Week Ahead

The importance of the national minimum wage

MRM head of news and content Paul Thomas assesses the impact of the national minimum wage since it was introduced 25 years ago.

Here’s a pub quiz question for you: which country introduced the first national minimum wage?

You get half a point for the country and another half for the year it was introduced. No cheating.

Stumped? It was New Zealand, in 1894.

For those of you who said the UK, believe it or not, we didn’t introduce a minimum level of pay for virtually all workers until more than 100 years later.

That’s not to say that there weren’t previous attempts at wage control. The Fair Wages Resolution, introduced in 1891, required companies engaging on government contracts to pay their workers a recognised minimum wage for their sector.

Nearly 20 years later, the Minimum Wage laws of 1909 led to the establishment of Trade Boards, which were converted into Wage Councils that regulated pay for certain industries until they were disbanded in 1993.

However, it wasn’t until 1 April 1999 that a blanket minimum pay threshold was introduced in the UK. You can read more about how it came about in this report from the Institute for Government.

Its relatively late introduction may shock some people, given the UK was a pioneer of the modern welfare state, having introduced a state pension and universal healthcare decades earlier.

But how much of an impact has the national minimum wage had since it was introduced 25 years ago?

Resolution Foundation (RF), the think-tank, has called it the “single most successful economic policy in a generation”.

RF claims its introduction has raised the pay of the nation’s lowest paid workers by £6,000 a year, compared to if their earnings had risen in line with typical wages.

While the minimum wage the UK was considered low compared by international standards when it was introduced in 1999, we now have one of the highest minimum wages (£11.44 from 1 April) in the world relative to typical wages, according to RF.

That’s something to celebrate as the national minimum wage turns 25 in a few days.