National Living Wage 2016

Starting this next April, the UK government is implementing a new higher minimum wage, a move that it has dubbed a ‘National Living Wage’. What this means, in practical terms, is that when the new wage is introduced, all British workers over the age of 25 will be entitled to revive at least £7.20 an hour.

The government’s decision to set the rate at one lower than that recommended by the Living Wage Foundation (the non-profit dedicated to the idea) has caused some controversy, especially as it is accompanied deep cuts to Working Tax Credits. However, the pay rise itself is nevertheless good news for British workers.

The stated intention of introducing the new pay rise is to move from a higher welfare, lower pay society to a lower welfare, higher pay one. This means that, in theory at least, the UK government expects to see a fall in welfare claimants as a result in plugging the gap in personal finances with the new higher wage.

The new changes are not without drawbacks though. Firstly, there will be no change in the minimum wage for under 25’s – a group who have seen progressively lower annual earnings over the last few years and who are really feeling the squeeze financially as a result. The current minimum wage for adults aged 18 to 20 is set to remain at £5.30 an hour. So, unfortunately, this means, if you are, for example a 19 year old working a zero hour contract in a restaurant or working 20 hours a week in a supermarket, you will see no increase in the amount you make.

The Government’s ‘living wage’ is also quite substantially lower than the one recommended by organisations who do research in the area. The current rate for London (where the cost of living is much higher than the rest of the UK), as suggested by the Living Wage Foundation, is £9.40. In other words, that’s the pay per hour that the organisation specializing in the field thinks that it costs for the average Londoner to support themselves.

The same holds true when it comes to the Living Wage Foundation’s suggested rate for the rest of the UK, which is set at £8.25 an hour. The Living Wage Foundation’s recommended hourly wages are currently part of a voluntary scheme for businesses, so unfortunately, if you are a low pay worker, unless you’re lucky enough to be part of one of the companies that support the scheme, there will be no legislation coming forward soon to set those rates as the actual minimum wage.

However, in spite of the drawbacks of the government’s proposed living wage, the pay rise next year will still be a welcome one for millions of UK citizens.