Almost one in five Newham residents do not earn the minimum wage

11 April 2014 in Council and democracy and Mayor
Mayor of Newham calls on Government to devolve enforcement of minimum wage to local authorities.
The Mayor of Newham has called on the Government to give more powers to local authorities to enforce against employers not paying the minimum wage, after research reveals almost one in five working residents take home less than £6.19 an hour*.
Sir Robin Wales has asked for tougher action after the statistics were revealed in independent research conducted by Ipsos MORI. The research also showed that nearly half of all residents in work do not receive the London Living Wage.
The research, based on reported working hours and earnings, highlights the importance of low pay as an issue and the need to put greater emphasis on ensuring workers’ rights are respected.
HM Revenue and Customs (HMRC) is responsible for enforcing the minimum wage. Despite evidence presented by Newham Council that the law is widely flouted, only nine prosecutions have been made nationally since 2001.
Councils work closely with local businesses on a range of issues but currently have no investigative or enforcement powers to secure compliance with the minimum wage legislation. Sir Robin Wales is calling for these powers to be devolved to local authorities, alongside tougher penalties, to enable them to take direct action and prevent local workers from being exploited.
Non payment of the minimum wage has a devastating impact. Previous research**, conducted for Newham by Ipsos MORI and local charity Community Links, found that workers not earning a fair wage struggle to make ends meet and are vulnerable to unexpected changes in their working patterns. They face the stress of living on very low incomes and the social stigma and vulnerability of working in the informal economy. Many did not believe they were worth the minimum wage.
Paying below the minimum wage also means good businesses are undercut by those not playing by the rules and local wages are driven down even further. This has an impact on public spending, increasing the level of in-work benefits paid out to subsidise exploitative employers.
Newham Council is taking forward a research project with leading experts in the field to develop proposals for the implementation of local enforcement of the national minimum wage. 
Sir Robin Wales said: “Many people do not realise that there is a hidden economy operating in the UK where workers are still not receiving the National Minimum Wage. It is a disgrace that laws introduced to prevent poverty pay are so poorly monitored and enforced.”
“We’re on the side of businesses that play by the rules and we will continue to work closely with them to bring new investment to the borough. However, we will come down hard on those that flout the law. Local enforcement powers would enable us to build a thriving local economy full of opportunities for our residents to get into good quality employment. However, without the national recognition that pay abuse still happens, that’s just not possible.”
Cllr Andy Hull, author of the Centre for London report Settle for nothing less: enhancing national minimum wage compliance and enforcement and Executive Member for Finance at Islington Council, said: “This research is an important reminder that non-compliance with the national minimum wage is rife. HMRC are too remote to stop it. Local authorities, much closer to the ground, are better placed to enforce the minimum wage in their patch. Fifteen years after the minimum wage was introduced, it’s time now to devolve the power and responsibility for tackling such exploitation from Whitehall to the town hall. That would take us a step closer to a modern Britain in which no-one has to work for less than the legal minimum.”
Conor D’Arcy from Think Tank The Resolution Foundation said: “The minimum wage has succeeded in lifting the wages of the UK’s lowest paid workers. But although the majority of employers do comply with the legislation, it is clear that exploitative non-payment of the minimum wage still exists. The minimum wage is a right, not a privilege and illegal non-payment should be stamped out. Enforcement efforts to ensure every worker receives at least the minimum wage are crucial but there is a need to go beyond that too, to encourage employers to pay more where they can afford to and begin to tackle the problem of wider low pay.”


* £6.19 is the national minimum wage at the time of the survey. Of the employed respondents to Understanding Newham 2013: Newham Household Panel Survey Wave 7 18% earn less than the National Minimum Wage of £6.19 at the time of research. Earnings were based on hourly pay figures for all employees aged 21 or over (excluding self employed and unpaid workers in family businesses – the main exemptions from the national minimum wage legislation) calculated by dividing gross weekly pay by total number of hours worked per week. This figure includes overtime which may or may not be paid.  Employers don’t have to pay workers for overtime. However, under legislation employees’ average pay for the total hours worked mustn’t fall below the National Minimum Wage.
** Ipsos-Mori and Community Links (May 2012) Non-compliance with the National Minimum Wage in Newham, London Borough of Newham available at