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At PMQs today (18/05/2022), Boris Johnson claimed that the Chancellor was going to raise the Living wage by a record amount.

Boris Johnson says he supports Rishi Sunak's work raising the living wage by a record amount, making sure people on Universal Credit pay a £1000 less in tax and creating a strong economic foundation.

My understanding was that the Living wage was a value calculated by the Rowntree foundation as the actual pay needed to meet living costs, and places no obligation on employers. The Minimum wage being a value set by government that employers must meet in their payments to staff outside of overtime, tips and so on.

So what does it mean for the Chancellor to raise the living wage? And why is the Prime Minister talking about it, if government doesn't control it, employers don't have to honor it and it represents the cost of living, not the wages paid.

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The National Minimum Wage refers to the age-graded minimum hourly rate of pay that employers must provide to workers. The rates are set by the government, and were most recently updated in the 2021 Autumn Budget, when the Chancellor accepted recommendations from the independent Low Pay Commission. The changes are effective from April 2022, the current rates being as follows:

23 and over 21 to 22 18 to 20 Under 18 Apprentice
£9.50 £9.18 £6.83 £4.81 £4.81

The National Living Wage was introduced in April 2016 as a new minimum wage for those aged over 25. More recently, the government has announced its ambition for the NLW apply to all those over 21, and for it to eventually reach two-thirds of median earnings by 2024.

Currently, however the National Living Wage refers solely to the '23 and over' part of the National Minimum Wage. When the Prime Minister refers to the Chancellor raising the living wage, he refers to its rise in the Autumn Budget from £8.91 to £9.50, an increase of 6.6%. Government does control it, and employers do have to honour it.

The Joseph Rowntree Foundation has also maintained its own 'living wage' figure since June 2015. It explains on its website:

The real Living Wage is an independently calculated rate of pay that is based on the actual cost of living in the UK and London and applies to all workers over 18. Over 5,000 employers in the UK are choosing to pay these voluntary hourly rates to all their staff. At the heart of the Living Wage movement is a simple idea - that a hard day’s work deserves a fair day’s pay.

In 2016, the government introduced a rise in the minimum wage for the over 25’s, which was called the ‘National Living Wage’. However, this is not based on the real cost of living and is why the real Living Wage is higher than the minimum wage and the National Living Wage.

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  • Notably, the Joseph Rowntree "Real Living Wage" also includes notional payments for alcohol, presents and gifts, holidays, jewellery, handbags and £90 a week for "cultural participation", all of which would be considered luxury spending in any realistic budget.
    – Valorum
    Commented May 18, 2022 at 22:25
  • @Valorum The idea of the living wage is that is allows you to participate in social live. It is supposed to be more than just prevent going hungry. Calling this luxury is a strong political statement.
    – quarague
    Commented May 19, 2022 at 6:41

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