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National living wage increases to £7.83

By Deri Jones
 
Plans to increase the national living wage by 4.4% to £7.83 an hour have been announced in the latest Budget.
 
Chancellor Phillip Hammond has also announced an increase in the national minimum wage for employees under 25. The new minimum rates are as follows:
  • £7.38 per hour for 21 to 24 year olds
  • £5.90 per hour for 18 to 20 year olds
  • £4.20 per hour for 16 to 17 year olds
  • £3.70 per hour for apprentices
Early years workforce
The announcement is likely to be met with concern from many early years settings, following the recent publication of local authority funding rates for 2018/19 which confirmed that most councils will not see any increase in funding next year, while 14% will have their hourly rate reduced.
 
Commenting on today’s announcement, the Alliance said that it supports the principle of the National Living Wage and that the early years workforce should be paid a fair wage, but warned that that this 4.4% increase and target of £9 an hour by 2020 will put additional pressure on already struggling providers.
 
Funding concerns
Neil Leitch, chief executive at the Alliance, commented: “The Chancellor’s announcement of an increase in the national living wage should, in theory, be warmly welcomed by a workforce that has long been underpaid – and there’s no doubt that pay in the early years sector needs to increase. But without being matched by an increase in government funding – and given that staff wages make up around 70-80% of childcare providers’ overall costs – this move will only serve to compound providers’ struggles at a time when a lack of government investment is threatening their long-term sustainability.”
 
The new living wage arrives at a time when the sector is already under pressure from the government’s 30-hours ‘free childcare’ offer. In an Alliance survey conducted in the summer, 2017 74% of providers warned that funding for the offer did not cover their costs.
 
Neil said: “Ignoring the childcare funding crisis won’t make it go away. Every week we hear from nurseries, pre-schools and childminders – all of them passionate, quality providers – who are being forced out of business because they simply cannot make the 30 hours work. If ministers want to continue to promote ‘free childcare’, they should make sure they – and not parents or providers – are paying for it.”
 
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