GovWire

The Low Pay Commission (LPC) today publishes a report into compliance and enforcement of the National Minimum Wage (NMW). In the context of rising underpayment in recent years, we look at data on underpayment from 2012 to 2019 to explore the persistence of underpayment for individual workers.

We find that around one in three underpaid workers were still underpaid the following year. The surest way to escape underpayment remains by changing jobs; workers who remain with the same employer year-to-year are more likely to continue to be underpaid. Too many factors, however, continue to create constraints for low-paid workers who wish to exercise their mobility and challenge exploitative employers.

The report marshals evidence from employers and low-paid workers on employment conditions, the labour market and the factors which force workers to accept exploitation. Even though the labour market has tightened since the pandemic, and vacancies have scaled record levels, the obstacles to changing jobs continue to weigh heavy in the minds of low-paid workers we speak to. The prevalence of insecure work makes job moves feel risky, while insecure employment leaves workers in a position of greater dependency on their employers and creates the conditions for exploitation. This wariness about moving jobs may be exacerbating employers recruitment difficulties.

Bryan Sanderson, Chair of the Low Pay Commission, said:

We are entering a crucial period for the National Minimum Wage, with major decisions impending over the policys future trajectory. It is important to remind ourselves that the minimum wage is only truly effective in protecting living standards if it is enforced. This is a necessity not only for the employees but to ensure that the great majority of employers who are managing through difficult times are protected from unfair competition.

In addition, enforcement of one right does not exist in a vacuum, but is connected to conditions in the workplace and workers confidence in the labour market. A truly comprehensive strategy would go beyond enforcement to consider labour mobility and the provision of means by which employee rights can be more effectively asserted.

Aligned with the above, very few workers bring underpayment cases to the enforcement body, despite the abundant evidence and anecdote suggesting it takes place on a considerable scale. The report repeats previous recommendations for the Government on the need to better identify the scale of the problem and improve the awareness and enforcement of workers rights.

Later this year, the LPC will present evidence to the Government to help decide what should happen to the National Living Wage after 2024, when it is hoped the rate will reach the target of two-thirds of median earnings. This advice will include new research into worker mobility and monopsony in the UK labour market.

NOTES FOR EDITORS

1. This report contains data on measured minimum wage underpayment from the ONSs Annual Survey of Hours and Earnings (ASHE) and Labour Force Survey (LFS). Using ASHE, we estimate that in April 2022 around 334,000 workers were paid less than the National Minimum Wage (NMW) rate they were entitled to.

2. This represents a fall in underpayment since April 2019 (the last point when ASHE data was unaffected by the pandemic), from 428,000 to 334,000. As a share of coverage (the number of workers paid within 5 pence of their NMW rate), underpayment remains stable over the period.

3. The figure for measured underpayment in April 2022 has been revised downwards since the publication of the LPCs 2022 Report, from 507,000 to 334,000. This is a consequence of revisions to ASHE data made by the ONS.

4. The LPC will make recommendations to the Government on NLW and NMW rates to apply from April 2024, by the end of October, as per the terms of the remit letter here.

5. The LPC will submit advice to the Government to inform future decisions on the NLW and NMW beyond 2024, by the end of December, as per the terms of the second remit letter here.

6. The National Living Wage (NLW) is the statutory minimum wage which will apply as of 1 April for workers aged 23 and over. Different minimum wage rates apply to 21-22 year olds, 18-20 year olds, 16-17 year olds and apprentices aged under 19 or in the first year of an apprenticeship.

7. Since 2020 the Government has had a target for the NLW to reach two-thirds of median earnings by 2024. However, the Government has recommended that if the economic evidence warrants it, the Low Pay Commission should advise to review the target or its timeframe. This emergency brake will ensure that the lowest-paid workers continue to see pay rises without significant risks to their employment prospects.

8. The National Living Wage is different from the UK Living Wage and the London Living Wage calculated by the Living Wage Foundation. Differences include that: the UK Living Wage and the London Living Wage are voluntary pay benchmarks that employers can sign up to if they wish, not legally binding requirements; the hourly rate of the UK Living Wage and London Living Wage is based on an attempt to measure need, whereas the National Living Wage is based on a target relationship between its level and average pay; the UK Living Wage and London Living Wage apply to workers aged 18 and over, the National Living Wage to workers aged 23 and over. The Low Pay Commission has no role in recommending the UK Living Wage or the London Living Wage.

9. The Low Pay Commission is an independent body made up of employers, worker representatives and experts whose role is to advise the Government on the minimum wage. The rate recommendations introduced today were agreed unanimously by the Commission.

10. The current Low Pay Commissioners are: Bryan Sanderson, Professor Patricia Rice, Professor Jonathan Wadsworth, Kate Bell, Simon Sapper, Matthew Fell, Louise Fisher and Martin McTague.

11. Bryan Sanderson can be contacted via the Low Pay Commissions press office (07

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