The national minimum wage is a pay floor used to stop the exploitation of cheap workers. All workers in the UK are legally entitled to be paid at least the minimum wage to survive and thrive in society. This is a precedent that goes back over a century.
The Trade Boards Act was introduced in 1909. Although, it only covered some sectors it did help raise the standard of living for many in the UK. It also served as a baseline for further acts to be passed and a set national minimum wage to emerge.
In recent years much more attention has been given to the living wage. Many employers are adopting this new ethical standard as the minimum wage often fails to cover rising inflation and living costs.
This article will discuss the national minimum wage in the UK. It will also address the living wage and future predictions for rates of pay.
As published by Gov.UK the new national minimum wage rates from April 2022 are:
|Rate from April||Rate (April 2021 to March 2022)||Percentage increase|
|National Living Wage||£9.50||£8.91||6.6%|
|21-22 Year Old Rate||£9.18||£8.36||9.8%|
|18-20 Year Old Rate||£6.83||£6.56||4.1%|
|16-17 Year Old Rate||£4.81||£4.62||4.1%|
Following 2021 recommendations by the Low Pay Commission the government raised the national minimum wage for those 23 and over by 6.6%. This new rate has been heralded as the highest ever increase in the national minimum wage. This was since it became known as the national living wage in 2016. However, some argue that this is not a true living wage at all.
The new national living wage rate is more of a necessity than an act of generosity. As reported by ONS, the consumer price index rose to a historic 6.2% in February 2022. This was the highest rate since March 1992 when it reached 7.1%. The new rate also does not account for rising fuel costs.
Other than the apprentice rate, the largest shift in national minimum wage was shown in the 21-22 age group which rose by 9.8%. As there are future plans to integrate this age group into the national living wage, this was done to bridge the gap. The apprentice rate improved dramatically by 11.9% to match the national minimum wage of 16-17-year-olds. Workers from the age of 16 - 20 saw the smallest increase in wages at a rate of 4.1%.
What is the history of the national minimum wage?
The Trade Boards Act of 1909 was introduced by Winston Churchill. This was arguably the first step toward minimum wages in the UK. This allowed the Board of Trade to look at any industry with comparably low wages to set up a trade board. From here representatives of employers and workers would negotiate a minimum wage.
Initially, only four sectors were targeted. These were:
- Ready and bespoke tailoring
- Paper box making
- Lace finishing
The minimum wage was set by hourly rate and piece rates. After world war two there were over 40 boards in place covering around three million workers. The reforming Wages Councils Act 1945 was set up at the end of world war two. These further helped set the foundations for a national minimum wage which also rose with the cost of living. Workers would receive a minimum amount for a weeks work. They were ensured better safety and a maximum amount of 'hours of toil.'
The Wages Act 1986 removed the powers of the wage councils, and also removed statutory paid holiday entitlements. Under New Labour, the National Minimum Wage Act 1998 was enacted. This finally provided a national minimum wage for all workers above the school leaving age.
In 2016 the government introduced a compulsory national living wage. However, many have denied that this is the true living wage.
What are the 2024 targets for the national minimum wage?
Firstly, as mentioned there is a target for 21-22-year-olds to become part of the national living wage by 2024. This will help reduce the wage gap between younger and older adults improving wealth equality.
In 2023 the Uprating Report by the Low Pay Commission predicts the living wage to be set at £10.32. However, if the government goes ahead with plans to drop the starting age to 21 it will drop to an hourly rate of £10.25. However, the report also states there is a higher rate of uncertainty than before due to international conflicts and rising energy costs.
In 2024 the national living wage or national minimum wage is predicted to sit between £10.70 and £10.95.
Is the national living wage the true living wage?
According to The Living Wage Foundation, the national living wage is not a true living wage. They argued that after the 2021 Autumn Budget, the living wage should be an hourly rate of £9.90 and £11.05 for London. This is a rate many employers have adopted voluntarily as a show of solidarity with workers.
That year the Labour Party Conference unanimously voted to raise the hourly rate to £15. Unite the Union is also calling for a £15 national minimum wage.
However, there is opposition to minimum wage rates of £15 per hour. Giles Wilkes - specialist partner for Flint Global, and senior fellow for the Institute for Gov, stated that it would add £73bn to the national wage packet. He also said it was: "highly unrealistic - because the jobs would disappear!"
Will the new national living wage rates balance out additional expenditure?
