Government and employers submit evidence on national minimum wage

During November and December 2000, the UK government and two leading employers' organisations presented evidence to the Low Pay Commission, which is currently considering whether to recommend an increase in the national minimum wage.

As requested by ministers, the independent Low Pay Commission (LPC) is continuing to monitor and evaluate the impact of the national minimum wage (NMW), currently GBP 3.70 per hour, and will be making recommendations on whether the NMW should be increased in a report due by July 2001 (UK0007182N). During November and December 2001, the government, the Confederation of British Industry (CBI) and the Engineering Employers Federation (EEF) presented evidence to the LPC.

According to the government's evidence, published by the trade and industry secretary, Stephen Byers, between 1.2 million and 1.5 million people have benefited from the introduction of the NMW and the substantial majority of low-paid workers are now receiving the NMW. The "NMW Helpline" is reported to have taken over 225,000 calls since it opened. There have been over 6,000 complaints of underpayment and enforcement officers have visited 8,800 employers. Back-pay totalling GBP 3.1 million has been secured for workers paid below the NMW. The NMW is also reported to have contributed to reducing the gap between men and women's pay, which narrowed by 1% between April 1999 and March 2000. The government argues that its evidence shows that the NMW has continued to be successfully implemented, bringing real benefits to low-paid workers and their families with no detectable impact on the levels of unemployment, average earnings and inflation.

In its evidence, the EEF called for a pre-determined formula to be used to set the next and any subsequent increase in the NMW, based on a retrospective analysis of the movement of basic pay rates across the economy, not on movements in average earnings. The EEF also favours reviewing the NMW every 18 months. The EEF says that it has "no objection" to reducing the age for receiving the adult rate of the NMW from 22 to 21, nor to extending the NMW to 16- and 17-year-olds, provided that their rate is set at a significantly lower level than the youth rate which currently applies to 18 to 21-year-olds (GBP 3.20 per hour).

The CBI's evidence to the LPC urged caution over a possible increase in the NMW. The CBI says that the NMW "has worked well so far because it was set at a prudent level", but that "companies are warning that increasing the rate to more than GBP 4.00 an hour would leave many struggling to cope with higher wage bills, with a knock-on effect on employment." The CBI recommends retaining the youth rate of the NMW to avoid an adverse impact on unemployment among young people, but says that it would accept a reduction in the qualifying age from 22 to 21. It believes that the government should not be tied to automatic annual increases, which could "prove unaffordable during an economic downturn", and that "periodic reviews by an independent body are the best way of deciding what the economy can handle."

Commenting on the CBI's evidence, the Trades Union Congress (TUC) said in a statement: "The CBI predicted massive job losses when the minimum wage was first introduced three years ago. They were wrong then, just as they are now. The minimum wage was first set at a deliberately prudent level to disprove employer and Conservative Party predictions of massive job losses. Now is the time to raise the minimum wage to a level which challenges poverty pay."

The TUC is campaigning for an increase in the NMW to between GBP 4.50 and GBP 5.00 per hour (UK0009187N).

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