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The National Living Wage

The National Living Wage (NLW) was introduced on 1 April 2016 and set at £7.20 per hour.  Its introduction was announced during the 2015 Financial Statement by the Chancellor of the Exchequer who set out an objective for it to reach 60% of median earnings by 2020.

The NLW is the new name for the main adult rate of the National Minimum Wage.  It is not tied to the cost of living and is distinct from the existing Living Wage, currently set at £8.25 per hour outside London, and £9.40 per hour in London.

National Minimum Wage (NMW) rates are provided in regulations made by the Secretary for State with parliamentary approval.  They are based on recommendations of the Low Pay Commission, which publishes reports annually in response to a remits set out by the Secretary of State.  The rates are amended every October. 

The introduction of the NLW coincided with the introduction of a new 21-24 year old rate.  From April 2017, the uprating cycle for all NMW rates will be aligned, so that all rates will be amended in April each year.

Concerns about age discrimination

The introduction of the NLW alongside a new 21-24 year old age band led to renewed interest in the rationale behind NMW age-banding, fears that workers over 25 would be discriminated against in favour of younger, cheaper, workers and concerns that workers aged 21-24 are now ineligible for the full minimum wage.

The rationale for minimum wage age banding has typically been that younger workers occupy a more vulnerable position in the labour market, with a greater need to acquire experience, and that if younger workers were eligible for the full minimum wage they might be priced out of the labour market.

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