The national living wage (NLW) rose by 26% between April 2015 and April 2019, more than twice the 12% increase in median hourly pay for NLW eligible workers, and faster than inflation (8%), according to the government’s Low Pay Commission (LPC).
The LPC reviewed the NLW until April 2020, at which point it reached the government’s initial target of 60% of median earnings.
The findings revealed that while households with an NLW worker saw earnings increase faster than for other households, at 30% compared to 20% from 2015/16 to 2019/20, their overall income levels increased at the same rate.
Minimum wage workers were less likely to move employers, but continued to progress onto higher pay. Each year, around 40% to 50% of minimum wage workers saw a pay increase that moved them off the minimum, whether with the same employer and job or a different one. The NLW temporarily reduced the number of workers progressing off the minimum wage in 2016, but rates returned to normal levels from 2017 to 2019.
The report also found that the NLW had reduced gender and ethnicity wage gaps at the bottom level of pay distribution. As women are more likely to be paid the NLW, the increases have also increased their pay more than men’s.
The gender pay gap at the 20th percentile fell from 9% in the first quarter of 2016 to 7% in the first quarter of 2020. Meanwhile, in the first quarter of 2020 the hourly pay range at the second decile by ethnicity was 8.7%, compared with 15% in the first quarter of 2016.
Bryan Sanderson, chair of the LPC, said: “As we continue to push the minimum wage towards its new target, it is important we learn the lessons of recent history. This review is a timely reminder of the policy’s achievements, as well as its limitations.
“The national living wage can be a judged a success in reducing pay inequality, and fears around job losses did not come to pass. Today’s report emphasises the need for a balanced and flexible approach in supporting both, of which the minimum wage is an important, but not the only part.”