National Minimum Wage

Chapter 2: The Impact of the National Minimum Wage
Table 2.5: Hourly Pay Gaps for Particular Groups of Workers Aged 22 and Over, UK,
2007/08-2010/11
Per cent Lowest decile Median
2007/08 2008/09 2009/10 2010/11 2007/08 2008/09 2009/10 2010/11
Unqualified 9.5 9.4 8.9 8.1 34.4 35.3 34.9 34.6
Women 9.4 8.1 6.9 6.8 19.5 19.5 17.6 19.1
Disabled people 2.9 3.5 2.3 2.5 11.1 11.7 9.9 9.5
Migrant workers 3.3 3.5 4.9 4.8 3.9 5.5 8.2 7.8
Ethnic minorities 2.5 3.2 4.5 3.2 3.9 5.3 5.0 3.4
of which
Indian -1.2 -3.0 1.4 1.7 -10.6 -13.2 -6.7 -8.1
Other non-white 4.0 4.5 4.5 4.0 4.4 5.3 5.5 2.9
Black 0.0 1.3 4.0 0.7 2.2 8.9 3.3 4.3
Pakistani 7.2 7.6 7.6 5.6 24.3 22.1 26.8 18.0
Bangladeshi 8.3 7.6 7.6 6.4 24.8 24.3 31.8 26.6
Source: LPC estimates based on LFS Microdata, income weights, quarterly, not seasonally adjusted, UK, Q4 2007-Q3 2011.
2.51 There is considerable variation in the pay gaps among different ethnic groups. For ethnic
minorities as a whole, the pay gap at both the lowest decile and the median were broadly
similar to those observed previously. The median pay gap for workers of Indian ethnicity was
negative and suggested that median pay for these workers was around 8 per cent higher
than median pay for white workers. By contrast the median pay gaps for workers of Pakistani
and Bangladeshi ethnicities were both positive and high (18 per cent and 27 per cent
respectively).
Views on Pay Gaps
2.52 Some stakeholders were concerned at the level of the pay gap between certain groups.
The Public and Commercial Services Union said the pay gap between highest and lowest
earners had been widening for the last thirty years and was now at a level not seen since
Victorian times. However, Unite said that the minimum wage had been a positive influence in
helping to close the gender pay gap and believed that a further significant rise would have a
beneficial impact on that gap. Similarly it noted the impact of the minimum wage on the pay
gap for ethnic minorities and for those with disabilities, and that employment for those with
disabilities had increased since the minimum wage was introduced.
Pay Settlements and Pay Structures
2.53 As well as investigating the impact of the minimum wage on individual earnings, we can also
look at its effects on pay setting and pay structures. This requires the study of employer
behaviour. In order to cope with minimum wage increases, employers may adjust their pay
structures or try to reduce their non-wage labour costs.
2.54 We start by looking at pay settlements. There are no official data sources on pay settlements,
so it is necessary to use data from four pay organisations – the manufacturers’ organisation
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