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How does the minimum wage compare to top pay?

Alex Hurrell

Earlier this week the government announced that the minimum wage will rise to £6.31 from October this year. This marks a 1.9 per cent increase on the current rate of £6.19 and means the fourth straight annual fall in the real value of the minimum wage after inflation. The new rate was announced by Vince Cable at a Resolution Foundation event, held with the High Pay Centre and the Institute of Directors, to bring together debates about high pay and low pay. So how exactly does the minimum wage compare to the hourly wages received by those higher up the earnings distribution?

Figure 1 below shows the gross hourly wage at different points in the hourly earnings distribution: the National Minimum Wage from October 2012 and the new rate from October 2013, and at the 50th (the median), 70th, 90th and 99th percentiles. The earnings distribution considered here relates to the gross hourly wage received by full-time employees as recorded in the Annual Survey of Hours and Earnings (ASHE). This measure excludes overtime but includes any bonus payments or incentive pay received in the reference pay period.

Sir Robin Wales

This guest post is by Sir Robin Wales, Mayor of Newham

The introduction of the National Minimum Wage (NMW) is widely regarded as one of the most impactful policies of recent decades. Its success as a policy is illustrated by the fact that the need for a minimum wage is rarely questioned any more, even as the government looks to repeal other areas of business legislation. This is great achievement, and the debate has now moved on to discussion over what level the minimum wage should be set at to cover living costs.

These debates are important. But, as the Resolution Foundation has highlighted, with them we have lost sight of a vital issue: enforcement. What many people do not realise is that there is a hidden economy operating where workers are still not receiving the NMW. Without improved enforcement of the law these abuses will continue.

The London Borough of Newham is today publishing research showing that in Newham a shortage of job opportunities combined with a lack of skills, confidence and knowledge of the NMW means workers end up in informal jobs paying measly wages.

Gavin Kelly

This post first appeared on Gavin Kelly's New Statesman blog.

Once in a while a policy moves from being partisan and divisive to representing the mainstream consensus in a very short period of time. That is, or at least was, the case with the national minimum wage (NMW). It wasn’t so long ago it was denigrated by much of the business community and the then Conservative opposition - but only a few years later it acquired a very different status as a statement of the bleeding obvious. The result, according to a timely new report by Professor Alan Manning, is that it has ‘settled down into a premature staid middle age’ following a noisy infancy without ever having passed through a teenage rebellion.

The scandal of low-paid care workers

Gavin Kelly and Joe Coward

This post originally appeared on the New Statesman blog

A friend who is a care worker employed by an agency has a moan to me about her work. Repeated 15 minute slots with a client followed by a frantic dash to another part of the city she lives in to do the same again. Care in a hurry, on the cheap. Welcome to home care for growing numbers in Britain: some of our most vulnerable people cared for by a growing number of overly stretched and underpaid workers.

The only way is up? The minimum wage and Britain’s low paid workers

Gavin Kelly

This post originally appeared on Gavin's New Statesman blog

Tomorrow sees a 15p pence per hour pay rise for Britain’s lowest paid workers. Of course, every penny helps, but don’t expect to hear much gratitude. With RPI inflation running at 5.2%, this year’s VAT increase still being absorbed, tax credits being stripped back and any number of other pressures on the cost of living, this year’s increase won’t allow Britain’s low paid to stand still never mind move forward. The best that can be said is they will be getting poorer (given inflation) at about the same rate as those on average pay.

The perils of welfare dependency – but not the kind you’re thinking of

Donald Hirsch

Centre for Research in Social Policy, Loughborough University

For the entire 30 years of my working life, reforms to our welfare system have marched to the drumbeat of calls to reduce “dependency”, by getting more people out to work. So hard have governments tried to achieve this aim that they have created a new kind of dependency, this time among working families receiving huge sums in tax credits. Even though this can sometimes mean giving someone as much state support in work as they would have got out of work (especially if working requires expensive, state-supported childcare costs), it has brought huge benefits to families. Not only can working feel good in itself (though not in all jobs), but the combination of state handouts with wages has brought many families out of poverty.