The Commissioners

Chairman's Foreword

Executive Summary

Recommendations

List of Figures

List of Tables

1. Introduction

2. Aggregate Impact of the National Minimum Wage

3. Low-paying Sectors and Small Firms

4. Particular Groups of Workers

5. Young People

6. Apprentices

7. Compliance and Enforcement

8. Setting the Rates

Appendices
Appendix 1
Appendix 2
Appendix 3
Appendix 4
Appendix 5

Abbreviations and Glossary

Select Bibliography

A8

The eight Central and Eastern European accession countries that joined the EU in May 2004: the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia.

ABI

Annual Business Inquiry

An annual ONS survey of businesses covering employment and financial information.

ACS

Association of Convenience Stores

Adult rate

The National Minimum Wage rate applicable to those aged 22 and over.

AEI

Average Earnings Index

A measure of the money people receive in return for work done, gross of tax. It includes salaries and bonuses, unless otherwise stated, but not unearned income, benefits-in-kind or arrears of pay.

ALI

Adult Learning Inspectorate

ALMR

Association of Licensed Multiple Retailers

ALP

Association of Labour Providers

Annualised

Where an adjustment is made to data so that they represent twelve months, to enable comparisons between different time periods.

Apprenticeship

A form of vocational training. Provides a learning framework involving a mixture of work-based and theoretical learning.

APS

Annual Population Survey

ARD

Annual Respondents Database

ASHE

Annual Survey of Hours and Earnings

AWB

Agricultural Wages Board

AWD

Agency Workers Directive

AWE

Average Weekly Earnings

BATC

British Apparel & Textile Confederation

BBPA

British Beer & Pub Association

BCC

British Chambers of Commerce

BERR

Department for Business, Enterprise and Regulatory Reform

BHA

British Hospitality Association

Bimodal

A distribution in which two numbers or values appear most frequently.

BISL

Business In Sport and Leisure

Bite

The value of the minimum wage, in percentage terms, relative to a specific point on the earnings distribution, usually the median, mean or lowest decile.

BRC

British Retail Consortium

BSSA

British Shops and Stores Association

BYC

British Youth Council

CBI

Confederation of British Industry

Claimant count

The number of people claiming Jobseeker’s Allowance in the UK. See also unemployment.

CoVE

Commission on Vulnerable Employment

CPI

Consumer Price Index

The headline measure of consumer price inflation in the UK and the index used for the Government’s inflation target. It is a measure of the change in the average price of consumer goods and services purchased by households. Unlike the RPI, the CPI excludes housing costs. There are also methodological differences between the two measures. It is used for international comparisons. See also inflation.

CPL

Comparative Price Level

An indicator of price level differences across countries and defined as the ratio of purchasing power parities (PPPs) to exchange rates. See also PPP.

Credit crunch

A sudden reduction in the availability of loans and other types of credit from banks and capital markets independent of a rise in interest rates.

CSSA

Cleaning and Support Services Association

DCSF

Department for Children, Schools and Families

Deciles (earnings)

Employees ranked by their earnings from lowest to highest then divided into ten equally sized groups. The lowest decile contains those in the bottom 10 per cent of the earnings distribution.

DEFRA

Department for Environment, Food and Rural Affairs

DEL

Department for Employment and Learning

DfES

Department for Education and Skills

DIUS

Department for Innovation, Universities and Skills

DTI

Department of Trade and Industry

DWP

Department for Work and Pensions

EAS

Employment Agency Standards

ECCA

English Community Care Association

Economically active

People who are either in employment or unemployment.

EEA

European Economic Area

An agreement that allows Iceland, Liechtenstein and Norway to participate in the European Union single market without joining the European Union

EEF

The manufacturers’ organisation

EHRC

Equality and Human Rights Commission

EIS

Employment Information Services

EMA

Education Maintenance Allowance

A means tested payment of up to £30 per week, available to young people aged 16–18 who remain in education and training after the age of compulsory education.

Employee jobs

The total number of jobs held by employees. Some people may have more than one job so the figure is higher than the number of employees.

Employees

Those who work for an employer under the terms of a contract of employment, whether it is written down, agreed orally or implied by the nature of the relationship.

Employment

Total number of employees, self-employed, participants in government training schemes, and people doing unpaid family work.

Employment rate

The total number of people in employment as a percentage of a defined group. The working age employment rate is typically used as the headline figure. The age group is stated otherwise. See also working age.

