Project the minimum wage rates by the OBR's national living wage forecast

changelog.d/nlw-april-2027-rates.added.md

@@ -0,0 +1 @@
+Add the April 2027 minimum wage rates Budget 2026 announced (paragraph 6.128): £13.21 for the national living wage, £11.27 for ages 18 to 20, and £8.31 for ages 16 to 17 and apprentices. The projection by earnings growth now starts from them.

changelog.d/nlw-projection-earnings.fixed.md

@@ -0,0 +1 @@
+Project the minimum wage rates, including the national living wage, after the last rate set by the OBR's national living wage forecast (EFO economy Table 1.13) and average earnings growth after it, so the Universal Credit benefit cap earnings exception, the minimum income floor, ESA permitted work, the childcare earnings tests and the Carer's Allowance earnings limit rise with them instead of holding April 2026 rates. A reform that sets a minimum wage rate from some year onwards now holds that rate flat against a rising baseline, where before it was an uplift on a flat one.

docs/book/assumptions/nowcasting-comparison.md

@@ -33,10 +33,10 @@ totals over the next two-to-three fiscal years.
 
 | Aspect | Resolution Foundation | PolicyEngine UK |
 |-------|------------------------|-----------------|
-| Wage floor | Models the National Living Wage / NMW explicitly each year, lifting anyone below their age-appropriate minimum to the floor. | Earnings are uprated by the OBR average-earnings index without an explicit floor; minimum wage uprating is held in `gov/hmrc/minimum_wage/` and only enters when a reform invokes it. |
+| Wage floor | Models the National Living Wage / NMW explicitly each year, lifting anyone below their age-appropriate minimum to the floor. | Earnings are uprated by the OBR average-earnings index without an explicit floor; minimum wage rates are held in `gov/hmrc/minimum_wage/` and projected after the last rate set by the OBR's national living wage forecast, then average earnings; they enter through the rules that read them (the Universal Credit minimum income floor and benefit cap earnings exception, the childcare earnings tests, ESA permitted work and the Carer's Allowance earnings limit), not through earnings. |
 | Spillovers | Includes a spillover effect for workers just above the wage floor (compression of the lower wage distribution). | No automatic spillover; earnings shift uniformly with the OBR index. |
-| NLW extensions | Models the 2024-25 extension of the NLW to 21- and 22-year-olds, and provisionally the 2029-30 extension to 18-20-year-olds. | NLW age bands are encoded in parameters (`gov/hmrc/minimum_wage`) but extensions only flow into outputs if a household's wage actually falls below the modelled floor — there is no explicit re-anchoring of earnings. |
-| Beyond 2025-26 | Assumes the wage floor grows in line with average earnings. | Same effective behaviour, but driven by uprating rather than a wage-floor rule. |
+| NLW extensions | Models the 2024-25 extension of the NLW to 21- and 22-year-olds, and provisionally the 2029-30 extension to 18-20-year-olds. | NLW age bands are encoded in parameters (`gov/hmrc/minimum_wage`). A change to a band, such as extending the NLW to younger workers, reaches outputs through the rules that read a person's age-band rate (the Universal Credit minimum income floor and the childcare earnings tests); earnings are not re-anchored to the floor. |
+| Beyond 2025-26 | Assumes the wage floor grows in line with average earnings. | Minimum wage rates after the last one set grow by uprating rather than a wage-floor rule: with the OBR's national living wage forecast to the end of the EFO, then with average earnings. Like the model's other indices, the projection ends in 2039 and holds flat from 2040. |
 
 **Practical implication.** Low-paid workers' incomes can grow faster under
 the RF nowcast than under PolicyEngine because the wage floor binds and

policyengine_uk/parameters/gov/economic_assumptions/README.md

@@ -25,6 +25,7 @@ GDP and population assumptions remain supported.
 | `consumer_price_index_ahc` | CPI excluding rents/maintenance/water (AHC measure)   | ONS ad hoc 3582; forecast derived by `utils/create_ahc_deflator.py` |
 | `rpi`                   | Retail Price Index year-on-year growth                   | EFO Table 1.7           |
 | `average_earnings`      | Average weekly earnings growth                           | EFO Table 1.6           |
+| `national_living_wage`  | National living wage growth, for April of each year      | EFO economy Table 1.13  |
 | `non_labour_income`     | Non-labour household income growth                       | derived from EFO        |
 | `road_fuel_volume`      | Petrol + diesel road-fuel clearances                     | HMRC Hydrocarbon Oils + OBR fuel-duty forecast |
 | `petrol_spending_litre_proxy` | Spending growth that preserves road-fuel litres    | HMRC + OBR              |
@@ -44,6 +45,18 @@ in an earlier EFO), the EFO's forecast years, and after them the
 `average_earnings` path. Years before the outturn year are kept, so each
 index keeps its base year.
 
