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|BENEFITS OF THE NATIONAL MINIMUM WAGE | Essay

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|BENEFITS OF THE NATIONAL MINIMUM WAGE |
|Britain’s first ever National Minimum Wage (NMW) comes into force|
|this April at a rate of 3.60 an hour for those aged 22 plus and |
|3.00 an hour for 18-21 year olds. According to Professor David |
|Metcalf, writing in the February Economic Journal, the NMW will |
|boost the pay of nearly two million employees by 30% on average. |
|Half the people who will benefit are female, part-time workers.

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|Metcalf estimates that the NMW will have the following impact on |
|the distribution of income, employment and exchequer finances: |
|Concentrating on working households, almost two-thirds of the |
|gains from the NMW will accrue to households in the bottom fifth |
|of the income distribution |
|The trade associations representing retailing and hospitality – |
|which employ almost a half of those affected by the NMW – have |
|welcomed the level of the NMW, so we can be reasonably confident |
|that the 3.60 an hour rate will not have an adverse effect on |
|jobs. |
|The NMW will have a broadly neutral effect on exchequer finances.|
|On the spending side, any savings on means-tested benefits will |
|probably be offset by a small rise in the public pay bill and |
|higher charges for things like security and cleaning. On the |
|revenue side, income tax and VAT will rise, but it is possible |
|that this will be partially offset by a fall in corporation tax. |
| |
|Metcalf, who is a member of the nine-strong Low Pay Commission |
|(LPC) that unanimously recommended the rate to the government, |
|describes the operation of the LPC, the major debates and the |
|probable impact of the NMW on inflation, employment and household|
|income distribution.

|
|He notes that from its establishment in July 1997 to its Report a|
|year later, the LPC engaged in an open consultation process. |
|Written evidence was received from around 500 organisations and |
|formal oral evidence was taken from 47 representative groups of |
|employers, unions and pressure groups. The LPC visited 61 cities,|
|towns and villages across the UK and held over 200 frank, open |
|meetings during such visits. Margaret Beckett, then Secretary of |
|State for Trade and Industry, described the LPC as a model form |
|of social partnership. |
|In addition to the evidence gained during these visits around the|
|country, three main factors influenced the choice of the NMW: |
|The old piecemeal system of minimum wage protection – the Wage |
|Councils – abolished in 1993 provided a benchmark for the NMW |
|because there was no evidence that the minimum rates they set led|
|to job losses. |
|International evidence on rates and coverage – high in France and|
|lower in the United States, for example – provided helpful |
|comparators.

|
|The cost and coverage were crucial. The Bank of England and the |
|Treasury certainly wanted the cost to be under 1% of the national|
|wage bill (in the event, it is 0.6%) and international evidence |
|pointed to an upper limit on coverage of around 10% (the out-turn|
|is 9%). |
|A lower youth rate was the most controversial matter discussed |
|and recommended by the LPC. It was felt that youngsters’ lower |
|productivity and higher unemployment justified a lower NMW. From |
|April, this applies to those aged 18-21 (16 and 17 year olds are |
|completely exempt) but the LPC have been asked to decide whether,|
|from 2000, those aged 21 should be paid the adult or youth rate.

|
|At the beginning of this century, Harold Spender argued for a |
|’plimsoll line for labour as well as ships – a line to limit the |
|extent of peril and suffering to which a worker is to be liable’.|
|As the century ends, Metcalf notes, British employees have at |
|last achieved that plimsoll line. |
|Note for Editors: ‘The Low Pay Commission and the National |
|Minimum Wage’ by David Metcalf is published in the February 1999 |
|issue of the Economic Journal. Professor Metcalf is Deputy |
|Director of the Centre for Economic Performance (CEP) at the |
|London School of Economics; and a member of the Low Pay |
|Commission, a statutory body charged with recommending and |
|evaluating the NMW. Its first Report was The National Minimum |
|Wage, CM3976, June 1998. |

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arguments in favour of the national minimum wage

|The main aim is to reduce poverty and to reduce pay |
|differentials between men and women.

|
|Other aims include .

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|BENEFITS OF THE NATIONAL MINIMUM WAGE | Essay
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| | |BENEFITS OF THE NATIONAL MINIMUM WAGE | |Britain's first ever National Minimum Wage (NMW) comes into force| |this April at a rate of 3.60 an hour for those aged 22 plus and | |3.00 an hour for 18-21 year olds. According to Professor David | |Metcalf, writing in the February Economic Journal, the NMW will | |boost the pay of nearly two million employees by 30% on average. | |Half the people who will benefit are female, part-time worker
2019-02-12 08:21:23
|BENEFITS OF THE NATIONAL MINIMUM WAGE | Essay
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