Story · United Kingdom
UK National Living Wage rises to £12.71
1 April 2026
The UK National Living Wage for workers aged 21 and over rose 4.1% to £12.71 an hour on 1 April 2026. It is a strong microeconomics example because the same policy can raise incomes while also increasing firms’ labour costs.
What happened
From 1 April 2026, the National Living Wage increased by 50 pence to £12.71 an hour for workers aged 21 and over. The 18–20 rate rose to £10.85, while the 16–17 and apprentice rates rose to £8.00.
Why it matters
A statutory wage floor directly changes the price of labour. Workers who remain employed can receive higher nominal income, potentially reducing low pay and increasing consumption. Firms may respond through employment, hours, prices, productivity, automation or lower profit margins.
Use it in an exam
Chain
Higher statutory wage floor → higher pay for affected workers → higher labour costs for firms → employment, prices, productivity or profit margins may adjust
Evaluation
A higher minimum wage can raise low-paid workers’ incomes without large job losses when the increase is modest and labour demand is relatively inelastic, but the effect varies by sector, firm margins and the size of the wage increase.
Useful diagram: Labour market diagram showing a wage floor above the market equilibrium
Sources and evidence note
Statutory rates are taken from UK government and Low Pay Commission material for April 2026. Employment, price and productivity effects are economic mechanisms rather than guaranteed outcomes.