In the mid 1990s, a UK employer could advertise an opening for a security guard on an hourly wage of just £2 — with a requirement to bring their own dog.
Twenty years on from the introduction of a national minimum wage, such miserly job offers — noted in a paper by the labour market economist Alan Manning — are a thing of the past.
An adult rate set in 1999 at £3.60 an hour has since risen faster than average earnings, with the main rate for employees over 25, now termed the “national living wage”, set to rise to £8.21 on Monday.
Increases in this wage floor have taken place particularly rapidly since 2015 — when George Osborne, the former chancellor, set a target for it to reach 60 per cent of median income by 2020.
But so far there is little evidence of negative effects on jobs, according to the Low Pay Commission, which advises government on the pace at which it can rise without adverse effect on the economy.
Up to 7m people — 30 per cent of the workforce — now benefit directly or indirectly from the national living wage, according to a report by the commission published on Monday to mark the anniversary. The bottom 1 per cent of workers were paid £5,000 more in real terms in 2018, if working full time, than they would have been with average pay growth, the commission said.
“There aren’t many policies that are hugely controversial at birth but which go on to become widely recognised triumphs,” said Torsten Bell, director of the Resolution Foundation, a think-tank. He noted that the minimum wage had halted — although not reversed — the previous 20 year increase in earnings inequality.
The minimum wage was a policy of the government of Tony Blair, the former prime minister, which introduced the measure in 1999 in the face of arguments by Conservatives that it would price people out of the job markets.
But now both Philip Hammond, the chancellor, and the opposition Labour party promise to go further to put an end to low pay. This ambition — implying a minimum wage as high as two-thirds of median earnings — could make the UK’s wage floor the highest in the developed world.
“The labour market can tolerate a higher minimum wage than many expected,” argues Kate Bell, head of economic and social policy at the TUC, and a member of the Low Pay Commission.
Recommended
However, others question how much further the national living way can rise without more serious effects on employment. The commission said it had already seen worrying examples of employers asking staff to work harder, rather than training or equipping them to become more productive.
Neil Carberry, chief executive of the Recruitment and Employment Federation, who also serves as a commissioner, said it was “important to acknowledge there are some substantial issues to work through”. One worry was the gap between cities, where employers seemed to be coping with higher wage bills, and more rural areas “where things seem to be a bit more of a struggle,” he said.
Calls are also growing to lower the age at which workers qualify for the main adult rate. Although many accept that a lower rate for teenagers can help school levers gain a toehold in the labour market, the rate for workers aged between 21 and 25 is lower than the national living wage, even though they are often in the same roles as older minimum wage workers.
The TUC said that its own analysis showed that the average 21-24-year-old low wage worker was earning £800 less a year than over 25s.
