LRD Booklets December 2020

The National Minimum Wage 2021 - a trade union guide



[pages 3-4]

The National Minimum Wage, (NMW), which, since 2016, has included the National Living Wage (NLW), has been the UK’s statutory wage floor since 1998. Rates go up on 1 April each year based on recommendations to government by the Low Pay Commission (LPC).

Between 2016 and 2020, the NMW rose faster than average wages and at above-inflation rates. However, the economic uncertainty caused by the COVID-19 pandemic has ended this five-year run of inflation-busting rises and the uplift in 2021 will be lower than expected, coming in at 18p on highest rate rather than the 49p expected before the pandemic.

The news will come as a blow to many low-paid workers, including men and women working on the front line in care homes and other areas, who will not see an increase in their pay in real terms.

However, the government, like the LPC, insists that the NMW policy is still on target to “end low pay” by 2024 by ensuring that the rates reach 66.7% of median wages by that year. It will also start paying 23 and 24-year-olds the higher National Living Wage from April 2021.

The reduced increase in the statutory wage floor in 2021 comes just as unions are arguing that the UK’s lowest paid need a pay rise more than ever and that tagging the NMW to median (midpoint) wages is not enough to end in-work poverty.

The TUC is calling for an immediate rise for the NMW to £10, saying that wages below this rate are just not enough for workers to live on. Research by the TUC found that 3.7 million keyworkers, so essential to keeping the country going during the pandemic, are currently earning less than £10 an hour.

It is not just the unions saying this, a report from the centre-right think tank Centre for Progressive Policy shows that a significant number of business leaders also want a higher minimum wage to protect workers from exploitation and poverty during the crisis.

In a further setback to the NMW’s status as a basic wage floor, the large number of workers put on the government’s Coronavirus Job Retention Scheme (furlough), has meant that over two million workers actually were paid less than the NMW in 2020. Those already on low pay have been five times more likely to have been furloughed on reduced pay than their better-paid counterparts.

The NMW and trade unions

Historically, unions have not always been unanimous in their support for an economy-wide wage floor because of a fear that a statutory minimum wage might weaken collective bargaining. However, they got behind the NMW in the 1980s after the disbanding of Wages Councils — which regulated pay, hours and holidays for various sectors — and the widespread reduction in collective bargaining power that occurred during and after the Thatcher period.

Since the NMW’s introduction by the Labour government at the end of the 1990s, unions have shifted their attention to ensuring that the law is properly enforced and lobbying to improve the legislation, often calling for rises that go beyond the rate set by government. They also increasingly organise and campaign at the grassroots for a Real Living Wage, which is a separate calculation of a higher rate minimum wage, based on what workers actually need to live on (see pages 6-7).

In terms of enforcement, the integrity of the NMW is being challenged both by increasing non-compliance and a growing pool of cheap, flexible labour that currently falls outside of the legislation’s remit. Unscrupulous employers across lower paying industries are failing to meet even their most basic of statutory obligations to their workforce or bypassing them altogether by calling their workers self-employed. This occurs across much of the gig economy, as well as in other sectors such as construction.

The rate at which the NMW is set is important for all trade unionists regardless of whether they work in a sector where it is prevalent. It sets the floor for collective bargaining in lower paid industries but also shows the need to extend collective bargaining into the areas where the NMW is paid more frequently because of a lack of union organisation.

This guide will help you to understand everything you need to know about the NMW including:

• what the NMW is, the current rate and who should receive it;

• how to check whether someone is being paid the minimum wage or not;

• how to report infringements;

• the coverage of the NMW and its impact on bargaining;

• the direction of travel for NMW policy;

• threats to the current NMW from de-regulated work;

• why the NMW isn’t high enough; and

• union campaigns to raise the wage floor.