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Abstract:

cover
CEP Discussion Paper
The British National Minimum Wage
David Metcalf
March 1999
Paper No' CEPDP0419:
Full Paper (pdf)

Great Britain has had statutory regulation of minimum pay for much of this century but never previously had a national minimum wage (NMW). This paper outlines the history of minimum wage regulation culminating in 1997 with the establishment of the Low Pay Commission (LPC) and the introduction of the NMW this year. The main issues considered by the LPC were the definition of the NMW, the rate itself and what to do about younger workers. As well as its own deliberations, the LPC took written and oral evidence and held over 200 meetings around the United Kingdom. This process was vital in achieving unanimity around a NMW (ú3.60 from April 1999 for those aged 22+) acceptable to the government. Comparative international evidence on coverage and cost was also important in coming to our conclusions and the British NMW is towards the middle of the range of coverage among OECD countries. Although there is general agreement that minimum wage systems reduce wage inequality, their impact on the distribution of household income is more controversial. Evidence presented suggests the NMW may have a more egalitarian impact on household incomes than is sometimes asserted. The Report of the LPC is only the beginning of the story. Responses to it were generally favourable: parliamentary regulations are needed to translate the recommendations into law; the NMW has to be enforced and evaluated. This necessary follow-up to the Report is discussed in the concluding sections.