Do you remember when the UK’s National Minimum Wage was first introduced..?  Well it was 1999, and do you recall what the first NMW was..?  £ 3.60 for adults aged 22 and over, (£ 3.00 for 18-21 year olds).

The introduction of the NMW in the UK some 25 years ago did create some concern. It was thought that it would “price-out” low paid workers and cause an element of increased unemployment.

However, UK businesses have adapted to the statutory regulation and accept this annual cycle increase to the lowest paid workers, with the inevitable consequence of increased costs and probable reduced profits for those companies whose workforce consist of such paid workers.

But what are the other consequences of the NMW..? Well, in 2016 the National Living Wage was introduced a further payment “band” for workers and currently this affect workers who are 21 and older.

There is a comprehensive narrative on NMW and NLW on the Low Pay Commission.  It’s a MS PowerPoint document originated in 2019, but the information is useful for anyone wishing to learn more about this subject. Here is the web-link: https://assets.publishing.service.gov.uk/media/5c9e0e72e5274a527faae38a/20_years_of_the_National_Minimum_Wage_-_a_history_of_the_UK_minimum_wage_and_its_effects.pdf.

 

 

There are several thoughts about the NMW and NLW and the effect it has had on the UK economy which I would like to mention. For example, has this “wage control” regulation compressed wage-scales offered to a greater number of workers now, than would have done if its introduction had not been made?  By this I mean are more workers being paid these “minimum wage amounts” than would have been in a free labour market? Or has the introduction of NMW or NLW increased pay awarded to workers as employers may not wish to be seen as a minimum wage payer?

Another thought is whether NMW or NLW has helped to stave-off an economic situation where deflation would have been harmful to national economy.  Particularly in western or capitalist economies, a desire for growth is needed to maintain the status quo.

These questions and others are going to be continuously debated.  One thing for sure is that whilst the UK tries to stimulate its economy, wage inflation will continue to grow.  The dilemma here has to be whether a balance can be achieved by businesses in their wage structures to support the political and fiscal plans of the UK economy.

 

“The National Minimum Wage: 25 Years of Impact, Questions, and Economic Balance” 

by Mario Bardwell, January 2025