Professor Sir George Bain said that without new thinking on the minimum wage there was a risk the purpose of the commission would be perverted and it might even turn into a drag on wages.
Bain is returning to chair a review of how the minimum wage and the role of the commission that sets it might be strengthened. He says his expert panel, set up with the help of the respected Resolution Foundation thinktank, will consider options such as helping push up wages in certain sectors that can afford to pay more.
He said the cross-party support achieved by the commission was paradoxically one reason it needed a review.
"My back still bears the scars from introducing the minimum wage so I don't need reminding how controversial it was," Bain said. "But in a way the policy has been a victim of its own success. The wide support means the policy has settled down into a premature middle age, with little thinking about how it could do more to tackle low pay.
"When we began our work in 1997, we saw jobs being advertised at 100 hours a week for £1 an hour. That sort of low pay is gone. But with one in five workers still earning below the living wage it's time to reflect on whether the design of the minimum wage is right for the next 15 years."
The commission has been seen as one of the great policy successes of UK politics and it is rare that its impact on the labour market is questioned.
But a report from the Resolution Foundation has found that almost one in 10 jobs now pays within 50p of the minimum wage as the labour market has become increasingly "bottom-heavy".
The study, Fifteen Years Later, looks at what has been learned about the minimum wage in the 15 years since the 1998 National Minimum Wage Act and how the policy could change in the next 15 years.
It suggests other countries have varied their minimum wages by sectors or set longer-term targets to maintain the value of the minimum wage over time. In the UK the variations in the rate relate largely to age and no long-term objective is set. The rate is set annually according to what it is judged the labour market can afford, subject to the need to keep unemployment under control.
The report finds one in 10 jobs (2.4 million) now pays within 50p of the minimum wage (£6.19 an hour at the full adult rate). That 10% figure rises to 12% among women, 22% among part-time workers, 18% in the retail sector and 42% in hospitality. These numbers exclude any unofficial underpayment.
In the early days of the minimum wage it was anticipated it would raise pay across the low-wage economy, but in practice it has mostly helped those at the very bottom. In some sectors, employers are taking on millions of very low paid workers with little chance of progression.
"We created the minimum wage to stop extreme exploitation, yet some employers now see it as the going rate for entry-level staff," Bain said. "That's not what it was supposed to do.
"With a single rate, it will always be hard to raise the rate because you're worried about employment in vulnerable areas. But minimum wages are ill-fitting garments, pinching hard in some places and leaving room in others. We need to ask whether there's more we could do to push up pay in sectors that could afford it."
The paper argues there is little sign of the minimum wage transforming many people's lives.
The review will make proposals for transforming the commission before the main parties draft their election manifestos. All sides recognise that squeezed living standards will be a central feature of the next election and will be casting around for options that do not come with a direct cost to the Treasury.
Among them may be:
• Setting an 'affordable wage', above the legal minimum, for each sector of the economy. This would be based on a judgment about what employers in that sector could afford to pay without job losses.
• Setting out a clearer long-term view of where the minimum wage should go, with the commission advising the government on how to meet it. The review may also look at whether the commission could provide 'forward guidance' on the value of the minimum wage.
• Giving the commission a broader remit to assess low pay and advise government on reducing it.
Source: guardian.co.uk
Author: Patrick Wintour
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