The British National Minimum Wage

Abstract

Great Britain has had statutory regulation of minimum pay for much of this century but never previously had a national minimum wage (NMW). This paper outlines the history of minimum wage regulation culminating in 1997 with the establishment of the Low Pay Commission (LPC) and the introduction of the NMW in 1999. The main issues considered by the LPC were the definition of the NMW, the rate itself, and what to do about younger workers. Although there is general agreement that minimum wage systems reduce wage inequality, their impact on the distribution of household income is more controversial. Evidence presented suggests the NMW may have a more egalitarian impact on household incomes than is sometimes asserted. The Report of the LPC is only the beginning of the story. Responses to it were generally favourable; parliamentary regulations are needed to translate the recommendations into law; the NMW has to be enforced and evaluated. This necessary follow‐up to the Report is discussed in the concluding sections.

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