White paper: Restructuring Minimum Wages

This paper considers the existing National Minimum Wage rules and finds them to be over complicated and difficult to comply with due to the large number of nuances. The Institute of Economic Affairs argues for a simplification of the minimum wage structure. It also argues that politicians should steer clear of wage-setting and restore greater responsibility to the Low Pay Commission (LPC).

Key findings

• The LPC should reject the Taylor Review proposal for new separate minima for workers on zero-hours contracts.
• The report proposes reverting to just two rates – one for 18–24 year-olds and one for those aged 25 and over. Those under 18 are now required to be in education and training and should not be treated as if they were full-time workers.
• The ‘National Living Wage’ title is misleading and suggests that employers have responsibilities which belong to government, and should be dropped.
• The LPC should have its powers to recommend rates fully restored, finds the report. It may also be appropriate for the LPC to recommend different rates to the national governments/administrations and possibly also to the London mayor.
• The report suggest that employees should be incentivised to make their own claims of minimum wage non-compliance by making fines payable as compensation to underpaid workers rather than going to the government.
• Clearer and more comprehensive guidance on minimum wage regulations should be made available to employers and employees, while the policy of ‘naming and shaming’ non-compliant employers should be confined to those intentionally or negligently underpaying.