chapter  8
19 Pages

Small firms and the National Minimum Wage


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The Low Pay Commission (LPC) was established in July 1997 to recommend the level of a new statutory national minimum wage. This was arguably the most symbolic act of a Labour government elected, for the first time for a generation, just months before. It signalled the end of almost two decades in which labour market ‘deregulation’ and ‘flexibility’ were the primary watch-words of employment policy. In particular, the Conservative administrations of the 1980s and 1990s had been keen to distance the state from private-sector pay-setting. The Fair Wages Resolution was rescinded in 1983. For almost a century it required companies working on government contracts to observe terms and conditions of employment not less favourable than those in relevant collective agreements. A decade later the Wages Councils, first established in 1909 to set minimum pay rates and conditions for workers in certain low-paying sectors, were eventually abolished after successive restrictions in the 1980s. In this context the introduction of the NMW, alongside a raft of other significant measures (see McKay, 2001), made a clear statement that ‘fairness’ was a legitimate consideration underpinning the future direction of employment regulation.