Increase in national minimum wage announced

Contrary to earlier signals, in February 2000 the UK government announced a GBP 0.10 increase in the main hourly adult rate of the national minimum wage, but this will take effect from October 2000, not from the April 2000 first anniversary of the introduction of the national minimum wage.

On 15 February 2000, the trade and industry secretary, Stephen Byers, announced that the adult hourly rate of the national minimum wage (NMW) will rise from GBP 3.60 to GBP 3.70 in October 2000 - 18 months after the NMW was first introduced (UK9904196F). According to government figures, this will affect 1.3 million workers. He also confirmed that the youth rate payable to workers aged 18-21 will rise in June 2000 from GBP 3.00 to GBP 3.20, benefiting 200,000 young workers. The government had been under strong pressure from trade unions and Labour MP s to up-rate the NMW on its first anniversary in April. Its initial inclination had been to rule out an increase in 2000 (UK0001147N), but the prospect of a major revolt by Labour MPs on the issue appears to have prompted the government to change tack. Ministers say that by introducing the increase in October, they are providing time for business to prepare for implementing the change.

The Confederation of British Industry"accepted" the GBP 0.10 increase but rejected calls for automatic increases each year. Its director-general, Digby Jones, commented that it was "one thing to raise the minimum wage at a time of economic growth but quite another to be tied to an automatic rise during an economic downturn". For the Trades Union Congress, general secretary John Monks welcomed the increase in the NMW as "a step in the right direction". He said: "It shows that the government has listened to the clear views of trade unions, Labour MPs and its supporters in the country." Some unions and low pay campaign groups said that the increase was not enough to make a significant difference to the low paid. Earlier in February, the Conservative Party's new parliamentary treasury spokesperson, Michael Portillo, indicated that the party had dropped its opposition to the NMW, announcing that it would be retained by a future Conservative government.

At the same time as announcing the increase, the trade and industry secretary published a second report by the Low Pay Commission, evaluating the impact of the NMW. This found that the NMW had been introduced smoothly and successfully, increasing the pay of some 1.5 million low-paid workers with no significant adverse effect on employment or the economy. The report presented evidence that the NMW had a positive impact on business in terms of improving performance and productivity. The Commission said that its original recommendation, put forward in its first report, that the main adult NMW rate should be raised to GBP 3.70 an hour (UK9807135F) was "affordable and sensible". It also recommended that 21-year-olds should be covered by the full adult rate, but the government has decided not to act on this recommendation - at least at this stage. (The findings of the Commission's second report will be the subject of a separate EIRO feature to be published shortly.)

The government has asked the Low Pay Commission to continue to monitor the NMW and to report to ministers by July 2001 with further recommendations on its rate. Professor George Bain has agreed to continue to chair the Commission during the next phase of its work. The Department of Trade and Industry has said that any further increase in the NMW will be in October 2001.

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