The government has said it will increase the minimum wage to £11.44 per hour from April next year.
The minimum wage, officially called the national living wage, is currently £10.42 an hour for workers over 23. But chancellor Jeremy Hunt has decided to also apply the rate to 21 and 22-year-olds for the first time.
The policy change comes ahead of today’s autumn statement, which will see the government outline its latest tax and spending decisions.
The change represents a 9.8% increase for over-23s since last year and a 12.4% increase for workers aged 21 and 22.
The separate national living wage for 18-to-20-year-olds will increase to £8.60 an hour from £7.49, meaning the wage hikes will affect 2.7 million low-paid workers.
Apprentices will also get a 20% hourly pay increase, going from £5.28 an hour to £6.40 an hour.
Hunt has accepted the proposals in full made by the Low Pay Commission. He said: “The National Living Wage has helped halve the number of people on low pay since 2010, making sure work always pays.”
The announcement comes after a year where the cost-of-living crisis has squeezed household budgets, with people on low incomes being hit hardest by soaring energy and food bills.
Bryan Sanderson, chair of the Low Pay Commission, said: “This hasn’t been easy for employers, with the economy facing a range of unprecedented challenges in recent years. The high degree of political and economic uncertainty has made assessing and forecasting the performance of the economy, and therefore our task, very difficult. It is a tribute to my fellow commissioners that we have continued to achieve consensus.
“Our new recommendation of a national living wage of £11.44 attempts to steer a path through this uncertainty and achieve the government target of two-thirds of the median wage, an outcome which if accepted would position the UK at the forefront of comparable economies.”
While the announcement will be welcomed by workers, some in the retail and hospitality industry have voiced concerns.
Responding to the announcement on X, formerly Twitter, UKHospitality chief executive Kate Nicholls said the rise was “a reminder that although government announces it, it is businesses who deliver it and why it is so vital other action is taken to reduce tax and costs, particularly [business] rates”.