The national living wage (NLW) has risen to £8.91 ($12.29) and the age threshold for the rate has been decreased from 25 to 23, which means thousands of young workers will be eligible.
The 2.2% rise is the equivalent of over £345 a year for a full-time employee.
Bryan Sanderson, chair of the Low Pay Commission, noted that "this has been an extraordinary year for all of us, but particularly for minimum wage workers, many of whom have worked throughout the pandemic in frontline roles or have worked in the sectors that have been hardest hit by lockdown measures."
"This week’s increase in the NLW is our first step towards the government’s target of two-thirds of median earnings. It is a real-terms increase, meaning that an hour’s work can buy more than it could last year, at the start of the pandemic. The level of the new rate however also reflects the need to protect workers from job losses,” he added.
He also said the commission will monitor how young people’s pay and employment are affected by the changes as it considers a further reduction in the age qualification to 21.
However, the BBC has pointed out that "hundreds of thousands of low paid workers on furlough will see no uplift at all after they were excluded."
It was reported in November that more than 2 million UK workers were forced to get by on less than the national minimum wage as employers furloughed staff and slashed wages last year.
And the Living Wage Foundation has said that a large gap remains between the government’s minimum wage for and a real 'living wage' based on the cost of living.
"NLW earners have collectively received £10bn less than they would have earned on the real living wage, over the NLW’s five-year history," the body said in a new report.
Over these five years, the foundation said that a full-time worker on the NLW has lost out on £8,400 across the UK and £21,800 in London, compared to a worker earning the real living wage.
The real living wage, which the foundation says is the only UK wage rate independently calculated based on the cost of living, stands at £9.50 outside of London, and £10.85 in London.
Some 7,000 businesses in the country voluntarily pay this wage. These include Aviva, Brewdog and Google, as well as the Everton and Chelsea football clubs.
Meanwhile, the government has said the other rates of the national minimum wage will also increase alongside the NLW.
The rate to hire those aged between 21 and 22 has gone up from £8.20 to £8.36, while that for 18 to 20-year-olds has gone up from £6.45 to £6.56.
16 to 17-year-olds will be able to earn £4.62 an hour, compared with £4.55 before, and apprentices will make £4.30, up from £4.15.
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