Low Pay Thresholds 2000/01

"The right to a fair renumeration" has been established as a fundamental right under the European Social Charter (to which the UK is a signatory). Article 23 of the UN Universal Declaration of Human rights states that "Everyone who works has the right to just and favourable renumeration ensuring.... an existence worthy of human dignity".

What constitutes low pay is not a fixed monetary measure but is defined in relation to the level of earnings in a country and the level of income that is deemed necessary to provide for a household's basic needs.

The Council of Europe has defined this 'decency threshold' as the equivalent of sixty-eight per cent of the average (mean) earnings of all full-time workers.

Council of Europe's Decency threshold: £7.39 per hour

• £410 (average gross weekly earnings, all full-time employees) x 68% = £279.1 per week
• £279.21 divided by 37.8 (average hours worked by all full-timers, excluding overtime hours = £7.39 per hour

This is a valuable definition, which is backed up by evidence from key studies into poverty, such as Townsend's Poverty in the UK, showing that families of workers earning less than two-thirds average earnings were suffering severe poverty and deprivation.However, it is less useful as a target against which to increase the earnings of low paid workers, as any figure based on average earnings will itself increase as earnings rise, making it unattainable. This is why the Low Pay Unit uses a formula based on two-thirds of the median - the point at which half earn above and half below - earnings for full-time men for measuring low pay.

Low Pay Unit's threshold: £6.82 per week

This represents 2/3 male median earnings, calculated:

• £386.6 (median gross weekly earnings for men) x 2/3 = £257.73 per week
• £257.73 divided by 37.8 (average hours worked by all full-timers, excluding overtime hours) = £6.82 per hour

The current NMW rate represents 40 per cent of male median earnings. The Low Pay Unit is campaigning for a figure equivalent to half male median earnings. Once this achieved, successive increases would be recommended to bring it closer to two-thirds male median earnings. (Click here for details of the formula.)

Recommended rate for minimum wage: £5.11 per hour

This represents half male median earnings, calculated:

• £386.6 (median gross weekly earnings for men) divided by 2 = £193.3 per week
• £193.3 divided by 37.8 (average hours worked by all full-timers, excluding overtime hours) = £5.11 per hour

Source: Low Pay Unit's calculations based on New Earnings Survey 2000 (This is the latest data available. The NES 2001 will be released in January 2002)

(This page was last amended in October 2001)