The Low Paid and the Minimum Wage

Evidence to the Low Pay Commission - September 1999

Executive Summary

This report provides a valuable insight into the practical experiences of low-paid workers accessing the NMW and its effect on their incomes. The research was based on a 'before and after model', interviewing workers who accessed the Unit's employment rights advice line prior to the introduction of the NMW and re-interviewing them at different points during the six month period after its introduction.

The study aimed to assess compliance with the NMW, its effect on individuals' working conditions as well as pay, to explore the role of advice and information in accessing the NMW and barriers to access.

The study comprised 45 low paid workers, the majority of whom were female, across the UK. Nearly two-thirds of the sample worked as cleaners, sales assistants, care assistants and bar staff. Prior to the introduction of the NMW, basic hourly pay ranged from £1.50 to £3.50 per hour.

The research showed that the majority of employers were complying with their basic obligation to pay the relevant minimum wage rate. However, almost half of those interviewed had experienced some problem with accessing their full entitlement to the NMW or had not gained the increase expected, either due to breaches of other employment rights - for example, reduction in hours or removal of paid breaks - or the withdrawal of state benefits offsetting any increase in wages. Of those workers not receiving the correct rate, half were reluctant to complain for fear of losing their jobs, despite the fact that the NMW Act protects workers from detriment.

Adequate access to advice and information was crucial in making workers aware of their rights and giving them confidence to approach their employers and enforce their rights. Yet without information about related employment rights and support to enforce them, many low-paid workers would be unable to benefit fully from the NMW.

Analysis of the Labour Force Survey showed that workers in the North East would be disproportionately affected by the introduction of the NMW: 14% compared to 8% in the UK as a whole. A fifth of workers in the distribution, hotel and catering sector would qualify for higher pay, as would almost a third of those working in personal and protective services, and 9% of careworkers. The report also uncovered geographical variation in the impact of the minimum wage across the region, varying from 18% of workers in Cleveland to 9% in Tyne and Wear.

More than half of jobs surveyed in the region offered pay below £3.60 at the time of the survey, and a number of jobs were advertised with pay below £2.00 an hour. In 1998, the North West had the lowest level of pay and the highest level of unemployment in the country.

The report concluded that there was no strong evidence that the NMW would lead to increased unemployment. The type of employment which would be most affected, bar and catering work, had most of the unfilled vacancies in the region. In contrast, rising pay levels in the North East could improve employment rates by raising the entry level wage for many staff, reducing staff turnover, and thus stimulating demand for local goods and services.