An increase in the minimum wage caused the number of low-paid employees to fall by 300,000 in the last year.
However, rapidly rising living costs and continued government cuts mean the proportion of people earning enough to achieve an acceptable standard of living has worsened.
Research published by the Resolution Foundation think tank found that the increase in the minimum wage – rebranded as the national living wage - to £7.50 per hour for over-25s had helped the number of low paid jobs fall at its fastest rate for 40 years.
It says 5.1 million employees were classified as low paid in 2016, a fall of 6.8% year-on-year.
However, average weekly earnings are currently £16 a week lower than at their peak before the crisis in 2008. The number of people failing to earn enough to achieve an acceptable standard of living has risen by 200,000 to 6.2 million in the past 12 months alone.
Women continue to make up the majority of the low paid workers, accounting for 61% of the total. This ratio has changed little in recent years.
Sheffield is home to a higher proportion of low paid workers than anywhere else in the UK, with 24% of all workers being classified as such. Nottingham, Liverpool and Newcastle were not far behind at 23%.
Conor D’Arcy, senior policy analyst at the Resolution Foundation, says: “Many people warned that the national living wage would be a jobs-killing disaster. It’s early days still but the result so far has been the biggest fall in low pay for four decades, in an economy where employment is at a record high.
“While it’s important to celebrate the national living wage as a bold, positive policy action, we shouldn’t get complacent. As well as the challenges it presents to some employers, over four million workers are still expected to be in low pay by 2020, and the old problems of women and part-time workers being far more likely to be low paid than men remain.
“The government must continue to work closely with employers to monitor any specific challenges arising from the ramping up of the national living wage, as well as continuing to tackle illegal non-payment of the national living wage and minimum wage.”