THE National Minimum Wage became a quarter of a century old this month. It was introduced by Blair’s “New” Labour government following its setting up of the nominally independent Low Pay Commission so that the commission could make recommendations to the government on the levels for the minimum wage.

After the Thatcher years when Wage Councils – which set minimum hourly pay rates in the lowest-paid sectors such as retail – were abolished, the move to create a national minimum wage seemed like a good one.

Blair had vowed to lift people out of poverty, especially children, and the minimum wage was one of the flagship policies by which he sought to do so. It was part of “New” Labour’s “welfare-to-work” active labour market programme where work would pay more than benefits.

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At the Labour conference, Blair batted back the arguments used against its introduction, saying it would not lead to jobs losses, inflation nor company bankruptcy. He was proved right on all three scores – but only because of the timidity of the National Minimum Wage.

The increase, nearly 10% or above, that came into effect on April 1 was the third-highest annual uprate since the National Minimum Wage was created. It has led many, such as former “New” Labour minister Margaret Beckett, to pronounce it was the greatest achievement of the 1997-2001 Labour government and of all the Labour governments of 1997-2010.

But as with many things with Blairism and “New’ Labour, it was much more than just a case of the devil being in the detail. Not only were the levels originally set too low and have continued to be so, but it was done so by age groups, when the cost of living for adults did not markedly differ whether they were 16, 18, 21 or 23 years of age.

All this led to the creation of the independent Living Wage, which is set at a higher rate than the minimum wage. In 2001, a campaign was started which was formalised in 2011 by the establishment of the Living Wage Foundation.

This was added to in 2019 by the Living Hours campaign, because it had become abundantly clear that the pay rates for working part-time could not sustain a decent living. 

And the Tories deliberately confused the situation in 2016 by naming the minimum wage for those over 23 (now 21) as the National Living Wage when it is no such thing.

Bad as though that all was, what the National Minimum Wage has essentially done by setting the rates so low is to legitimise and institutionalise low pay. Employers now have a clear guide as to the minimum amount of hourly pay they can lawfully get away with.

The National Minimum Wage was a classic piece of “New” Labourism. While it recognised a problem created by the Tories and their neoliberal version of capitalism, it did so in a far from full-blooded way.

It is a form of “light touch” regulation of employers because the enforcement of is so lax. Though there are enforcement orders, there are no penalties paid by employers unless they fail to act after already having received an enforcement order. And it was not until 2013 that the process of “naming and shaming” employers not paying the minimum wage began.

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Aggrieved workers still have to pursue employers that fail to pay the minimum wage, whereas HM Revenue & Customs could carry out spot checks to ensure employers abide by the law.

Even with the minimum wage, there is more in-work poverty than ever before, with many claiming benefits in order just to try to make ends meet. This is the clearest indication that the National Minimum Wage has effectively legitimised low pay by giving it a statutory underpinning.

It also means that the state is effectively subsidising low paying employers by allowing them to pay this level, which then necessitates their workers to also claim benefits. This is one of many hidden handouts to employers.

The National:

It’s not clear that Keir Starmer (above) will move away from this position despite what is in Labour’s New Deal for Working People.

That document, largely influenced by the unions, says: “Labour in government will change the Low Pay Commission’s remit so that the minimum wage will for the first time reflect the need for working people’s pay to at least cover the cost of living … [and] the national living wage will live up to its name.”

It also pledges to establish and properly fund a single enforcement body with extensive powers to penalise minimum wage violations. The omens do not seem good but time will ultimately tell.

Professor Gregor Gall is a research associate at the University of Glasgow and author of Mick Lynch: The Making Of A Working-Class Hero (Manchester University Press, 2024)