National Minimum Wage
Ten Years of the National Minimum Wage
Numbers paid below National Minimum Wage
April 2009 marks the tenth anniversary of the introduction of the National Minimum Wage (NMW) in the UK. On 1 April 1999 the adult and youth development rates were introduced for the first time and this was followed by a rate for 16 and 17 year olds in 2004.
Since its introduction, the number of jobs paid below the NMW has been monitored by the Office for National Statistics (ONS). In 1998, a year before the NMW was introduced, nearly 1.3 million employee jobs (5.6 per cent) were paid below the 1999 NMW rate, while in 2008 there were 288,000 (1.1 per cent) paid below the NMW.
The impact of the NMW in 1999 can clearly be seen with the percentage of employees being paid below it falling from 5.6% to 2.1% in the year of its introduction. There was a further decrease in 2000, after which the percentage has remained broadly the same, at just over 1 per cent.
Impact of the NMW on the distribution of all employee earnings in the UK
Hourly earings excluding overtime
When it was introduced, in April 1999, the NMW was worth 48 per cent of the level of all employee median hourly earnings in the UK. In April 2008 the corresponding figure was 52 per cent. When compared with the lowest decile, the NMW increased from 87 per cent to 92 per cent. This shows how increases in the NMW have moved it closer, proportionately, to key earnings levels at the lower end of the earnings distribution.
Conversely, compared with the uppermost earnings decile, the NMW has increased only by a small amount, from 22 per cent to 23 per cent. This reflects the greater increase in earnings in the upper part of the earnings distribution over this period. Notes: The estimates for 1998-2003 are produced using the average of estimates from the Labour Force Survey and the Annual Survey of Hours and Earnings to which the methodology developed in 2004 has been applied. The estimates for 2004 onwards are produced using the Annual Survey of Hours and Earnings.
Although low pay estimates attempt to measure the number of jobs that are paid below the National Minimum Wage, it should be noted that the estimates cannot be used as a measure of non-compliance with the legislation. This is because it is not possible to determine from the survey data whether an individual is eligible for the minimum wage. For example, it is not possible to identify people such as apprentices and those undergoing training, who are exempt from the minimum wage rate or are entitled to lower rates. If employees receive free accommodation, employers are entitled to offset hourly rates.
The lowest decile is the value below which the lowest earning ten per cent of the population lies.
The highest decile is the value above which the highest earning ten per cent of the population lies.
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