It is unlikely that the national living wage rates set out by the government will help account for additional costs. For example, as published by ONS, Ofgem had to increase the energy price cap substantially because global energy prices rose by over 50%. This meant prices rose by 19.2% for electricity and 28.3% for gas in February 2022. This is expected to increase further in October 2022.
This means that the 6.2% rise in the national living was - as big as it was, was trounced by rising energy bills.
Also, house prices have risen to new levels. In March 2022 house prices had risen by around 11%, meaning the average cost of a UK household is £282,753. Rent prices also rose to record levels with a 10.8% average increase in the UK. Some areas such as Manchester saw rates rise by nearly 20%. This means that although the national living wage has increased, it is still harder to pay rent.
What is Universal Basic Income?
Elon Musk has previously spoke on the potential need for universal basic Pay in the future. At the World Government summit 2017 he stated:
"There will be fewer and fewer jobs that a robot cannot do better. What to do about mass unemployment?
"And I think ultimately we will have to have some kind of universal basic income. I don't think we're gonna have a choice"
The idea of a universal basic income is not a new one. The routes of the idea can be traced back to 1526 by humanist Johannes Ludovicus Vives. He argued that municipal governments should give a subsistence minimum to every citizen on the grounds of morality.
In short, instead of a national minimum wage given for hours of work, universal basic income is a basic living wage paid to all citizens whether they work or not.
As it stands the UK is at risk of losing 35% of jobs to automation. Uber for example plans to have a full fleet of driverless cars by 2030. It seems that much like the new government minimum wage, universal income may become a necessity rather than a luxury.
What are the arguments against universal basic income?
There are a number of arguments against universal basic pay. Instead of providing a national minimum wage entitlement, UBI will give everyone a minimum payment. In a show of absolute equality, everyone from billionaires to the unemployed will receive equal payments. Typically this results in those that need more, such as those with disabilities being paid less than they normally would from social security benefits.
It also means that to meet these demands tax for those still in work would skyrocket. Financial resources may also be pulled from services like the NHS and education to meet the cost.
The very structure of society and social cohesion may also collapse under this model. There are many things that jobs, and wages (set at differing levels) can encourage and benefit people including:
A Financial Times article argued that delinking this could lead to social decay as it removes the incentive to work. They claim unemployment is linked to crime, broken homes, and substance abuse. The same article argues instead for increased incentives for part-time work, working from home, and shorter workweeks.
Furthermore, darker predictions speculate that universal basic income could be a stepping stone toward the social credit system or further government control. Much like in China, allowances could be removed if your behaviour is deemed unacceptable by the government.
The World Economic Forum are at the forefront of pushing for a universal basic income. A WEF contributor wrote an article named: Welcome To 2030: I Own Nothing, Have No Privacy And Life Has Never Been Better.
In this bleak vision, people have sacrificed all autonomy, freedom, privacy, wages and ownership, for algorithmic choices, free rent, free travel, security, and zero pollution.
The national minimum wage is the minimum hourly wage workers are legally entitled to. As of 2022, the minimum hourly rate is set at £4.81 for apprentices and young people. The national minimum wage climbs to £9.50 for people 23 years old and over.
The national minimum wage has climbed to record levels this year. However, many argue it is still not enough to meet the demands of a true living wage. For example, the living wage foundation sets the bar at £9.90 per hour. Others, such as Unite the Union are calling for a £15 per hour national minimum wage. Others have argued this is unrealistic, would lead to unemployment, and would add billions to the national pay packet.
Although the new rates mean workers are entitled to be paid more money, it is canceled out by rising living costs. In particular energy prices, rent, and house prices have soared.
Employees in the UK have had a long struggle to earn a minimum wage. Winston Churchill introduced the foundations for a minimum wage in 1909 which gradually progressed to give better employment rights. Some of these entitlements were stripped in the 1980s, but finally in 1998 a minimum wage was introduced.
However, the future is marching on and technological advancements mean millions of jobs are at risk of automation takeover. Some have speculated that to coincide with mass unemployment a universal basic income will be introduced.
Under UBI everyone will have a basic monetary lifeline if employment is not possible. However, there are negative predictions associated with this. Including:
- Taxes not distributed fairly
- Tax money being taken away from services like the NHS
- Collapse of social cohesion
- Removing incentive for work
- Destroying freedom/privacy
- Ushering in totalitarianism