Enterprise

A firm or a business.

EOC

Equal Opportunities Commission

Established rate of pay

The rate of pay employees can be expected to progress to, usually within a year, having completed any initial training and probationary period.

ET

Employment Tribunal

Ethnicity

A character trait or affiliation resulting from national, racial or cultural ties.

EU

European Union

Eurozone

The currency union of 16 European Union (EU) states which have adopted the euro as their sole legal tender.

FAME

Financial Analysis Made Easy

Four-quarter moving average

A form of seasonal adjustment that takes the average of four calendar quarters (in this report the latest quarter plus the three preceding quarters).

FRS

Family Resources Survey

FSB

Federation of Small Businesses

FTE

Full-time education

Full day care

Facilities that provide day care for children under the age of eight for a continuous period of four hours or more on any day in premises which are not domestic premises.

Full-time

In employer and household surveys, jobs are generally classified as being full-time if the contracted hours of work are 30 hours or more per week.

GB

Great Britain

Constituted by England, Scotland and Wales.

GCSE

General Certificate of Secondary Education

GDP

Gross Domestic Product

A measure of the value of goods and services produced in an economy in a particular period.

GfK NOP

Growth from Knowledge National Opinion Polls

GLA

Gangmasters Licensing Authority

GMB

A trade union

GMPERAS

Greater Manchester Pay and Employment Rights Advice Service

GVA

Gross Value Added

A measure of the additional contribution to the economy of each individual producer, industry or sector.

HMRC

HM Revenue & Customs

HO

Home Office

Housing equity withdrawal

New borrowing secured on dwellings that is not invested in the housing market (e.g. not used for house purchase or home improvements), so it represents additional funds available for reinvestment or to finance other purchasing.

HR

Human Resources

IDS

Incomes Data Services

IES

Institute for Employment Studies

ILO

International Labour Organisation

ILO Unemployment

The measure based on the International Labour Organisation (ILO) guidelines which counts as unemployed those who are without a job, are available to start work in the next two weeks, who want a job and have been seeking a job in the last four weeks, or are waiting to start a job already obtained.

IMF

International Monetary Fund

Inactive (economically)

People who are neither in employment nor unemployment, including those with caring responsibilities, students, retired or permanently unable to work. This also includes those who want a job but have not been seeking work in the last four weeks, those who want a job and are seeking work but are not available to start work, and those who do not want a job.

Inactivity rate

The total number of people who are economically inactive as a percentage of a defined group. The working age inactivity rate is typically used as the headline figure. The age group is stated otherwise. See also working age.

Independent/ voluntary sector

Non-profit, non-governmental, non-statutory organisations.

Inflation

A general and progressive increase in prices. See also CPI, RPI and RPIX.

Informal economy

Economic activity that is neither taxed nor monitored by a government. It is not included in official estimates of output, employment or earnings.

Insolvency

A firm that has been registered as unable to meet its debts or discharge its liabilities.

IRS

Industrial Relations Services

JWEP

Joint Workplace Enforcement Pilot

Labour force

Those in work or available for work.

Labour market

The interaction between workers and employers that determines employment and earnings.

Large firm

A firm employing 250 or more employees.

LFS

Labour Force Survey

Low-paying industry

Those industries that employ a large number of minimum wage workers or those in which a high proportion of jobs are paid at the minimum wage. The low-paying industries are: retail; hospitality; leisure, travel and sport; social care; food processing; agriculture; hairdressing; cleaning; security; and textiles and clothing.

Low-paying occupation

Those occupations where a large number of workers or a high proportion of jobs are paid at the minimum wage. We have grouped them into low-paying occupational sectors that are akin to the industry groupings that we use. The low-paying occupational sectors are: retail; hospitality; leisure, travel and sport; social care; food processing; agriculture; hairdressing; cleaning; security; textiles and clothing; childcare; and office work. For example, retail consists of shelf stackers, trolley collectors, till assistants and other lower-skilled retail jobs.

Low-paying sector

Those industries or occupational sectors that employ a large number of minimum wage workers or those in which a high proportion of jobs are paid at the minimum wage.

LPC

Low Pay Commission

LRD

Labour Research Department

LSC

Learning and Skills Council

MA

Modern Apprenticeship

Macroeconomics

The study of the economy as a whole.

