WAGES COUNCILS - WAS THERE A CASE FOR ABOLITION

The 1993 Trade Union Reform and Employment Rights Act removed the rema ining minimum wage protection for some 2.5 million low paid workers by abolishing the last 26 UK Wages Councils. The Government's case for a bolition rested on three key arguments: (1) minimum wages do little to alleviate poverty since most covered workers do not live in poor hous eholds; (2) when in operation, minimum wages reduced employment in cov ered industries; (3) the problems of poverty that the wages councils w ere set up to deal with in 1909 are not relevant in today's labour mar ket. In this paper we address each of these points in turn. We find th at: (a) 50 per cent of families with at least one earner being paid wa ges council rates come from the poorest 20 per cent of famines; (b) th e existing evidence suggests that abolishing the Wages Councils is unl ikely to create jobs; (c) the widening earnings distribution in the UK means that low pay is an increasingly important determinant of povert y. If anything, there appears to be an increasing need for minimum wag e legislation in the UK.