Minimum Wage Marks 20 Years Without Damaging Jobs

  • Apr 03, 2019 BST
  • Team Kalkine
Minimum Wage Marks 20 Years Without Damaging Jobs

In the mid-1990s, a UK employer could advertise an opening for a security guard on an hourly wage of just £2.  Twenty years on from the introduction of a national minimum wage, such miserly job offers are the things 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. Increase 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 the government on the pace at which it can rise without any adverse effect on the economy.

Up to 7 million people, 30 per cent of the workforce are now benefited directly or indirectly from the national living wage, according to a report by the commission published on Monday 25th March to mark the anniversary. The bottom 1 per cent of workers were paid £5,000 more in real terms in 2018.

According to Torsten Bell, director of the Resolution Foundation, not all policies at birth are controversial but which go on to become widely recognised triumphs are mostly controversial at the time of starting. He noted that the minimum wage had halted although not reversed in 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 will be implying a minimum wage as high as two-thirds of median earnings and could make the UK’s wage floor the highest in the developed world.

As per Kate Bell, Head of economic and social policy at Trades Union Congress (TUC) and member of the Low pay commission, the labour market can tolerate a higher minimum wage than many expected.

However, other question is how much further the national living wage 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 Confederation, 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.

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 leavers 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. Analysis done by TUC showed that the average wage of 21-24-year-old was £800 less than over 25s.

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