+`national_living_wage` projects the minimum wage rates
+(`gov.hmrc.minimum_wage`) after the last rate set. It is the growth of the
+rates set to 2027, then the OBR's estimates in Table 1.13 of the detailed
+economy tables, then `average_earnings`' long-run growth. The checked-in
+estimates are the October 2026 EFO's, ahead of the other series' March 2026
+vintage, because HM Treasury costed Budget 2026's Carer's Allowance taper on
+them. `utils/import_obr_forecasts.py` doesn't read Table 1.13, so the series
+is updated by hand with each EFO. `test_minimum_wage_projection.py` holds the
+table and fails if the series stops reproducing it, or if its long-run years
+stop matching `average_earnings`. Each rate is set by an S.I., so this is a projection, not
+a formula.
+
 ## Time horizons
 
 Three horizons are stitched together for each OBR and ONS series (not

policyengine_uk/parameters/gov/economic_assumptions/create_earnings_uprating.py

@@ -11,8 +11,9 @@
 triple lock and rounds to the 0.1 percentage points published by the ONS.
 
 ``create_economic_assumption_indices`` compounds it into
-``gov.economic_assumptions.indices.earnings_uprating``. The series starts
-from a 2010 base and runs to one year past the statutory inputs. Published
+``gov.economic_assumptions.indices.earnings_uprating``. The yearly series
+starts from a 2010 base and runs to one year past the statutory inputs; the
+index, like the others built there, stops in 2039. Published
 benefit amounts remain explicit; the index projects later years.
 """
 

policyengine_uk/parameters/gov/economic_assumptions/yoy_growth.yaml

@@ -205,6 +205,89 @@ obr:
         - title: OBR long-run economic methodology (the 3.83% rate from 2036, unchanged from November 2025)
           href: https://obr.uk/forecasts-in-depth/the-economy-forecast/potential-output-and-the-output-gap/
 
