Introduction of the National Minimum Wage (Essay Sample)

BRITAIN’S NATIONAL MINIMUM WAGE
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Introduction of the National Minimum Wage (NMW) in Britain
Prior to 1998, the United Kingdom did not have a national minimum wage control. Particular industries had implemented systems that were used to control wages under the Trade Boards Act 1909, minimum wage floors, and the Wages Councils, which operated from the start of the century up to their abolition in 1993 (TEMPEL, 2001). This period had witnessed declined trade union membership that contributed to weakened bargaining power thus making the employees very susceptible to low pay and unfair treatment. In support of the minimum wage, the Labour Party passed a conference motion in 1985 and to prove their commitment to the minimum wage they included it in their manifesto in 1992. This proved a hard idea to sell with the conservative party watering the policy down with the claims of loss of employment to the workers. These show off attracted various scholars who wanted to research and establish the correlation between the National Minimum Wage (NMW) and unemployment. Most of these researchers established that negligible impact of NMW on employment highly favouring the Labour Party (WILLIAMS, 2014)
In 1995, the labour party made a significant leap towards establishing the NMW by committing to create the Low Pay Commission (LPC) which would consist of the three employers, three labour and three independents representatives who would set the NMW after the elections.During the 1997 elections campaign, the Labour Party made the National Minimum Wage its flagship policy.After the landslide victory in 1997, the labour party set the ball rolling and the Low Pay Commission(LPC) with George Bain as the chairman (WILLIAMS & ADAM-SMITH, 2009)
The policy was drafted and passed into law under the National Minimum WageAct (1998) which took effect on 1stApril 1999 with the Low Pay Commission (LPC) setting the adult hourly rate at £3.60.The NMW rates are usually reviewed on October of each year by the Low Pay Commission (LPC). The LPCthen makes recommendations for implementation to the Government.During the introduction of the NMW, it was projected that in the long-run its enactment would help eradicate the problem of poverty pay resulting to a living wage. The poverty pay exists when the earnings from paid work fail to push people out of poverty.
In the UK, the NMW rate per hour depends on age, and whether one is an apprentice - to qualify for a NMW one must be at least school leaving age.(WILLIAMS, 2014)
Below NMW for the past 5years.
Year

21 and over

18 to 20

Under 18

Apprentice(aged 16 to 18 and those aged 19 or over that are in their first year)

2014(current)

£6.50

£5.13

£3.79

£2.73

2013

£6.31

£5.03

£3.72

£2.68

2012

£6.19

£4.98

£3.68

£2.65

2011

£6.08

£4.98

£3.68

£2.60

2010

£5.93

£4.92

£3.64

£2.50

Fig.1. Table illustrating the changes in NMW over the last 5 years (Gov, 2015).
Impact of the National Minimum Wage (NMW) in Britain
Paul Gregg observed that NMW can only have limited the impact on countries poverty levels because the poorest are not at work at all in the first place. Thus looking at an individual perspective, a raise in wages results in the improvement in the living standards and thus one moves from poverty pay (TEMPEL, 2001).
NMW has also had a significant impact on reducing the gender pay gap. This is because the majority of people who were being paid below the set NMW were women who were employed on a part-time basis. The NMW has contributed to a convergence of the earnings of low-paid men and low paid women. However, the gap between men and women in the highest paid category has remained stubbornly wide (GREAT BRITAIN. 2011)
According to the a survey conducting by the Low Pay Commission after the introduction of the NMW in 1998, there was no evidence of reduced employment and hours reduction nor any effect on home closures. According to the survey, the industries usually take the "bite" through reduced profits or a translation of increase in prices of goods. However, no research has conclusively pointed out the relationship between a rise in NMW and raise in prices. It’s however argued that the minimum wage can only rise to a certain level beyond which a further increase would result in unemployment (WALTMAN, 2008). 
According to the LPC survey, the culmination of the NMW has a significant effect on the wage distribution thus reducing wage inequality. NMW has proved to be a very useful tool for income redistribution when used with other government intervention measures
(DIBBEN, KLERCK & WOOD, 2011)
Observations made from earlier research about the impact of minimum wages on youth employment indicated that in cases of an adverse effect of a rise in minimum wage, the young people are more vulnerable than adults. In this regard, the LPC was a little bit cautious when handling youth rates to an extent that Minimum Wage varied by age with the younger workers having a lower NMW (TEMPEL, 2001). 
To what extent did the introduction of NMW point to a significant shift in the British model of employment relations?
The creation of the NMW has lead to a total change in the...