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Under so-called “levelling up” plans, Prime Minister Boris Johnson is expected to sign off on a new minimum wage for 2022 before the end of October.
Amid rising energy prices, worries about gas companies going bust, shortages of food and petrol, and the end of furlough last week, the yearly minimum wage increase announcement is a welcome bit of good news. Speaking at the Conservative Party Conference, the PM said his goal was to move “towards a high wage, high skill, high productivity economy that people of this country need and deserve”, with the hike in minimum wage being a key part of that.
But how much actually is the new minimum wage increase – and who will benefit from the rise next year?
How much is the new minimum wage for 2022?
For those over 23-years-old, the new minimum wage is £9.42 an hour under the new measures, set to be signed off by the Prime Minister within weeks.
But while it’s being referred to as the “minimum wage” collectively, the National Living Wage is what’s actually being discussed. The official National Minimum Wage is only applicable to those under 23-years-old but above school leaving age. Following changes earlier this year, anyone over 23-years-old is now on the National Living Wage. This difference came into place in 2016 initially, but only those 25-years-old or over were eligible for the new band.
Every year the Low Pay Commission (LPC), an independent expert advisory board, makes recommendations to the government. In their April report, the LPC predicted that the recommendation of £9.42 per hour – up to a maximum of £9.45. The Prime Minister must make a decision on the proposals before the end of the month. While nothing is set in stone just yet, The Times reports he will approve the recommendation.
The increase, coming into place in April 2022, will be the third highest annual rise since the financial crash.
According to The Times, the predicted increase means that the annual earnings of someone on the National Living Wage will increase by 5.7%. Someone on this hourly pay band working 35 hours per week will receive an extra £925 per year before tax.
The paper also reports that ministers view the increase in minimum wage as the way to tackle, what Boris Johnson has called, the “low-wage, low-cost approach” to the economy.
However, the decision to increase minimum wage has been criticised by Labour. It comes on the same day that the government carried out its cut to the £20 per week Universal Credit (UC) uplift, which they brought in at the beginning of the pandemic last year.
This is the biggest overnight cut to social security – ever. 5.5 million people in the UK will now have a £1,040 payment gap per year. It also comes at the same time as the end of furlough, which the government began to help those who could not work during lockdown.
What is the current minimum wage?
National Minimum Wage is in age bands until age 23, when it changes to the National Living Wage. Everyone over this threshold earns the same amount.
- National Living Wage (for those aged 23 and over): £8.91 per hour
- Minimum wage for 18 – 20-year-olds: £6.56 per hour
- Minimum wage for under-18s: £4.62 per hour
- Apprentice minimum wage: £4.30 per hour
The apprentice minimum wage is for people under 19-years-old. Or, for people over 19-years-old but in their first year of the apprenticeship. If an apprentice is over 19-years-old and they have finished the first year of the programme, they receive minimum wage for their age group.
Who will benefit from the rise in minimum wage?
Under new minimum wage 2022 plans described by The Times newspaper, lowest earners on the National Living Wage (over the age of 23) will benefit from the rise in 2022.
The increase from £8.91 to £9.42 will happen in the coming spring, which is when the rates usually change. The yearly change also tends to affect those in lower brackets, too. In 2020, the rate of pay for those aged 18-20-years-old increased from £5.90 to £6.15. While those under 18-years-old saw a rise of 20p as rates went up from £4.35 to £4.55 last year.
However, any increase would be to the government-set National Living Wage and the National Minimum Wage.
There is another grade called the Living Wage, which is set by the Living Wage Foundation. Organisations opt into this voluntarily, paying London-based workers £10.85 per hour and £9.50 to those living outside of the capital.