This is the final report of the Resolution Foundation’s review of the future of the National Minimum Wage. The review has worked for the past nine months under the chairmanship of Professor Sir George Bain, the founding chair of the Low Pay Commission, exploring whether the minimum wage and its supporting architecture could do more to tackle Britain’s pervasive problem of low pay.
Our recommendations cover three areas, arguing for a broader, more far-sighted and assertive approach. We recommend that the government make it an explicit long-term ambition of economic policy to reduce the incidence of low pay, setting out a plan to reduce the share of employees who earn below two-thirds of the hourly median wage. We suggest that the government adopt the ambitious but achievable long-term goal of reducing the UK’s high incidence of low pay from 21 per cent to 17 per cent, a reasonable goal against international benchmarks.
Second, we need to make the minimum wage more far-sighted. Here we recommend that the process for setting the rate be reformed in several respects. We make two recommendations to increase clarity. In the short-term, the Secretary of State for Business should ask the LPC to set out how long it will now take for the National Minimum Wage to recover the value it has lost in real terms during the exceptional down-turn we have recently experienced. We also recommend that the LPC be asked to publish alongside its recommendation for each year's minimum wage a preliminary view on its intention for the following year’s minimum wage.
Third, because a single legal wage-floor—which we favour—will always be a blunt tool, a key role for the LPC should be to encourage a debate over when employers could go further than today’s statutory NMW. The proper arena for this debate is civil society, not Whitehall, but the state can help shift the terms of debate, in part by publishing information. Our analy-sis suggests that industrial sectors are a good way to start. The Secretary of State for Business should ask the LPC to publish analysis to show which sectors of the economy could afford to pay more than its recommended NMW.
Finally, we believe that a similar case can be made for London. While we oppose the idea of regional minimum wages, in the capital we feel there is a case for moving directly to the publication of a single reference rate: a non-mandatory minimum wage giving in effect a London-weighting for the NMW.
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