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>>Back to Press notice index
Press Release 18 June 1998 STATEMENT BY LPC CHAIRMAN: PRESS CONFERENCE ON PUBLISHING THE REPORT I am pleased to present the first report of the Low Pay Commission, which the President of the Board of Trade has published today. The Commission has had a substantial task over the last nine months. We are very conscious that our recommendations directly affect hundreds of thousands of businesses, and many more individuals, throughout the country. It has also been a historic task. This is the first time that a National Minimum Wage, covering all business sectors and parts of the UK, has been introduced. Our terms of reference rightly emphasised the importance of understanding the economic and social implications of our recommendations. It was essential for us to understand what the National Minimum Wage will mean for individuals and businesses across the UK. The Commission spent a great deal of time ensuring that we did just that. We are grateful for the amount and quality of the written evidence that we received: nearly five hundred submissions. We also appreciate the interest shown by some fifty organisations which accepted our invitation to give formal oral evidence. But we were determined not to be a desk-bound, London-based Commission. Since last Autumn, we have held some two hundred meetings in over sixty cities, towns and villages throughout the UK to get more detailed insights into what the National Minimum Wage will mean. We have met overloaded counsellors in advice services, committed managers sometimes in struggling businesses, and low-paid workers and unemployed young people on bleak estates. They have all brought home to us the impact which our report, and the decisions that flow from it, will have throughout Britain. The length, and I hope, the content of this report shows the extent to which we have addressed the range of complex issues which underlie a National Minimum Wage. I am grateful to my fellow Commissioners for their enormous contribution to this work since last summer. We believe our conclusions represent a coherent package which is both prudent and straightforward. Above all, it should benefit many businesses and workers throughout the UK. Our central recommendations relate to the rate. We advise that the appropriate rate for the National Minimum Wage should be £3.70 per hour in June 2000. Consistent with introducing the wage at an earlier date and our aim to proceed with prudence, however, we recommend the initial rate of £3.60 per hour should be introduced in April 1999. We consider that a minimum Development Rate should be available for those aged 18 to 20. The Development Rate should also be available to those aged 21 or over for up to a maximum of six months for workers beginning a new job with a new employer who are receiving accredited training. In the long term we hope the Development Rate for younger workers can be linked with and dependent on the promotion of structured training and development. We recommend that an initial Development Rate of £3.20 per hour should be introduced in April 1999. Our advice is that the appropriate Development Rate in June 2000 should be £3.30 per hour. All those aged 16 and 17, together with those on apprenticeships, should be exempt from the National Minimum Wage. In all, our report makes twenty-four recommendations. Some are more detailed than others. They relate to defining the wage as well as to its implementation and enforcement. The detail is important. It matters to some sectors that piecework should count towards the wage, and to others that commissions and service charges paid through the payroll should count. And we have received a clear message from all sectors, all parts of the country, and employers and employees alike that the National Minimum Wage should be implemented and enforced effectively. These concerns are reflected in our recommendations which are clearly spelt out in our report. Our recommendations form a coherent package which is designed to support a competitive economy. We have taken a prudent approach in choosing the initial rate, to find the balance between improving low pay and avoiding damage to efficient businesses and employment opportunities. We have given particular attention to how the National Minimum Wage can support training and skills enhancement. While our recommendations are detailed, we believe they are straightforward. We have tried to accommodate diverse pay structures and systems, and to allow employers and workers scope to agree systems that meet the National Minimum Wage. This, together with good publicity, should enable a high degree of self enforcement, supported by a role for an existing enforcement agency. We believe that our recommendations complement and underpin the New Deal and the tax and benefits reforms announced in the March 1998 Budget, and should be monitored alongside their further development. These reforms, together with the National Minimum Wage, will tackle working poverty and help people move from welfare to work. The National Minimum Wage will also have the positive effect of reducing the subsidy to inefficient employers who are able to pay low wages, knowing that the taxpayer will top up incomes through the benefit system. Poverty wages cannot encourage people to move from benefits to work. We were struck by a comment made to us in Northern Ireland, and echoed in other visits, that the low paid were often on "the margins of degradation". We hope that our recommendations will play some part in giving workless households and those in low-paid employment more opportunities to participate fully in the economic and social life of society. The introduction of a statutory floor for wage levels must encourage feelings of belonging not to the margins, but to the mainstream of society. We are introducing a pay floor, not a pay policy. A minimum wage should never be regarded as a "going rate" for pay. Successful employers who achieve higher value-added in their products or services will continue to be able to pay well above the floor. The role of the National Minimum Wage is to help remove the worst cases of exploitation and encourage improved efficiency, performance and investment in staff. Our recommendations were made on the basis of careful analysis and extensive consultation. We were determined that the National Minimum Wage should make a difference. At the same time we recognised the importance of taking a prudent approach that would avoid adverse effects on business and the overall economy. That caution included a concern to protect and promote jobs for young people. No-one wants a wage that cannot be paid. The Government has decided to be even more cautious. We as a Commission recognised from the outset that it was our job to recommend the rates and levels at which the National Minimum Wage should be introduced. It was for the Government finally to decide. It could not - and should not - be otherwise. We remain confident that our own recommendations are sufficiently cautious. In particular, we believe from talking to employees and employers - many of whom are also mothers and fathers - that by at least their 21st birthday, workers should be treated as adults. But at the end of the day it is the Government, not the Commission, that has to take responsibility. We welcome the Government’s clear statement that we as a Commission have a continuing role, including the specific task of reviewing the treatment of 21 year olds. The Government has also decided to be more cautious in terms of the level at which the youth rate will initially be introduced. We do, however, recognise its intention to increase the rate to £3.20 in June 2000, and to take into account our advice on further uprating of the adult rate in the year 2000. This fits with our view, stated in the report, that the Minimum Wage should not be allowed to "wither on the vine". Our recommendations on the rates and levels are clearly important. We have made at least twenty other recommendations. We are pleased that the Government has also accepted the principle of these other recommendations. The Commission embodies the principle of social partnership. The nine of us are drawn from employer, employee and academic backgrounds. The way in which we have worked and, in particular that we have reached unanimous agreement on the whole range of issues we have covered, is unambiguous evidence that social partnership can work. Our recommendations reflect a shared view that the National Minimum Wage should support a competitive economy; be set at a prudent level; be simple and straightforward; and make a difference. We believe that our recommendations meet all those tests. They offer progress in raising the wages of the lowest paid, with a prudent approach that will avoid adverse effects on business and the economy. This must be a continuing process with periodic uprating to ensure that the benefits of the National Minimum Wage continue to be felt well into the new millennium. Low Pay Commission Elizabeth House 39 York Road London SE1 7NQ Tel. 020 7855 4553 | |
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