1 ©The Work Foundation Beyond the National Minimum Wage? A practical agenda for tackling low pay David Coats, Associate Director – Policy

2 ©The Work Foundation Summary Policy architecture Progress since 1999 Who has failed to benefit? A practical policy agenda

3 ©The Work Foundation History UK came late to the argument for a National Minimum Wage Employer and trade union opposition But…long history of state intervention in the UK - Wages Councils - Fair Wages Resolutions - Extension of collective agreements only period since 1891with no minimum wage protection in the UK Decline of collective bargaining led to a change of mind by the trade unions….and the Labour Party Extensive preparation pre-1997

4 ©The Work Foundation Policy architecture A national minimum wage Youth rates and trainee exemptions The critical role of the Low Pay Commission - Building consensus - “The inevitability of gradualism” - Limiting stakeholder opposition - Neutralising the government’s political opponents

5 ©The Work Foundation What’s happened since 1997?

6 ©The Work Foundation “Low paid” sectors and the extent of low pay (No. and % of jobs in each low paying sector, 2007)

7 ©The Work Foundation Where are the Low Paid? (Numbers of low paid workers by sector, Source: ONS Employee Jobs Series)

8 ©The Work Foundation Who Benefits? April 2007: 64 % of minimum wage jobs held by women 61% of minimum wage jobs are part-time NMW jobs more likely to be temporary or casual than permanent NMW jobs more likely to be held by those from some minority ethnic groups (Pakistanis and Bangladeshis), the disabled, those under 25 and those over 60.

9 ©The Work Foundation A Narrowing Gender Pay Gap

10 ©The Work Foundation NMW Rates Date of LPC Report Date of increaseAdult RateYouth Rate (18- 22) rate June 1998April 1999£3.60£3.00N/A October 2000£3.70£3.20N/A March 2001October 2001£4.10£3.50N/A October 2002£4.20£3.60N/A March 2003October 2003£4.50£3.80N/A October 2004£4.85£4.10£3.00 March 2005October 2005£5.05£4.25£3.00 October 2006£5.35£4.45£3.30 March 2007October 2007£5.52£4.60£3.40 March 2008October 2008£5.73£4.77£3.53

11 ©The Work Foundation The NMW, earnings and prices Source: ONS. Note: The NMW was introduced at the level of £3.60 an hour in The dark blue line plots actual NMW increases. The pink line plots the NMW had it been uprated in line with average earnings since 1999 and the green line does the same with prices

12 ©The Work Foundation Reducing the incidence of low pay? Low paid workers in the UK (%earning less than)

13 ©The Work Foundation Minimum Wages Across Countries (Levels 2007, % of median Source: Low Pay Commission, 2008 Report) CountryIn £ - exchange rate In £ - PPPsAs % full time median earnings Australia Belgium Canada France Greece Ireland Japan Netherlands New Zealand Portugal Spain UK USA

14 ©The Work Foundation But….. UK still has almost 1 million workers on the NMW A large number of households in working poverty (Cooke and Lawton 2008) A higher than average percentage of workless households People stuck in the revolving door from employment to JSA Limited opportunities for advancement and progression

15 ©The Work Foundation What is to be done? Higher NMW? Living wages? Simpler, more effective tax credits? Public procurement/labour standards (FWR, US style living wages) More effective enforcement? Improving the quality of low wage work? Sector forums? A renewed effort to deal with gender pay equality? A new role for the LPC? Develop a sophisticated understanding of the determinants of job quality

16 ©The Work Foundation More good jobs? What drives job quality? - Globalisation? - Production regimes? - Employment regimes? Models: - Liberal market (UK/USA) - Corporatist(Germany) - Inclusive (Nordics)

17 ©The Work Foundation Effects of Job Security on Job Quality – and vice versa Source: Paugam and Zhou (2007)

18 ©The Work Foundation Policy options Skills development - Leitch, the level 2 guarantee and all that Advancement, progression and a new role for JobCentre Plus Community development programmes to tackle multiple disadvantage: - Skills (again) - Language - Support for job search - Transport policy - Social capital to build resilience? - Childcare Above all else make work pay - and pay much closer attention to job quality

19 ©The Work Foundation Policy options A slightly less flexible labour market? - Stronger employment protection legislation - Effective working time regulation - An explicit recognition of the role of trade unions Explicit recognition of the role of social partnership Determined effort to create a more “inclusive” employment regime