Mean

An average of a series of values, derived by dividing the sum of all the values by the number of values.

Median

An average of a series of values, derived by ranking all the values in ascending order and taking the middle value.

Medium-sized firm

A firm employing between 50 and 249 employees, inclusive.

Micro firm

A firm employing between 1 and 9 employees, inclusive. Micro firms are a subset of small firms. See also small firm.

Microeconomics

The study of individuals’ and firms’ economic decisions.

Migration

Movement from one area to another. The terms in-migration and out-migration refer to migration into and out of an area respectively, and are therefore interchangeable with immigration and emigration. An international migrant is someone who changes their country of usual residence for a year or more. Internal migration relates to movement within the UK.

Minimum wage employer

An employer making use of the National Minimum Wage rates.

MPC

Monetary Policy Committee

MWSS

Monthly Wages and Salary Survey

NCWE

National Council for Work Experience

NDNA

National Day Nurseries Association

NEET

Not in Education, Employment or Training

NES

New Earnings Survey

NESS

National Employers Skills Survey

NFU

National Farmers’ Union (England and Wales)

NGH

National Group on Homeworking

NHF

National Hairdressers’ Federation

NHS

National Health Service

NICs

National Insurance Contributions

NIESR

National Institute of Economic and Social Research

NINo

National Insurance Number

NMW

National Minimum Wage

Non-UK-born

All people born outside the United Kingdom.

Normalised

A procedure to adjust the data to a different scale. In this case, the median is set to zero (by subtracting the annualised growth in earnings) and the rest of the data is adjusted accordingly for the other percentiles (by subtracting the same annualised growth as that for the median).

NUJ

National Union of Journalists

NUS

National Union of Students

NVQ

National Vocational Qualification

A work-related, competence-based qualification. It reflects the skills and knowledge needed to do a job effectively, and shows competency in the area of work the NVQ framework represents.

Occupational sector

See low-paying occupation.

OECD

Organisation for Economic Co-operation and Development

OFSTED

Office for Standards in Education

ONS

Office for National Statistics

Output

The total value of all of the goods and services produced.

Part-time

In employer and household surveys, jobs are generally classified as being part-time if the contracted hours of work are less than 30 hours per week.

PAYE

Pay-As-You-Earn

Pay gap

The proportional difference between the earnings of two groups of workers.

Pay settlement

The percentage increase in basic pay when agreements become effective. Bonuses, lump sums and progression are not included. Where the percentage increase varies for different employees, the figure recorded is usually the average increase, the increase received by most workers, or the paybill rise.

PBS

Points Based System

PCS

Public and Commercial Services Union

PCT

Primary Care Trust

Percentiles (earnings)

Employees ranked by their earnings from lowest to highest then divided into 100 equally sized groups. The lowest percentile contains those in the bottom one per cent of the earnings distribution.

Plant

A single-site business or an individual site of a multi-site business.

Population

The estimated or projected number of people in an area. This includes all those usually resident in the area, whatever their nationality. Members of HM forces stationed outside the UK are excluded from the UK population estimate, but members of the US forces stationed in the UK are included. Students are taken to be resident at their term-time address.

PPP

Purchasing Power Parity

Currency conversion rates that both convert to a common currency and equalise the purchasing power of different currencies. In other words, they eliminate the differences in price levels between countries in the process of conversion.

Price maker

An individual or company that is influential enough to affect the price of an item. The term is most often applied to companies, specifically those which have a monopoly in their market, and are therefore able to choose and demand a specific price for their goods.

Price taker

An individual or company that is not influential enough to affect the price of an item. See price maker.

Private sector

Organisations that are run for profit and that are non-governmental. In some instances official data for the private sector includes the independent/voluntary sector.

Productivity

Output per worker.

Profit share

Corporate profits as a percentage of GDP.

Public sector

Covers government (central and local), public corporations and the Bank of England.

Q

Quarter

Three months. Typically referring to calendar quarters i.e. January to March etc. unless otherwise stated.

Quartile (earnings)

Employees ranked by their earnings from lowest to highest then divided into four equally sized groups. The lowest quartile contains those in the bottom 25 per cent of the earnings distribution.

Rate of return

A measure of corporate profitability. It compares the profits made by companies with the value of the buildings, plant, machinery and vehicles held as capital assets by those companies.

