Labour felt the minimum wage should be decided according to the economic circumstances of the time and with the advice of a Low Pay Commission, on which business would be represented.

Not surprisingly, this caused some uncertainty among employers, who heard echoes of ‘old Labour’ in these arguments.

They were not necessarily reassured when it was pointed out that many other countries in western Europe as well as the United States have this type of legislation.

Nor was the point that, until 1993, Wages Councils determined minimum rates in a number of industries.

The Low Pay Commission was set up shortly after the election under the chairmanship of Professor George Bain.

Its membership comprised two academics, three trade union officials, and three representatives of the business community.

The Commission introduced the NMW in April 1999 with a national hourly basic rate of £3.60 per hour for adults and £3.00 for young people aged 18 to 21, pretty much in the middle of the appropriate international comparisons.

When the Wages Councils were wound up, the 2.5 million workers covered by the agreements were paid on average between £2.60 and £3.00 per hour.

Had this been increased in line with average earnings since 1993 (the last Wages Councils year), the rates in 1998 would have been between £3.10 and £3.60.

At the time, a survey of earnings revealed that some 6% of the labour force received less than £3.50 per hour and 20% less than £4.60. Estimates suggest that around 1.9 million employees would be entitled to higher pay as a result of the National Minimum Wage.

Over a million were women in part-time employment with a large proportion of young people also entitled to higher pay. The industries most affected were hospitality (such as hotels and catering) and business services (such as cleaning).

The level of the minimum wage is reviewed regularly. From October 2009, the adult rate (22 years of age and over) was increased to £5.80 an hour, for those aged between 18 and 21, £4.83 an hour and £3.57 an hour for young people.

The introduction of a minimum wage raised three concerns.

• that it could price some jobs out of the market
• that it would narrow differentials and lead to claims for their restoration
• that the increase in wage costs could add to inflation, particularly if other employees seek to maintain their previous differentials

It has to be said that these problems do not appear to have materialised – at least not yet.

Unemployment has not risen, and survey evidence suggests that the minimum wage has not been a significant factor in wage settlements, while the Low Pay Commission found no significant effect, positive or negative, on productivity.

In large part, this is probably due to the minimum wage having been initially set at a relatively modest level.

Over the medium- to longer term, however, these concerns may resurface, particularly if the minimum wage continues to rise at a much faster pace than overall earnings