Living Wage Set for 3.9% Rise as Hospitality Warns of Pressure on Entry-Level Jobs

The National Living Wage is expected to increase by 3.9% to around £13.20 an hour from 2027, with the rate for younger workers rising by a similar proportion, according to a report in The Times.

Chancellor John Healey is expected to confirm the uplifts in tomorrow’s Budget, following recommendations from the independent Low Pay Commission.

The rate for workers aged 21 and over would go from £12.71 to roughly £13.20. For 18 to 20-year-olds, the minimum wage would climb from £10.85 to about £11.27.

If confirmed, the figures would break from recent years, when rates for younger staff rose faster than those for older workers. They would also raise questions over Labour’s manifesto commitment to align the two rates within this parliament.

The shape of the settlement comes against a backdrop of rising youth unemployment.

Joblessness among 16 to 24-year-olds has reportedly passed 16% for the first time in more than a decade, and business groups have argued that steep wage rises for younger staff have made employers more cautious about recruiting them.

Tackling the number of young people not in employment, education or training (Neets) has been identified as a priority by both Healey and Andy Burnham. Alan Milburn, whose review of youth joblessness is due to conclude next month, previously suggested in a summer report that higher employment costs had contributed to the increase in unemployment.

Kate Nicholls, chair of UKHospitality, welcomed the expected approach. She said that moving too quickly to equalise the rates would reduce entry-level opportunities, and warned that the sector is still absorbing two years of double-digit pay rises alongside higher employer national insurance costs. Further pressure, she added, would hamper hospitality’s ability to create jobs and help address the Neets challenge.

The wage announcement is expected to sit alongside a package of what the government is calling “everyday fixes”. The Treasury confirmed yesterday that import tariffs would be scrapped on a range of goods, including chocolate, baked beans and certain fertilisers used by farmers.

Prime Minister Andy Burnham said that making tax-free mileage rates permanent for care workers and extending parental pay to self-employed fathers would ease pressure on household budgets.

John Healey said the measures were only part of wider efforts to give families breathing space, pointing to the knock-on effect of conflict in the Middle East and Europe on living costs.

The Treasury has declined to comment on the reports.