The National Minimum Wage (NMW), introduced in 1999, has largely succeeded in eliminating ‘extreme low pay’, defined as being paid less than half of median pay. Despite this, the level of low pay has remained stubbornly the samel since the mid-1990s. There are a variety of measures of low pay, but all suggest that between 22 per cent and 32 per cent of workers are what might be considered low paid. A sizeable number of low-paid workers continue to be ‘stuck’ in low-paid work. Around a quarter of workers are ‘stuck’ within 5p per hour of the NMW for five years or more.
Much of the debate around low pay has taken the need to tackle low pay and reform welfare benefits in isolation, with some focusing purely on one element and others focusing on the other. That is a false dichotomy. This report looks at both together and considers how low pay can be tackled effectively in both the long and the short-term and how important reforms, notably Universal Credit, can be used to help achieve this. It looks at how to use a variety of levers to raise wages and, crucially, ensure that people do not become ‘stuck’ in low paid work, which has a damaging impact on both family life and engagement in the economy.