From its controversial introduction in 1999 amid warnings of job losses, the National Minimum Wage has flourished, and since 2016 has been turbo-charged by the National Living Wage. Both main parties now want to go even further. The Conservatives want to raise the UK’s legal wage floor to a level that ends low pay, while Labour want to turn it into a real Living Wage for all workers aged 16+, so that it reflects the cost of living. Either way, the UK is set for one of the highest wage floors in the world. How different are the main parties’ plans for the minimum wage? Do they risk setting the wage floor at too high a level that causes job losses? And how can they match welcome ambition with an evidence-based approach that has served the UK so well over the past 20 years? At an event at its Westminster offices, the Resolution Foundation presented new analysis of the two main parties’ plans for the minimum wage, including how they compare with each other, with other countries, and how they might affect firms and workers across the UK. A panel of experts debated key questions about the future of the minimum wage, followed by an audience Q&A.

1. #GE2019
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2QAG_Guest
Welcome_Guests November 19@resfoundation
The floor’s the limit
The minimum wage in the 2019 election
Katherine Chapman, Director of the Living Wage Foundation
Helen Dickinson, Chief Executive of the British Retail Consortium
Alan Manning, Professor of Economics at LSE
Nye Cominetti, Economic analyst, Resolution Foundation
Chair: Gavin Kelly, Chair, Resolution Foundation

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How did we get here?
@resfoundation

3. 3
Minimum and living wages, 1999-2019
Source: Low Pay Commission
@resfoundation
The minimum wage main adult rate is now £8.21

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Minimum and living wages, 1999-2019
Source: Low Pay Commission
@resfoundation
… this sits alongside specific rates for younger workers

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Minimum and living wages, 1999-2019
Note: 18-20 rate was 18-21 until 2011.
Source: Living Wage Foundation and Low Pay Commission. @resfoundation
… and the two (voluntary) living wage rates

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Annual growth in minimum wage (main adult rate) and median hourly pay
Source: Low Pay Commission, and RF analysis of Annual Survey of Hours and Earnings (ONS)
@resfoundation
The wage floor has grown fast, then slow, then fast again
2016: National
Living Wage
introduced

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Where are we going?
@resfoundation

8. 8
Value of minimum wage in 2024 under current path and Conservative and Labour plans
Conservatives’
plan implies a
minimum wage 9
per cent higher in
2024 than under
current policy
Source: RF analysis using Annual Survey of Hours and Earnings, and Office for Budget Responsibility projections of average pay.
@resfoundation
Both main parties have ambitious plans

9. 9
Cash value of main adult minimum wage: current path, and Labour and Conservative plans
Source: RF analysis using Annual Survey of Hours and Earnings, and Office for Budget Responsibility projections of average pay.
@resfoundation
Key difference 1: Labour want to move more quickly

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Bite of minimum wage relative to median full-time hourly pay in select OECD countries
Source: OECD and RF calculations based on Annual Survey of Hours and Earnings (ONS) and OBR.
@resfoundation
Either approach pushes us to the top of the international
league table

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Distribution of pay by age band, and minimum wage policies, expressed in April 2020 terms
Source: RF analysis of Annual Survey of Hours and Earnings (ONS); OBR average wage projections; Low Pay Commission.
@resfoundation
Key difference 2: The parties have very different policies when
it comes to youth rates

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Distribution of pay by age band, and minimum wage policies, expressed in April 2020 terms
Source: RF analysis of Annual Survey of Hours and Earnings (ONS); OBR average wage projections; Low Pay Commission.
@resfoundation
Key difference 2: The parties have very different policies when
it comes to youth rates

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Distribution of pay by age band, and minimum wage policies, expressed in April 2020 terms
Source: RF analysis of Annual Survey of Hours and Earnings (ONS); OBR average wage projections; Low Pay Commission.
@resfoundation
Key difference 2: The parties have very different policies when
it comes to youth rates

14. 14
Distribution of pay by age band, and minimum wage policies, expressed in April 2020 terms
Source: RF analysis of Annual Survey of Hours and Earnings (ONS); OBR average wage projections; Low Pay Commission.
@resfoundation
Key difference 2: The parties have very different policies when
it comes to youth rates

15. 15
Distribution of pay by age band, and minimum wage policies, expressed in April 2020 terms
Source: RF analysis of Annual Survey of Hours and Earnings (ONS); OBR average wage projections; Low Pay Commission.
@resfoundation
Key difference 2: The parties have very different policies when
it comes to youth rates

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Percentage of employees at 10p pay bands in 2015 and 2018
(2015 distribution uprated in line with median pay growth 2015-18)
We estimate that
£3bn was added
to low earners’
total annual pay
between 2015
and 2018
Source: RF analysis of Annual Survey of Hours and Earnings (ONS).
@resfoundation
Bringing politics into rate-setting brings risks, but also need
to recognise benefits to the low-paid over recent years

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Conclusions
@resfoundation

18. • Both main parties have ambitious plans for the future
of the minimum wage
• Key differences are pace of increases and on youth
rates (and, possibly, setting & uprating process)
• Political meddling brings risks - employment effects,
credibility, and harder to change course if needed
• But benefits too – now looks like minimum wage was
too low pre-2016
• Task for next Government: hold onto ambition but find
uprating process that manages risk & allows flexibility
18
Conclusions
@resfoundation