National Minimum Wage

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National Minimum Wage Scottish Grocers’ Federation Scottish Licensed Trade Association Social Enterprise UK Somerset Care Stage Management Association Stonehaven Care Group Thorne, Graham Trades Union Congress Truecare (New Forest) Ltd UK Fashion and Textile Association Union of Shop, Distributive and Allied Workers UNISON Unite United Kingdom Home Care Association Unquoted Companies Group Victoria Inn, Lincoln Watson, Mark Welsh Government White Horse Child Care Ltd Winchester Growers Limited XpertHR 158
Appendix 2 Low Pay Commission Research Overview 1 The National Minimum Wage (NMW) was introduced in the UK in April 1999 and since then numerous researchers, funded independently or by the Commission, have investigated its impact. The general consensus of these studies is that the minimum wage has raised the earnings of the low paid without significantly affecting employment or generating wage inflation. Instead of cutting employment, research evidence indicates that firms have attempted to cope with increases in the minimum wage by changing pay structures and reducing non-wage costs; reducing hours; raising prices; or accepting lower profits. But it should be noted that much of this research was conducted when the economy was performing strongly, although the research commissioned for our 2011 Report, taking account of some of the recent economic downturn, drew similar conclusions. However, that research also found some tentative evidence that the employment of young people may have been affected by the minimum wage during the recession. 2 For this report, we again commissioned research that focused on the impact of the minimum wage in recession and the impact on young people. We start this section by discussing the impact of the minimum wage on the earnings distribution and pay differentials, before considering wider issues of employment and hours. We also investigated whether these effects differed by size of firm. Our focus then turns to young people to again consider the relationship between age, wage and productivity; the impact on employment and schooling; and the reasons why wage growth among young people had been slower than for older workers during the recession. We then consider the impact of the introduction of the Apprentice Rate in October 2010. Our research programme was completed by investigating non-compliance, and the impact of the potential abolition of the Agricultural Wages Board for England and Wales (AWBEW). 3 Butcher, Dickens and Manning (2012) built on their previous analysis of the impact of the minimum wage on the wage distribution, which had found clear evidence that inequality had been falling at the bottom of the wage distribution since the introduction of the minimum wage. For the UK as a whole, over the period between 1998 and 2010, the researchers again found modest spill-over effects. The minimum wage directly affected up to the 6th percentile, at which the spill-over effect was largest, raising wages by about 7 per cent more than in the absence of the minimum wage. This effect stretched up the pay distribution (wages were raised by about 4 per cent at the 10th percentile and still over 1 per cent at around the 20th percentile). The effect was larger for women than men. Disaggregating these affects by geography, they found that areas most affected by the minimum wage had even larger 159
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Commissioners’ Introduction Last
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