National minimum wage not fit for purpose says its founding father
Professor Sir George Bain, who chaired the low pay commission when the minimum wage was introduced, says it needs updating.
The founding father of the national minimum wage has said the system is no longer fit for purpose and must change in order to tackle Britain’s low pay problem.
Professor Sir George Bain chaired the low pay commission (LPC) when the minimum wage was introduced 15 years ago. For it to last another 15 years it urgently needs updating to tackle new issues in the labour market, he said on Friday.
“The minimum wage has been a clear success but the world has changed in the 15 years since it was introduced. We now know the policy has not caused unemployment, and there is broad political support. But with more than one in five workers in Britain suffering from low pay, it’s time to talk about how we strengthen the minimum wage for the years ahead,” he said.
Bain is chairing a review at the Resolution Foundation thinktank of how the minimum wage and the role of the commission that sets it might be strengthened.
Politicians from all parties are promising to help people who have been squeezed by pay levels that are failing to cover rising food and fuel bills. George Osborne has suggested that the minimum wage could rise from £6.31 per hour to £7, as the LPC prepares to make its recommendation for the new minimum wage level in the spring.
An interim report from the Resolution Foundation on Friday said the policy has had many strengths and lifted many workers out of extreme low pay. However, many employees are starting work on the minimum wage and failing to secure pay rises for years after, as it has become the going rate in some sectors. There are also a large number of workers who are earning barely more than minimum wage because a “ripple effect” has failed to transpire, the thinktank’s report says.
About 1.2 million workers are paid the minimum wage and a further 1.4 million workers earn no more than 50p more. The Resolution Foundation says 5 million workers remain low-paid based on the definition of earning below two-thirds of the typical hourly wage – which currently means someone earning less than £7.71 is low paid.
It sets out possible reforms to the minimum wage and to the LPC’s remit for Bain to consider ahead of his final recommendations next month. One suggestion is to broaden the government’s work on low pay beyond the minimum wage by setting an explicit ambition to reduce the proportion of workers who are low paid.
It also suggests setting the ambition for the level of the minimum wage over a medium-term horizon, compared with the current short-term system of unveiling the latest rate each year in spring and introducing it in the autumn.
The commission may also benefit from powers to pressure some employers to go beyond the national minimum when they can afford to, the report added.
Bain said: “Reform of the minimum wage will be hard to get right – it would be easy to damage a policy that works well. But our discussions suggest there are ways to take a more assertive and ambitious approach while still keeping the flexibility of the current system.”