On the 20th anniversary of the National Minimum Wage, a new report by the Low Pay Commission examines how the policy has transformed the UK labour market.
- The minimum wage has reversed the pre-1999 trend of pay growth inequality.
- Last year the lowest-paid workers earned £2.70 per hour more in real terms than if there had been no minimum wage – £5,000 a year for a full-time worker.
- 30% of workers have benefited either directly or indirectly from the minimum wage – with up to 7 million individuals a year feeling the benefits.
- The LPC has not found significant negative effects on employment from raising the minimum wage.
Bryan Sanderson, Chair of the Low Pay Commission, said:
“Today we are celebrating the 20th anniversary of the National Minimum Wage and recognising the transformative effect it has had on the UK’s labour market.
“It has succeeded in raising the pay of the lowest paid – by £5,000 a year in real terms for a full-time worker – without harming their job prospects.
“The Low Pay Commission’s social partnership and evidence-based approach have been crucial to the success of the policy.”
Today’s report by the Low Pay Commission sets out the long-term effects of the National Minimum Wage and the National Living Wage, with new analysis of pay and employment data. It describes the history of the minimum wage in the UK, including the debates leading up to its introduction. And it details how the LPC’s model of social partnership informs its advice to Government on the rates.
The introduction of the National Minimum Wage (NMW) in April 1999 had a significant impact on the lives of the lowest paid. Until then, it had been the norm for low-paid workers to see their earnings grow more slowly than the average, regardless of wider economic conditions. The earnings of the lowest-paid rose by much less than the average throughout the 1980s and 1990s. The NMW and National Living Wage (NLW) have reversed this norm: since 1999, the lowest paid have seen their hourly pay grow faster than all other workers.
And in addition, many more workers have benefited indirectly – the effects of an increase in the minimum wage ripple up the pay distribution, as employers maintain a ‘differential’ between the minimum rate and pay for managers and team leaders just above.
With each annual increase, the NMW and NLW have increased the pay of up to 30% of all jobs – up to 7 million workers on current employment levels. Between 1999 and 2018, we estimate that the total benefit to workers of minimum wage increases has been £60 billion. The bottom 1% of workers were paid £2.70 an hour more in real terms in 2018 than they otherwise would have been – an additional £5,000 a year for the lowest-paid full-time workers.