Unemployment within the UK differs and there have been calls for the National Minimum Wage to evolve; perhaps with different rates for different UK regions. Would regional devolution good idea? What would be the legal implications? In the third of a four part series on low pay issues from Lewis Silkin, Tom Heys considers the issues.
Unemployment within the UK differs greatly. Official statistics show that Hartlepool has an unemployment rate of 13.6%, whilst in Stratford-upon-Avon it is just 2.9%. Not only that, but the cost of living similarly varies greatly. Because of this, some have called for the introduction of different rates for different areas.
A regional approach to national minimum wage?
Compared to trying to set rates across sectors, legislating for a regional approach to the national minimum wage would be easier. Local authority boundaries already provide a concrete way of determining where one area stops and another one begins. What might a regional approach to the minimum wage look like?
There are calls for local authorities to be given the power to enforce the minimum wage. With the drive towards regional devolution, could they also be given the power to raise or lower the minimum wage, subject to an absolute floor set by the Low Pay Commission? But politicising the minimum wage could simply lead to it becoming a political football, kicked along for the sake of electoral expediency.
A better approach might be for a beefed up, better funded, Low Pay Commission to go through the same process it goes through in setting the national minimum wage, but on a micro level. Rather than engaging with the CBI and national trade union officers, it would instead engage with local chambers of commerce and regional trade union officers. It would require a great deal more work for the Low Pay Commission to replicate its process for every local authority area – there are 426 local authorities in the UK. However this work could be reduced significantly if local authorities were grouped into bigger regions (perhaps along the lines of the 12 European parliamentary constituencies). Fewer different rates set across bigger regions would be simpler.
Different minimum rates: legal issues
However, different minimum rates across the country would raise some legal issues. How would you work out what rate should apply? The simplest and most straightforward approach would be to make it dependent upon the workplace. That would cover the vast majority; most low paid workers tend to be based at a single workplace. For those whose work is wholly or mostly home based, the relevant rate could be either the minimum wage in force at the registered office of their employer, or the worker’s home address, whichever is higher. The more complicated issue to resolve relates to those who travel across minimum wage borders: what would be the relevant rate that should be applied? One way might be to measure in what areas the worker spends the most time. This process might be an administrative pain, but realistically, there are few low paid jobs which involve any degree of travel and which would fall into this group (an exception might be domiciliary carers).
A regional approach (requiring more resources for the Low Pay Commission) could be implemented with few major legal issues. If it can be shown that there are real potential benefits in such a policy, it should be seriously considered. Trying to implement a dual strategy – so that there are different sectoral rates which vary within the regions – would likely prove too complex, both to administer and comprehend.
This is the third in our four part series focusing on low pay.
Part one: "What next for the Low Pay Commission?"
Part two: "What next for the National Minimum Wage; sectoral rates"
By Tom Heys, Lewis Silkin
Could different minimum wages for different parts of the country be practical? Could it be a power devolved to local authorities? Use the comments section below to share your thoughts about whether a regional approach to the NMW could work.
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