Real value

A price or value that has been adjusted for the effect of inflation. Used to demonstrate the cost of goods in the past in today’s money.

REC

Recruitment and Employment Confederation

Recession

A period in which there are at least two consecutive quarters of negative growth in output.

Redundancy

Dismissal from a job because an employer needs to reduce the size or cost of the workforce; sometimes voluntary.

Residence-based

Defined by where one lives. See also work-based.

Retail sales value

The total takings adjusted for inflation. See also retail sales volume.

Retail sales volume

The total actual takings, not adjusted for inflation. See also retail sales value.

RMT

The National Union of Rail, Maritime and Transport Workers

RPI

Retail Price Index

The most familiar and the longest standing general purpose measure of inflation in the UK. Also known as the RPI all items index. It monitors the change in the general level of prices for goods and services used by most households in the UK. See also inflation.

RPIX

Retail Price Index excluding mortgage interest payments

RSA

Rural Shops Alliance

School leaving age

The age at which a child is no longer legally required to remain in education. Currently in England children must remain in education until the last Friday in June in the school year that they reach the age of 16.

Seasonal adjustment

A process of estimating regularly occurring seasonal effects and removing them from the raw data.

Self-employed

People not working for an employer but finding work for themselves or having their own business.

Sessional care

Facilities where children under eight years old attend day care for no more than five sessions a week, each session being less than a continuous period of four hours in any day. Where two sessions are offered in any one day, there is a break between sessions with no children in the care of the provider.

SIC

Standard Industrial Classification

The UK system of classifying businesses and other standard units by the type of industrial activity in which they are engaged.

SLTA

Scottish Licensed Trade Association

Small firm

A firm employing between 1 and 49 employees, inclusive. Sometimes the subset of firms employing between 1 and 9 employees, inclusive are defined as micro firms.

SMEs

Small and Medium-sized Enterprises

Firms employing between 1 and 249 employees, inclusive.

SOC

Standard Occupational Classification

A hierarchical system for classifying jobs, in terms of their skill level and skill content.

SPPI

Services Producer Price Index

State Pension age

The earliest age at which someone can claim their State Pension. It is currently 65 for men and 60 for women, but will increase gradually to 65 for both men and women between 2010 and 2020.

Statistically significant

A result that is unlikely to have occurred by chance – determined using statistical tests on data.

Statutory leave entitlement

From 1 April 2009 all workers have a statutory right to at least 5.6 weeks’ paid annual leave, including public and bank holidays (that is at least 28 days’ paid holiday if working five days a week).

Strike rate

In relation to enforcement of the minimum wage, this is the percentage of cases investigated where non-compliance is found.

TUC

Trades Union Congress

UCG

Unquoted Companies Group

UK

United Kingdom

Constituted by Great Britain and Northern Ireland.

UKBA

United Kingdom Border Agency

UKHCA

United Kingdom Home Care Association

UFU

Ulster Farmers’ Union

Unemployment

Unemployment can be defined in two ways: those seeking work and available to work, the ILO unemployed; and those claiming unemployment benefit, the claimant count. See also claimant count and ILO Unemployment.

Unemployment rate

The total number of people in unemployment as a percentage of the total number of economically active people in a defined group. See also economically active.

UNISON

A trade union

Unite

A trade union

US

United States of America

Usdaw

Union of Shop, Distributive and Allied Workers

Vacancy

An employment position for which employers are actively seeking applicants from outside their business or organisation.

VAT

Value Added Tax

VWEF

Vulnerable Workers Employment Forum

WAG

Welsh Assembly Government

Wage bill

A firm’s total pay bill, including basic wages and additional payments such as bonuses, overtime and benefits-in-kind.

Work-based

Defined by where one works. See also residence-based.

Workforce

The total number of people currently in work.

Workforce jobs

The sum of employee jobs (as measured by surveys of employers), self-employment jobs from the LFS, those in HM Forces, and government-supported trainees. Vacant jobs are not included.

Working age

Those aged 16 to retirement age, i.e. 16–64 for men and 16–59 for women. See also State Pension age.

WRS

Worker Registration Scheme

Workers from the A8 countries are required to register under the scheme if they wish to work for an employer in the UK for more than one month. See also A8.

YDR

Youth Development Rate

Youth rates

The 16–17 Year Old Rate and the Youth Development Rate. In other words, the applicable National Minimum Wage rates for those aged under 22.