+  national_living_wage:
+    description: National living wage year-on-year growth, for the rate from April of each year.
+    # The OBR forecasts the national living wage itself (EFO detailed economy
+    # tables, Table 1.13): rates set to 2027, then "OBR estimates consistent
+    # with the rest of our economy forecast". Each value here is one year's
+    # rate over the year before's, to six decimals, so compounding them from
+    # £13.21 reproduces the table to the penny: £13.51 (2028), £13.85 (2029),
+    # £14.23 (2030) and £14.62 (2031). HM Treasury costed the Budget 2026
+    # Carer's Allowance taper on these "OBR projections for increases in the
+    # National Living Wage" (policy costings, October 2026). After the EFO
+    # horizon the series takes average_earnings' long-run growth: the Low Pay
+    # Commission's reference point for the rate is two-thirds of median
+    # hourly earnings (remit 2026). Refresh 2028 onwards with each EFO.
+    values:
+      # Rates set: S.I. 2021/329 to 2026/357, and £13.21 for 2027 (Budget
+      # 2026, paragraph 6.128), from £8.72 in 2020.
+      2021-01-01: 0.021789
+      2022-01-01: 0.066218
+      2023-01-01: 0.096842
+      2024-01-01: 0.097889
+      2025-01-01: 0.067308
+      2026-01-01: 0.040950
+      2027-01-01: 0.039339
+      # OBR estimates (2028-2031), EFO October 2026 Table 1.13
+      2028-01-01: 0.022984
+      2029-01-01: 0.025251
+      2030-01-01: 0.027289
+      2031-01-01: 0.026986
+      # Long run (2032+): average_earnings growth, as refreshed by the
+      # October 2026 EFO (#2717)
+      2032-01-01: 0.0285
+      2033-01-01: 0.0309
+      2034-01-01: 0.0334
+      2035-01-01: 0.0358
+      2036-01-01: 0.0383
+      2037-01-01: 0.0383
+      2038-01-01: 0.0383
+      2039-01-01: 0.0383
+      2040-01-01: 0.0383
+      2041-01-01: 0.0383
+      2042-01-01: 0.0383
+      2043-01-01: 0.0383
+      2044-01-01: 0.0383
+      2045-01-01: 0.0383
+      2046-01-01: 0.0383
+      2047-01-01: 0.0383
+      2048-01-01: 0.0383
+      2049-01-01: 0.0383
+      2050-01-01: 0.0383
+      2051-01-01: 0.0383
+      2052-01-01: 0.0383
+      2053-01-01: 0.0383
+      2054-01-01: 0.0383
+      2055-01-01: 0.0383
+      2056-01-01: 0.0383
+      2057-01-01: 0.0383
+      2058-01-01: 0.0383
+      2059-01-01: 0.0383
+      2060-01-01: 0.0383
+      2061-01-01: 0.0383
+      2062-01-01: 0.0383
+      2063-01-01: 0.0383
+      2064-01-01: 0.0383
+      2065-01-01: 0.0383
+      2066-01-01: 0.0383
+      2067-01-01: 0.0383
+      2068-01-01: 0.0383
+      2069-01-01: 0.0383
+      2070-01-01: 0.0383
+      2071-01-01: 0.0383
+      2072-01-01: 0.0383
+      2073-01-01: 0.0383
+    metadata:
+      unit: /1
+      label: National living wage growth
+      reference:
+        - title: OBR EFO October 2026, detailed forecast tables (economy), Table 1.13
+          href: https://obr.uk/efo/economic-and-fiscal-outlook-october-2026/
+        - title: HM Treasury, Budget 2026 policy costings, Carer's Allowance taper (cost base)
+          href: https://assets.publishing.service.gov.uk/media/6ae1883fe4367e5c8b0467df/AB26_Policy_Costing.pdf
+        - title: Low Pay Commission remit 2026
+          href: https://www.gov.uk/government/publications/national-minimum-wage-and-national-living-wage-low-pay-commission-remit-2026/low-pay-commission-remit-2026-national-living-wage-and-national-minimum-wage
+
   consumer_price_index:
     description: Consumer price index year-on-year growth.
     values:

policyengine_uk/parameters/gov/hmrc/minimum_wage/apprentice.yaml

@@ -4,6 +4,13 @@ description: Minimum wage rate for apprentices.
 # rate began on 1 October 2010 (NMW Regulations 1999 reg. 13(3) as substituted
 # by S.I. 2010/1901 reg. 5). Rates take effect on the commencement date of each
 # amending S.I.: on 1 October until 2016, then on 1 April from 2017.
+# Rates after the last one set here are a projection, not law: the last rate
+# set times the growth since then in
+# gov.economic_assumptions.indices.obr.national_living_wage, rounded to the
+# nearest penny, as for the other minimum wage rates (non_apprentice.yaml).
+# Growing it by the national living wage's index, which keeps its ratio to
+# that rate to the penny, is an assumption: the Low Pay Commission is asked
+# to set it to support apprentices' employment prospects (remit 2026).
 values:
   2010-10-01:
     value: 2.5
@@ -95,11 +102,21 @@ values:
     reference:
       - title: The National Minimum Wage (Amendment) Regulations 2026, regulation 2(3)(c)
         href: https://www.legislation.gov.uk/uksi/2026/357/made
+  2027-04-01:
+    value: 8.31
+    reference:
+      - title: Budget 2026, paragraph 6.128 (announced 28 October 2026; the amending S.I. is not yet made)
+        href: https://www.gov.uk/government/publications/budget-2026-document/budget-2026-html
 metadata:
   economy: false
   household: false
   label: Apprentice minimum wage
   unit: currency-GBP
+  uprating:
+    parameter: gov.economic_assumptions.indices.obr.national_living_wage
+    rounding:
+      type: nearest
+      interval: 0.01
   reference:
   - title: The National Minimum Wage Regulations 2015, regulations 4A(1)(d) and 5
     href: https://www.legislation.gov.uk/uksi/2015/621/contents