National Minimum Wage

Appendix 2: Low Pay Commission Research
18 Another recent development in the labour market for young people was the introduction of
the Apprentice Rate in October 2010, initially set at £2.50 an hour. Ipsos MORI and
Cambridge Policy Consultants (2012) were commissioned to undertake an assessment of its
impact. Using information gathered mainly from employers, the researchers concluded that
the impact had been minimal. This finding was unsurprising as the hourly rate had been set
in line with the pre-existing Learning and Skills Council minimum weekly apprentice pay in
England of £95 a week. It also found that the average minimum hourly pay for apprentices
reported by employers in the UK was £5.41 but this varied from £3.08 in hairdressing to
£7.10 in team leadership and management. Of more relevance to the Commission, around 10
per cent of employers said apprentices were paid less than £2.60 an hour, the then
forthcoming October 2011 rate.
19 The research also found that some employers had expressed concerns regarding the move
from a weekly to an hourly rate and that this might lead to changes in training hours.
A minority of employers had difficulties with the rules. It also found that awareness of the
Apprentice Rate was low. This is particularly disappointing to the Commission as these
employers all employed at least one apprentice.
20 Although we have commissioned research looking at issues of non-compliance previously, the
extent and character of non-compliance remains a significant gap in our knowledge.
In an attempt to rectify this, Ipsos MORI and Community Links (2012) were commissioned
to investigate why employers did not comply with minimum wage (or other employment)
legislation. Conducting face-to-face interviews, they found that employers who were noncompliant
ranged from those who said they could not afford to pay the minimum wage to
those for whom it was a deliberate choice. Employers in this latter group cited as reasons to
justify non-compliance the need to be competitive; the existence of a pool of workers prepared
to work for less; the lack of a productivity incentive provided by a minimum wage; the
exploitation of illegal workers; the provision of additional non-wage benefits; and that some
workers (e.g. students, housewives, carers) or some jobs (casual, part-time unskilled) were
not ‘proper’.
21 The research identified three main pathways to non-compliance: first, a hobby that developed
into a business; second, a business start-up; third, inheriting or buying an existing informal
business. In all three cases, ignorance of the correct procedures became harder to undo over
time. Further, there was a perception that the penalties for non-compliance of the minimum
wage were low and that they were unlikely to be caught.
22 Looking forward, we also attempted to take account of future government measures by
commissioning research on the implications of the abolition of the AWBEW. Existing
agricultural workers would be entitled to their current terms and conditions after abolition.
IDS (2011b) concluded that abolition would therefore probably only immediately affect
existing Grade 1 agricultural workers (mainly casual, seasonal and unskilled) as the Low Pay
Commission would be recommending a national minimum wage. It was likely that these
workers would be paid the NMW, historically 1-2 pence an hour lower than Grade 1 under the
AWBEW. For those currently working at Grade 2 and above, there would be little short-term
effect other than removing them from a national pay-setting mechanism that also covers
employment terms and conditions.
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