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MN-1510 week 4
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Lecture notes of 11 pages for the course Current issues in Economics at SWAN (week 4 notes)
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National Minimum Wage- Election pledge made by labour party in 1997 election
- Introduced in March 1998 and UK NMW came into effect on April Fool’s Day
in following year
- Originally only applied to 22+ year olds
- National Living Wage: statutory minimum wage for workers aged 25
and over. introduced in April 2016 and has a target of 60%
of median earnings by 2020, depending on the economic
growth
- Before this time, NMW did not exist in UK, but some wage controls were
applied to certain industries under Trade Board Act of 1999
- 27 Wage Councils that set minimum wages for some 2.5 million low wage
workers in UK – abolished by 1993 Trade Union and Employment Rights Act
Reasons given by the Government for the abolition of wage councils
was that they:
- Did little to alleviate poverty as most of covered workers were not in
poor households
- Reduced employment in industries they covered by raising wages above
the market level
- Problems of poverty were not very prevalent in modern society.
Background
Low Pay Commission( LPC): established in 1997 as part if National Minimum
Wage Act to make recommendations to Government about what rate(s) should for
NMW
- First took reccomendations in 1998
- Low Pay Commission is an independent body: made up of employers, trade
unions, and experts whose role is to advise Government on minimum wage.
- Nine commissioners (Bryan Sanderson is the Chair)
Purpose of NMW:
- Raise pay of low paid workers
- Reduce inequality and poverty in UK
- Increase incentive to work
LPC sets annual rates on basis of evidence on what market can bear. Their
recommendations have always been accepted by Government
NMW ( and NLW) is not Living Wage (LW) – LW is an hourly rate of pay an
average person would need to earn in order to cover the basic costs of living
(as agreed from budget surveys and/or expert advisors).
- LW is currently £10.75 an hour in London and £9.30 an hour in the rest
of the UK.
- NMW is lower
, Year 25 and over 21 to 24 18 to 20 Under 18 Apprentice
April 2019 £8.21 £7.70 £6.15 £4.35 £3.90
April 2020 £8.72 £8.20 £6.45 £4.55 £4.15
23+ 21-22 18-20 Apprentice
April 2021 £8.91 £8.36 £6.59 £4.62 £4.30
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