Due North: the impact of the Minimum Wage in the North East

Low Pay Unit Report - December 1998

Executive Summary

Britain's first ever NMW came into force on 1 April 1999, at £3.60 for workers aged 22 and above, and £3.00 for 18 to 21 year olds. This report estimates its impact on the South West region, using official statistics and a Jobcentre survey.

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.