The Chancellor announced his intention to lower the age threshold for the National Living Wage to 21, accepting advice from the Low Pay Commission. The NLW is currently set at £8.21 for workers aged 25 and over, for those 24 and under – National Minimum Wage applies with age thresholds and an apprentice wage for those in first year of training. 

In his speech to the Conservative Party conference, the Chancellor announced his intention to reduce the age threshold for the National Living Wage (NLW), so that it applies to those aged 23 and over from 2021, and to those aged 21 and over within five years.

This follows a review of the youth rates of the National Minimum Wage (NMW) carried out by the Low Pay Commission over the past year. The LPC made its recommendations to the Government in a letter sent in August, and which we are publishing today.

The LPC will publish its full report on the NMW youth rates, as well as its advice to the Government on the future of the NLW, in due course. The government will set out more details on the future policy framework for the NLW, including the role of the Low Pay Commission, at the Budget.

Bryan Sanderson, the Chair of the LPC, said:

“We are very pleased that the Government has accepted our advice to lower the age of eligibility to the National Living Wage from 25 to 21. Doing so in a phased approach balances ambition for the pay of young people with caution towards the impacts on businesses and the most vulnerable workers in this group.”

In his recommendation letter dated 6th August 2019, Bryan Sanderson also mentions the potential implications, though he clearly underlines that this is overall a positive move for the future: 

“The changes we propose here will have a direct impact on the Government’s ambitions for the minimum wage post-2020. The inclusion of younger workers in the NLW population will lower the median wage on which any target is based and therefore the nominal values of the NLW rates in the future. This means there are some clear trade-offs: younger workers benefit in the form of higher pay, but older NLW workers will receive lower rates of increase than they otherwise would have. At the same time, the overall risk of job loss for those aged over 25 will be lower than it otherwise would have been, and higher for 21 to 24 year olds. The Commission has considered these trade-offs and discussed them with employer and employee stakeholders. Our view is that this change is the right choice: it will make the system fairer and bring it back into line with understood business practices.”