Chancellor John Healey is expected to increase the national minimum wage for 18 to 20-year-olds (NMW 18-20) at the same rate as the national living wage (NLW), prompting questions about the government’s pledge for one single wage floor for all adults.
The current NMW 18-20 rate is £10.85, and the proposed increase would bring it to around £11.27 from April 2027. The NLW rate, which is currently £12.71, would also increase by 3.9% to around £13.20.
The Low Pay Commission (LPC) had recommended that the NLW rate should be between £13.02 and £13.34 to keep it at two-thirds of median hourly earnings. The central estimate was £13.18, which is a 3.7% increase.
From 2023 to 2026, the NMW 18-20 rate has grown at a rate more than double the NLW, with a 44.9% increase compared to the NLW’s 22.0% increase. This accelerated growth has been cited as a contributing factor to the one million young people not in education, employment or training (Neet).
Impact on Young Workers
Trade unions have argued that the NMW 18-20 rate is increasingly obsolete, as many employers already pay the NLW to all adults. The LPC found that around 70% of 20-year-olds are already paid at or above the NLW, and they are more likely to work full-time and have left full-time education.
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The LPC recognises that labour market outcomes for young people have deteriorated over the past two years, but it is not aware of any robust evidence that higher youth rates have contributed to these falls. However, the commission plans to undertake further analysis to differentiate between the impact of the minimum wage and other factors that may be disproportionately affecting the sectors that young people are most likely to work in.
Business Reaction
Kate Nicholls, chair of UKHospitality, welcomed the slower increase in the national minimum wage for young people, saying it would help protect job opportunities at entry level. Mat Newnham, head of employment and partner at law firm Birketts, cautioned that the government needs to balance protecting the earnings of lower-paid workers with ensuring that the overall cost and regulatory burden of employing people does not discourage businesses from recruiting or creating entry-level opportunities.
Newnham added that a slower approach to equalising the minimum wage rates for younger workers would suggest that the government is beginning to recognise this balance. The chancellor will confirm the rates in his first Budget, which will be announced tomorrow.
The LPC consulted on reducing the NLW eligibility age to 20 in 2027 and then to 18 in 2028 or 2029. This proposed pathway will be subject to economic conditions and government policy towards young people.
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