Minimum wage needs radical reform, says free market think-tank
The UK's minimum wage structure should be simplified to just one or two different hourly rates for workers aged 18 and over, the Institute of Economic Affairs (IEA) said today.
The UK has five different minimum hourly wage rates, more than almost any other country. In a new report the IEA said the complicated structure made it hard for employers to follow the rules, and expensive for regulators to enforce them.
HMRC now has an annual budget of £25m for enforcing the minimum wage, which could be reduced if the rules were simplified, the report said. It said most minimum wage underpayment is the result of small businesses with no legal expertise failing to understand the rules.
The UK has had a National Minimum Wage for nearly twenty years, and changes to the policy, such as the implementation of the National Living Wage in 2015, along with court and tribunal decisions, have increased the administrative burden, the report said.
Among the changes the report suggested was scrapping the lowest minimum wage rate, which currently applies to workers under 18. The proportion of 16-17 year olds in full-time work has decreased from 30 per cent to 17 per cent since the rate was introduced in 2004.
It also suggested getting rid of the apprentice rate, and devolving wage rates to the nations of the UK, which it said would make pay fairer and reflect increased devolution over the past fifteen years.
The report said the Low Pay Commission should be empowered to set minimum wage rates in the future, and the the practice of 'naming and shaming' organisations which have breached the law should be reviewed.
Commenting on the report, Professor Len Shackleton at the IEA said: “The labour market has changed greatly in the last twenty years and the structure of the minimum wage system needs to change to reflect this. Rules should be simplified and clarified so that both employers and employees fully understand entitlements.”