National Minimum Wage statistics
24 February 2023
The National Minimum Wage (NMW) statistics report has been published by the House of Commons (HOC). The report covers areas such as the value of the NMW, jobs paid at the NMW and international comparisons.
As payroll professionals we are aware about the legality around NMW and how this applies to most workers, and the CIPP offer a payroll course on the National Minimum Wage. The NMW was introduced on 1 April 1999 and since then, the rates have been increased on an annual basis. NMW rates are determined by the government with the advice of the Low Pay Commission (LPC). The LPC makes annual recommendations in response to a remit set by the government. We outline some of the key findings (verbatim) from this report.
The LPC and the setting of minimum wage rate
The LPC has based its recommendations on the extent to which the NMW may be increased without damaging the employment prospects of low-paid workers. The National Living Wage (NLW) has been subject to specific targets of 60% of median wages by 2020. The NLW reached its first target of 60% of median wages in April 2020. Its next target is two thirds of median wages by 2024. The LPC estimate that a rate of £11.01 in 2024 will be 66% of median wages.
How many people are paid the NMW?
The LPC estimates that there were around 1.6 million workers paid at or below the minimum wage in April 2022, which is around 5% of all UK workers. Jobs paid around the minimum wage are concentrated within a small number of low-paying occupations. The report finds that 45% of all jobs paying at or below the minimum wage are in retail, hospitality, cleaning and maintenance professions.
Value of minimum wage rates in real terms
By looking at the ‘real’ value of the NMW (i.e. adjusted for inflation) this allows to assess how the NMW is keeping up with the cost of living. The LPC notes four distinct phases in the path of the NMW in the report. In April 2022 there was some decrease due to high inflation, but the various NMW rates were all higher in real terms than they were before the recession in 2008.
Projected value of the NLW
Higher than expected wage growth in 2021 and 2022 influenced by higher inflation and a tighter labour market has caused forecasters to increase their projections of the NLW. The Office for Budget Responsibility (OBR) projected in March 2022 that the NLW will reach a £10.65 in 2025 and £11.00 in 2026. In January 2023, the LPC projected that the NLW would reach £11.08 in 2024.
Trends
The number of jobs paid at or below the minimum wage has increased since it was first introduced in 1999, when it covered 834,000 workers. It is estimated that around 700,000 more people are in jobs paid at or below their relevant minimum wage rate in 2022 than in 1999.
Coverage fell between 2019 and 2022, from nearly 2.0 million to 1.6 million. This is likely to be due to a tight labour market in 2022, with firms struggling to hire workers. Firms told the LPC they had to raise pay above the minimum wage to attract and retain workers.
The percentage of employee jobs paid at or below the minimum wage varies across countries and regions of the UK. Coverage was lowest in London and the South East and highest in Northern Ireland in 2022.
Workers aged 25 and over were more likely to have jobs paid at or below the NLW if they had more than one job, were employed on a temporary basis, worked part-time or worked in the private sector. Women in this age group were more likely to be in a minimum wage job than men.
Around 5% of employee jobs held by 25–29-year-olds were paid at the NLW. This is higher than 30–49-year-olds (4%), around the same as 50–64-year-olds, and lower than workers aged 23-24 and 65+ (9%).
How does the NMW compare to minimum wages in other countries?
In 2021, the UK had the eighth highest adult minimum wage out of 25 Organisation for Economic Co-operation and Development (OECD) countries (based on the NLW rate) after considering differences in the cost of living.
The value of the UK NMW is relatively high compared to minimum wages in other OECD countries. The reports compares the NLW with minimum wages in other countries, and states that the UK had the eighth highest minimum wage out of 24 OECD countries in 2021 after adjusting for differences in the cost of living. The design of NMW regimes also varies between countries and some countries do not have a minimum wage. In addition, the report considers national minimum wages as a proportion of median earnings. On this basis, the UK ranked in the middle of the distribution of national minimum wages in 2021 (the latest year for which data are available). As the NLW increases in value to 2024, the UK is likely to move into the top third of the country rankings.
You can access the full report here.
The CIPP are proud to have held roundtable events with the LPC to allow our members to give qualitative feedback directly to commissioners. If you are interested, please keep an eye out for future roundtable invites which will be sent to full, fellow and chartered members. Thank you to all members who took part last year or fill out our survey, your contributions are greatly appreciated.
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