Twenty-five years on: what the national minimum wage teaches us about radical change

Only months after winning the 1997 general election, Labour introduced legislation for a national minimum wage. In the general election five years earlier, the party’s policy had been a source of vulnerability rather than success, with opposition across the board – including by the labour movement. But 25 years since a national minimum wage was introduced, the policy – and the framework around it – is still in place.  

Few policies stand the test of time so resolutely. Fewer still manage it having once been divisive. Over a decade ago, the IfG looked at why the policy was so successful – hearing from those who had been involved in its design and delivery. Those lessons hold firm today for anyone who wants to achieve permanent change.  

Maintain political commitment – but learn from failure

The Labour party included a proposal for a national minimum wage in the 1992 manifesto knowing it was contested. That high level political commitment did not waver – and this is always the most important feature of change. Nothing can replace political grit. But Labour did learn from the failures of 1992 – where it had committed to an inflexible formula for wage-setting, allowing critics to pile in and accuse the party of economic irresponsibility. In 1997, the manifesto committed to the principle of a national minimum wage – but avoided specifying a level, instead pledging to create the Low Pay Commission to inform the process.    

Work with others to build a case for change

Sustained change is often not just about government – or political parties – but about the actions of civil society, unions, the private sector and other tiers of government. An extended public campaign by the Low Pay Unit and the National Union of Public Employees changed attitudes within the labour movement, with those pushing for change also able to draw on new work in academia that dispelled concerns over job losses. Labour worked with and relied on a much wider network of people and organisations to help create a context for change.  

Preparing in opposition allows for speed in government  

Legislation for a national minimum wage was announced in the Queen’s speech just two weeks after the 1997 election. This speed – and the relative consensus around the policy – was largely as a result of work done in opposition.  

Between 1994 and 1997, party officials worked to build the case for a minimum wage – using new academic evidence and building mechanisms like the Low Pay Commission to take responsibility for setting wage levels out of the hands of politicians (an innovation that helped reduce the opposition of business groups like the CBI). It also established groups to work through detail that would enable the policy to be implemented quickly, such as the treatment of specific groups like au pairs, and how to ensure compliance from employers. This activity didn’t just make the introduction of the wage faster – but meant that Labour had built a wider constituency of support and worked through key barriers to implementation in advance of going into government.  

Institutional innovation can provide stability and room to adapt

The creation of the Low Pay Commission has been crucial to the endurance of the national minimum wage. When first established, the combination of a high quality chair, commissioners and secretariat allowed the minimum wage to be set in a consensual way. The tripartite model with representatives from business, the labour movement and independents defused potential opposition, helped resolve disputes internally to avoid handing decisions back to the government, and made it easier to implement the proposals when made. This was underpinned by the strength of the analytic base it developed.  

Moreover, the decision to put the Low Pay Commission on a permanent statutory basis enabled it to adopt an incremental and adaptive approach as it could solve issues over time – starting with relatively modest proposals, monitoring the impact and then making adjustments. This adaptive approach was crucial for the business community because it stopped the minimum wage becoming a “political football”, which might be subject to large and unpredictable movement on the basis of partisan considerations. 

For any new-elected government seeking to design and deliver successful and lasting policy, the national minimum wage is a case study in how to get things right.