The national minimum wage is no longer strong enough to tackle the country’s low pay problem and the policy will need to be reformed if it is to repeat the successes of its first 15 years.
Professor Sir George Bain, the founding chair of the Low Pay Commission which recommends the rate of the minimum wage, is heading up a review of the policy’s future at the Resolution Foundation An interim report from the review chaired by Professor Bain notes that the current settlement has had many strengths but that it also falls short in important respects.
The report sets out a range of options for reforming the minimum wage and giving the Low Pay Commission, which supports it, new impetus. These ideas include:
- Broadening the government’s work on low pay beyond the minimum wage by setting an explicit ambition to reduce the share of workers who are low paid; setting the ambition for the level of the minimum wage over a medium-term horizon and giving the LPC additional tools to complement the minimum wage, creating new pressure points on employers to go beyond the national minimum when they can afford to.
- While the minimum wage has been highly successful at lifting most people out of extreme low pay, it has not had the upward ‘ripple effect’ that many expected. As a result, many workers earn just above the minimum wage but still too little to get by. In some sectors, the minimum wage has become the going rate.
- Around 1.2 million workers are paid the minimum wage (or within 5 pence of it). Above that level however, a further 1.4 million workers earn no more than 50 pence above the legal hourly minimum In total, 5 million workers remain low-paid. The official definition of low pay is earning below two-thirds of the typical hourly wage – which currently means someone earning less than £7.71 an hour is low paid.