Government announces National Minimum Wage

June 1998 saw the publication of the report of the UK's Low Pay Commission on the level of the forthcoming National Minimum Wage.

On 18 June 1998, the Government published the report of the Low Pay Commission (LPC), appointed in July 1997 (UK9711177F) to recommend the level of the statutory National Minimum Wage (NMW). The NMW is one of the central commitments of the Labour Government (UK9712190N), which responded to the report by affirming its belief in "decent minimum standards, as a spur to competing sustainably on quality, to tackle social exclusion and to make work pay". The Government continued that the NMW is a key element in the range of policies it has already introduced - such as the "New Deal" for unemployed people (UK9707143F) and the Fairness at work white paper (UK9806129F) - aimed at aiding the UK on the road to recovery. It argues that the NMW will help create a better rewarded and more committed workforce, and become a force for driving up standards and boosting competitiveness. The Government also believes that the NMW will have a positive effect are in reducing staff turnover and encouraging investment in training.

The Government has welcomed the report and supports all of the LPC's key recommendations - subject to consultation on some of the practical details - including a review after two years. In particular, it accepts a main minimum wage rate of GBP 3.60 per hour before deductions, with effect from April 1999. When combined with the new "working families tax credit" (UK9804116F) and other benefits, for a single-earner couple with two children this means an effective wage of more than GBP 7 per hour. The Government also accepts that all those aged 16-17, or on formal apprenticeships, should be exempt.

The Commission proposed that that a "development rate" of GBP 3.20 should apply to all those aged 18-20, and to all workers starting a new job with a new employer and receiving accredited training. However, while accepting the idea of such a rate, the Government preferred to proceed cautiously with its introduction and decided to phase it in two stages, with an initial transitional rate of GBP 3.00 from April 1999, which will increase to GBP 3.20 in June 2000.

The Trades Union Congress (TUC) welcomed the announcement but thought that the Government was a little over-cautious. General secretary John Monks said: "Inevitably, such a process did not produce a report in line with every union desire. But while the GBP 3.60 rate is lower than we would have liked, we see this as a start on which we can build in future. We believe the critics of a minimum wage will be proved wrong, and this will give us the opportunity to press for up-rating in future."

Adair Turner, director-general of the Confederation of British Industry (CBI), said that: "The figure of GBP 3.60 per hour is at the top end of what is acceptable for business. Overall it should not place too much pressure on inflation or lead to major job losses, but it will inevitably have a significant effect on some industries and in some regions. Any higher and we would be moving into more dangerous territory. The level announced today allows for a reasonable and workable way forward."

A more detailed feature article appears in the EIROnline records for July 1998.

Useful? Interesting? Tell us what you think. Hide comments

Eurofound welcomes feedback and updates on this regulation

Add new comment