An independent report into the national living wage (NLW) found raising it has only a minimal effect on employment rates while significantly improving the financial position of the lowest paid.
The study, commissioned by former chancellor Philip Hammond to inform government policy on minimum wages, found that while a higher minimum wage would eventually lead to lower employment, there was 'room for exploring a more ambitious NLW remit in the UK.'
Welcoming the report the treasury said its findings supported plans to increase the NLW (the statutory minimum wage for employees over the age of 25) to £10.50 an hour by 2024, equivalent to two-thirds of median hourly income. In September, the government also pledged to bring the age threshold for the NLW down to 21.
The NLW is currently £8.21 per hour, and £7.70 for those aged between 21 and 24.
It found the effects of a higher minimum wage on employment levels was muted, whilst significantly increasing the earnings of low-paid workers, and said there was good evidence that a higher minimum wage could reduce vacancies and turnover instead of destroying jobs.