PolicyLens

Green - Labour market

Raise the minimum wage to £15

Set the adult National Living Wage at £15 from April 2027, excluding automatic youth-rate alignment.

Last updated: May 2026.

Read the policy-specific methodology note

Scale of change

The adult rate is £12.71 from April 2026. The Low Pay Commission’s April 2027 reference estimate is £13.18. A £15 rate is £1.82 above that path and about 76% of implied adult median hourly pay.

  • Adult rate rises 18.0% versus April 2026.
  • It sits 13.8% above the LPC 2027 reference path.
  • Immediate 18–20 alignment is modelled separately.

Core trade-offs

The policy raises pay for low-paid adults and some workers just above the floor. Costs fall on employers, consumers, profits and publicly funded services. The main risk is pressure on hiring, hours and provider viability in exposed sectors.

  • Direct gains go to workers below £15.
  • Employers bear higher wage and on-cost bills.
  • Public costs rise where government is the buyer.

Illustrative fiscal impact

-£2.0bn to +£5.5bn. Central estimate: +£0.8bn.

  • Positive numbers mean net public-finance pressure; negative numbers mean Exchequer savings or receipts.
  • Gross wage gains raise tax receipts and reduce some means-tested support.
  • Public cost depends on care, childcare and outsourced-service funding.
  • Uncertainty reflects behaviour, compliance, procurement pass-through and spillovers.
  • This is an illustrative estimate, not an official costing.

Economic impact by 2027-28

  • Jobs: Net losses may be limited if phased; hiring and hours risks rise in exposed sectors.
  • Wages: Large gains below £15; some spillovers and pay-compression pressure above it.
  • Prices: Visible pressure likely in labour-intensive services; aggregate inflation effect likely modest.
  • GDP / productivity: Overall GDP effect probably small; negative if hours, investment or firm exits dominate.

Assessment

A £15 adult rate would be a large low-pay intervention, above the LPC’s two-thirds-median path. It benefits low-paid adults who keep jobs and hours. Costs fall on employers, consumers, margins and publicly funded providers. The central fiscal estimate is small, but uncertainty is much wider once procurement, behaviour and compliance are included.

Confidence: Medium-low. Wage-gain channels are clearer than job, hours, price and public-service effects. The largest uncertainty is how exposed firms and providers adjust.

Main risks

  • Hiring and hours: Higher labour costs may reduce marginal hiring, hours or training in hospitality, retail, care, childcare and small firms.
  • Public-service exposure: If fee rates do not rise, care and childcare providers may cut quality, exit markets or underpay staff.
  • Youth-rate extension: Extending £15 immediately to younger workers would be a much larger shock and needs separate modelling.

Safeguards

  • Phase the adult rate with LPC checkpoints and published pause triggers.
  • Model youth rates separately before alignment.
  • Fund commissioned services and strengthen enforcement in exposed sectors.

Academic evidence

Dube and Lindner, Handbook of Labor Economics, Elsevier, 2024

Recent minimum-wage evidence review

The chapter finds large earnings gains and generally limited employment effects at studied levels, while stressing heterogeneous effects and possible turning points.

Supports ambition with caution; it does not give a safe ceiling for a £15 UK rate.

Minimum Wages in the 21st Century (2024)

Cengiz, Dube, Lindner and Zipperer, Quarterly Journal of Economics, 2019

Low-wage jobs bunching study

Across major US minimum-wage changes, lost jobs below the new floor were largely offset by jobs just above it.

Supports the wage-gain channel and limited aggregate job-loss assumption.

The Effect of Minimum Wages on Low-Wage Jobs (2019)

Harasztosi and Lindner, American Economic Review, 2019

Who pays for the minimum wage?

Hungarian evidence found substantial wage gains, limited employment losses and meaningful price pass-through after a large minimum-wage rise.

Supports price and margin adjustment as important channels.

Who Pays for the Minimum Wage? (2019)

Dustmann, Lindner, Schonberg, Umkehrer and vom Berge, Quarterly Journal of Economics, 2022

German minimum-wage reallocation

Germany’s minimum wage raised pay and shifted some workers toward better-paying employers, without a large employment fall.

Shows adjustment can include reallocation, not only job cuts.

Reallocation Effects of the Minimum Wage (2022)

UK government evidence

Office for National Statistics, 2025

Low-pay distribution evidence

ASHE counts employee jobs and shows low-paid work concentrated by age, occupation and sector.

Used for affected-job and exposure assumptions.

Low and high pay in the UK: 2025 (2025)

Office for Budget Responsibility, 2020

OBR fiscal channels

The OBR models minimum-wage effects through tax, welfare, prices, employment, hours and employer adjustment channels.

Supports separating fiscal offsets from public-service costs.

The National Living Wage (2020)

Sources

Other Green policies

PolicyLens estimates are illustrative and not official costings.