Britain’s Minimum Wage Is a Joke

While the government 'names and shames' a few bosses who broke the law on pay, the minimum wage itself remains a scandal – denying millions of workers enough money to live.

Credit: James Braund / Getty

Speaking ten years on from the 1998 introduction of the minimum wage, then-prime minister Gordon Brown told Labour conference of his pride at the power of the measure to change lives. It was, as he put it, ‘one million people freed from exploitation’. If only things were so simple.

Last week, the government released a ‘name and shame’ list of 191 companies fined by HMRC for breaching minimum wage law between 2011 and 2018. The list itself was a diverse and tragic indictment of the behaviour of brands across the economy, from Sheffield United Football Club and the Body Shop to Pret a Manger and John Lewis. Those named on the list reportedly owed a total of £2.1 million in unpaid wages to more than 34,000 workers, for everything from wrongly deducing wages to not paying workers properly for their hours.

But the list is just the tip of a growing iceberg of exploitation. In the gig economy, that exploitation is epitomised in the treatment of Deliveroo drivers, one in three of whom make less than the national minimum wage according to the Bureau of Investigative Journalism. Some earn as little as £2 an hour. Amazon sub-contractors told the Daily Mirror they earn as little as £1.80 an hour after van hire, fuel, and deductions for failing to deliver up to 250 parcels a shift. Hospital cleaners and porters I spoke to for Tribune described being chronically underpaid by companies, often leaving them earning less than the legal minimum in any given month.

Neither ISS or Mitie, the outsourced cleaning companies, or tech giants like Deliveroo, Amazon, and Uber featured on the government’s list of employers who failed to pay the minimum wage. All in all, between April 2015 and March 2021 more than one million workers were cheated out of £100 million in their legal wages.

Another conspicuous problem with the new list is that it’s just that: a list. While most of the companies on it faced fines, few faced any deeper consequences. In fact, just six employers have faced criminal prosecution (as opposed to civil fines) for paying employees less than the minimum wage in the past six years, according to a Freedom of Information request filed by openDemocracy. In that time, tax authorities found more than 6,500 violations. Also, while HMRC can issue fines of up to 200 percent of employees’ missing wages for violations, between 2015 and 2020, the average fine was just under 50 percent of wage arrears. Public shaming is no replacement for actually holding employers to account.

It’s worth noting how we got to a place where the legal right to an already insufficient minimum wage is increasingly an uncertainty. While the government has announced some increased funding for HMRC, much of that new money focuses on tax avoidance rather than policing illegal wages. Over the last few years HMRC faced intense cuts – just under a 40 percent drop in budgets across HMRC, the DWP, and the Treasury. Official government headcount data shows that thousands less people now work for the department. That fall in staffing leaves HMRC less able to pursue employers paying below the legal minimum, especially since it lacks the resources to proactively investigate companies, relying instead on the lowest-paid workers self-reporting exploitation – which many are too vulnerable to do. Underpinning all this, of course, is an ideological disinterest on the part of the government in raising a finger to help workers beyond the most basic optics.

Cases, meanwhile, are on the up. The Office for National Statistics claims 2,043,000 jobs were paid below minimum wage in 2020. Most of that fivefold increase is accounted for by the furlough scheme, which only covers 80 percent of wages, but the 425,000 recorded the year before is still astronomically higher than the 155,000 workers HMRC were able to return unpaid wages to. And that only covers the companies who HMRC actually catch. Research by the Resolution Foundation estimates that the government only ever identified 13 percent of the roughly 11,000 firms who underpaid their workers in 2018-2019.

It goes without saying that the impact is dire. Is it at all surprising that a state that can’t assure its citizens even its inadequate minimum wage also has sky-high in-work poverty? One estimate from the Joseph Rowntree Foundation suggests that around 56 percent of households living in poverty in 2018 had at least one member in work. The link between a job and stability, success, and prosperity has been broken.

The fact that these missing wages can cause such damage highlights the most fundamental problem: the current minimum wage is simply not enough. Take the most recent substantial increase in the minimum wage, in April. While the government promised in 2019 to end low pay in work by increasing the rate to £10.50 an hour (roughly the real living wage rate), in the end, the rate was only increased to £8.91 an hour – a 19p rise for those over 25, and a 71p rise for those aged 23 and 24. As that increase was announced, so too was an average 4.3 percent rise in council tax and a 9 percent increase in gas and electricity prices for over half of households, not to mention rising charges for prescriptions, TV licences, and more. The country’s lowest paid workers are seeing their costs go up and their incomes failing to match it.

In 1894, the first politician to back something resembling a minimum ‘living wage’, Liberal MP Mark Oldroyd, defined it as a wage that ‘must be sufficient to maintain the worker in the highest state of industrial efficiency, with decent surroundings and sufficient leisure’. Today, with a ruling class more interested in stacking up its own wealth than in making sure the majority have the means to survive, that remains a goal for which we have to fight.