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Should we abolish the National Minimum Wage for young people?

09 February 2012

Subject : News
The youth unemployment figures reached an all time high of 1.02m in November 2011. The youth unemployment figure has not been below 500,000 in the last 20 years and has been on a constant rise since around 2003. Long-term youth unemployment is now over 250,000.

There are many different reasons for this sustained rise in youth unemployment, with suggestions including immigration, the cuts and the EuroZone. There is no clear consensus and an equally numerous number of possible solutions. A report co-authored by David Miliband suggested that it is a structural problem that predates the recession.

Many possible solutions to the youth unemployment problem have been floated, but many are all medium-longer term ideas. They might be effective at reducing youth unemployment, but none of these policies would have an effect on the youth unemployment numbers for several years.

More immediate solutions are needed now to address the problem. Commentators have suggested creating new National Minimum Wage bands for 21-24 year olds, or even abolishing the National Minimum Wage entirely for young people as a way of reducing youth unemployment.

The current minimum wage rates are currently:

  • £6.08 for workers aged 21 and over (up from £5.93);
  • £4.98 for workers aged 18-20 (up from £4.92);
  • £3.68 for workers aged 16-17 (up from £3.64); and
  • £2.60 for apprentices under 19 or 19 or over and in the first year of their apprenticeship (up from £2.50)

These varying age-related levels have been a feature of the minimum wage since it was first introduced in 1999 (then the minimum wage was £3.60 for over 22 year olds and £3.00 for over 18 year olds; there was no minimum wage for those aged 17 and under).

When they were created, these different bands were justified by the Low Pay Commission on multiple grounds. The main reason focused on the idea that work should not pay too well for young people to encourage them to continue in education or training. A further relevant factor was that young people are inexperienced and require more training and supervision (both of which cost a business in lost productivity), so employers need a financial incentive to employ younger workers.

On the face of it, abolishing the National Minimum Wage appears an effective measure for employers to take advantage of. But how effective would it be?

Employers can already pay younger employees a lower wage, yet ONS data shows that 75% of 18-21 year olds (and 40% of 16-17 year olds) are already paid more than the minimum wage.

Given that a large proportion of employers appear not to be using the freedom to pay young people less, it is hard to see how further lowering (or even removing) the wage floor could help create more jobs and boost youth employment. The policy could just further promote the idea that it is acceptable to pay people differently because of age, whilst being of very limited practical benefit at solving youth unemployment.

Some argue that the nation’s youths really need are jobs which they can learn from and build careers, rather than jobs just for the sake of jobs. They say a job which an employer values at being worth just a couple of pounds an hour is not going to be the sort of job which will provide youth with the chance to learn and grow.  

Article by Tom Heys

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