Biggest Pay Rise In 20 Years For UK's Lowest Earners

The National Living Wage is taking effect - and bringing changes for many of the UK's lowest earning workers...

Introduced in April 2015, the National Living wage raised the minimum pay threshold for over-25s to £7.20 an hour - and set a future target of £9 an hour for 2020. Now, ONS figures from April 2016 indicate that, in the short-term at least, the NLW is having its intended effect, delivering Britain's lowest paid workers their biggest raise in 20 years with specific benefits for younger and part time employees and women.

In more detail, trends revealed by the ONS report include:

  • A 6.2% wage increase for the bottom 5% of full time UK earners.
  • A 4.4%  increase for the bottom 10%.
  • A 2.5% increase for the top 5%.
  • An increase of 2.2% in median gross weekly earnings for full time workers.
  • A rise of 6.6% in weekly earnings for part time workers.
  • 45% of self-employed workers earn less than the NLW.

Wages, Gender & Geography

The well-documented disparity between men and women's wages seems to have been affected by the NLW: 

  • From 2015 to 2016, the gender pay gap narrowed - from 9.6% in 2015, to 9.4% in 2016.
  • The narrowing trend is more prominent in the lower-paid male and female worker bracket, where the gap is now less than 5%. 

Since there are more women than men in lower-paid employment, the positive trend is being attributed directly to the introduction of the National Living Wage. To highlight the effect, the ONS report points out that the gender gap remains at a consistent 18.8% in higher income roles.

The ONS data also revealed typical geographic disparities: in the City of London, median weekly income is £1,034, but in the north of England that figure may be as low as £413. While many regions saw wage growth, the north-south split endures: up to April 2016, the West Midlands had the highest wage growth at 3.7%, and the north-east the lowest, at 0.7%. 

Future Uncertainty

While the pay data is good news for many members of Britain's workforce, 2016's growth isn't expected to last...

  • In the wake of a potential 'hard' Brexit, Treasury papers show Britain losing £66 billion a year - cutting £780 from wages, and limiting the government's '£9 an hour' 2020 target to £8.60.
  • In the short term, the post-Brexit fall in sterling is expected to lead to high inflation - and a sharp drop in real wages.
  • Beyond the economic turbulence, arguments against the NLW persist with predictions that it will cost jobs rather than boost productivity or address inequality. 

That said (and taking the consequences of Brexit into account), the UK's economy continues to show surprising resilience with consumers boosting 2016 retail sales, lower-than-expected inflation and an on-going drop in unemployment. As the dust continues to settle, and world markets continue to adapt to a variety of dramatic events, predicting the impact on the UK's wages, isn't going to get easier.