The government has been given the go-ahead to raise the National Living Wage (NLW) by more than £2 an hour by 2024.
An independent review into the evidence on minimum wages concluded that “a more ambitious National Living Wage” is the right approach, following former Chancellor Philip Hammond’s pledge to increase it.
The review, which studied evidence from Britain, America and Europe, supports the government’s plan to raise the NLW to £10.50 an hour by 2024 and reduce the age threshold from 25 to 21.
The current NLW for employees aged 25 and over is £8.21.
The review, led by Arindrajit Dube, a Professor of Economics at the University of Massachusetts, found that minimum wages in a range of countries have had a negligible or zero effect on jobs, but significantly increased the earnings of the lowest paid.
Chancellor of the Exchequer, Sajid Javid, said: “The evidence is clear that our approach is the right one.
“We will end low pay by putting the National Living Wage on a path to increase to £10.50 over the next five years.”
The Low Pay Commission (LPC) has warned that the government’s ambition to eradicate low pay by raising the NLW will be “very stretching” for employers, and will only succeed if matched by action to raise productivity, align tax and benefits police and enforce policies.
The LPC says that with these changes, the NLW could cover up to a million more workers, affecting a new group of employers.
Chairman Bryan Sanderson told the Financial Times: “We share and support the government’s ambition,” but he added that “when it comes to ending low pay and alleviating poverty”, a minimum wage would not work in isolation, and should be seen “as one element of a broader approach”.
Meanwhile, Labour has dismissed the findings of the review as an “insult to hard working people” and has pledged introduce a £10 hourly minimum for all workers over 16 immediately if it wins power in the December 12 general election.