OVLOV JAY:
You misunderstood my point. I was on £4.75 before the NMW was introduced. The employers, agency who represent most unskilled NMW warehouse workers, dropped the rate as soon as it was introduced. I didn’t stand for it, leaving the following week. Unfortunately, every employer taking on unskilled labour were all paying NMW by that point
I accept your account. What it doesn’t explain is why you were being paid £4.75 to begin with. If the employers can just knock £1.25 off the rate and not see any difference (no strikes, no shortages), then what stopped them dropping the rate beforehand?
In particular, what stopped them dropping their rates in unison?
As I say, the best explanation I can come up with is simply that the bosses finally realised they were overpaying above the rate necessary for the market, and the NMW acted as a starting gun for them to drop rates in unison.
The reason they would have got into a position of overpaying isn’t clear. Perhaps a hangover from days when there was a local shortage or better union solidarity, and managers with no incentive to upset the applecart hadn’t revisited the rates since (and perhaps, without the starting gun of the NMW, any who had tried to drop rates unilaterally had created unacceptable churn and an exodus to those still paying better).
Perhaps this is the explanation, that NMW created payroll pressure (so managers had an incentive and an excuse to take risks), and it operated across the market at once (so managers were talking with each other about the problem, and knew what others would be doing at the same time). In this way, they were able to get the rate down to its market level, without risking excessive churn and poaching.
Obviously, this is not the same as saying that NMW caused the drop. It realised a potential that was already there. The potential for employers in a sector to act in unison is frequently there - what backstops it is the threat of shortages (of new recruits or existing workers who leave for other sectors or occupations) or industrial action by existing workers.
Since that threat of industrial action obviously wasn’t there to backstop wages at £4.75, the underlying market rate silently fell away for some reason, but the rate you were being paid remained higher until there was a trigger for managers to drop the going rate back to the lower market rate.