Jonathan Reynolds announced that he had instructed LPC Chair Baroness Stroud to update the commission’s remit. This revised remit requires the LPC to consider the cost of living for the first time, alongside the impact on businesses, the labor market, and the broader economy.
However, the government has opted for a “one-year holding position” for the 2025 NLW rate for individuals aged 21 and over. The LPC has been tasked with ensuring the rate does not fall below two-thirds of the UK median earnings for this age group, a standard measure of low hourly pay.
The Resolution Foundation think tank has noted that this new remit represents a deceleration in the growth rate of the minimum wage compared to the approach taken since 2015, when the minimum wage increased at a faster pace relative to typical wages.
Reynolds stated: “We aim to develop a path towards a genuine living wage, but it is essential that this path is evidence-based and aligned with promoting inclusive growth for both workers and businesses.”
He has requested that the LPC recommend a national minimum wage rate for 18 to 20-year-olds effective from April 2025. This should continue to narrow the gap with the NLW, progressing year by year towards achieving a single adult rate. “We are committed to establishing a single adult rate and will carefully consider any impacts on youth employment or participation in education and training as we move towards this goal,” Reynolds added.
Chancellor Rachel Reeves emphasised: “Economic growth is our top priority, and we are committed to ensuring good jobs for working people. However, many are either out of work or not earning enough. The new LPC remit is a crucial step towards getting people into and keeping them in work, which is essential for growing our economy, rebuilding Britain, and improving living standards.”
TUC General Secretary Paul Nowak welcomed the government’s move: “Hard work should be rewarded fairly. These are significant steps towards making the minimum wage a real living wage, benefiting millions. We support the government’s decision to push the LPC to be more ambitious moving forward and to eliminate age-based wage disparities. Young people face the same cost-of-living pressures as adults and will benefit from their pay being aligned accordingly.”
This initiative builds on the Government’s “Plan to Make Work Pay,” which outlines a bold and comprehensive strategy to update workplace rights for the modern economy, empower workers, and drive economic growth.
These changes represent the initial steps toward fulfilling the Government’s mission to boost economic growth and improve living standards nationwide.
