implementation and effects of the natioanl minimum wage in the uk

Those most affected by low pay are women, part-timers, younger employees, peripheral workers (seasonal or casual workers), people with disabilities, those working for small companies, those working in certain parts of the private sector (especially hospitality, retail, social, personnel services and healthcare).

The levels of national minimum wage are based on the recommendations of the independent low pay commission. “National minimum wage is a legal right which covers almost all workers above school leaving age”. (www.dti.gov.uk). If changes are to be made to the rates, it will take effect in October.  As of October 2006 the rates are as follows:

• Workers aged 22 and over- £5.35 per hour (increased from £5.05 per hour)
• Development rate for 18-21 year olds- £4.45 per hour (increased from £4.25 per hour). This rate also applies to 22 year olds and over during their first six months of employment.
• Development rate for 16-17 year olds- £3.30 per hour (increased from £3.00 per hour)
• Accommodation offset- £29.05 per week (increased from £27.30 per week)

As of October 1st 07 it will increase again to;

• 22 and over- £5.52
• 18-21 year olds- £4.60
• 16-17 year olds- £3.40
• accommodation offset- £30.10

The number of hours employers have to pay their workers the minimum wage is calculated differently according to the types of work they do. There are four types of work; timed workers, salaried-hours worker, output worker and unmeasured worker. A timed worker, for example a factory worker, is paid according to set hours or periods of timed work.

A salaried –hour’s worker, for example an office worker, is paid for a pre-determined number of minimum hours a year. These types of workers are contractually entitled to an annual salary paid in equal instalments.

An output worker, for example a home worker, is paid according to each piece produced or each task performed.

Lastly, unmeasured workers, for example domestic staff, are paid according to the performance of certain tasks. There is no specified time period when the task must be completed. Employees work when required or when work is available to them and employers can choose whether to pay an unmeasured worker for every hour worked or a daily average.

Not everyone is entitled to the national minimum wage. However the vast majority of adult workers in the UK (except the Channel Islands and the Isle of Man) are entitled to the National minimum wage.

There are certain people who are exempt from receiving the national minimum wage. These include the genuinely self-employed, voluntary workers, worker who are based permanently outside the UK or in the Channel Islands or Isle of Man, apprentices (who are under 19 or over 19 but within their first year of employment), armed forces, prisoners etc.

The implementation of the national minimum wage has come with certain advantages.

One advantage of a national minimum wage is that it attacks low pay and poverty and it has a positive effect on the results of them. It increases the average living standard and brings poverty-stricken households a step closer to moving out of the band of lower class citizens.

A national minimum wage also reduces low paid work, which may be viewed as unfair and exploitive. It ensures companies compete on the basis of the quality of the goods and services they provide and not on low prices (based predominantly on low rates of pay). It also forces businesses to share some of their vast wealth with the people that help produce it.

Another advantage of the national minimum wage is that it reduces the dependency of the low paid on state- benefits. This is an advantage because this then reduces taxes.

A national minimum wage will be good for working women as “more women than men fill the lowest-wage jobs in retail, healthcare, restaurants and hotels”. ()

As well as having advantages, a national minimum wage can come with certain disadvantages as well.

The largest group of beneficiates from the introduction of the national minimum wage in the UK were women working part-time. A potential threat to an increase in wages is a reduction in the working hours available, with part-time (flexible) and low skilled jobs particularly vulnerable.

One might question whether a minimum wage is high enough to have a positive effect on the poor.

One advantage is that there is a chance of a possible increase in unemployment for low-wage earners. This is because a national minimum wage set above the free-market wage for certain groups raise the marginal cost of employing people. As a result of this firms will “cut jobs, reduce hours of work and unemployment will rise”. Small business owners, facing an increase in labour costs will not only reduce employment but they might also be forced to close their doors.

Another disadvantage is that having a minimum wage might exacerbate inflation. This is because firms will have to put the price of their goods or services up in order to pay their employees and workers a higher wage.

Having a national minimum wage could cause problems for the tax and benefit system as an increase in unemployment (through the loss of jobs) would result in people becoming more dependent on state welfare.

Conclusion

In deciding whether a national minimum wage is a good or bad thing, one must first decide whether the benefits out way the cost. It would be easy to say that having a minimum wage has little impact on the lives of the poor as it may not be high enough to make a positive effect. Also most poor people do not work so the implementation of a minimum wage could be seen as pointless. For all these reasons it would seem that having a minimum wage legislation does more harm than good to the very people it was introduced to help. However, on the other hand, workers need a minimum amount of income from their work to survive and pay the bills. It also forces businesses to share some of the vast wealth with the people who help produce it.  For these reasons it would seem that the implementation of a minimum wage has a far more positive effect on the economy than we are being led to believe.

Bibliography

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3. http://www.eiro.eurofound.ie.2000/02/features/uk0002157f.html
4. http://www.blackwellsynery.com/doi/abs/10.1111/1468_0084.64.5.3?cookieSet=1&journalCode=obes
7. TRADE UNION CONGRESS, 1995, Arguments for a National Minimum Wage