The Labour party has rounded on the government decision to freeze the national minimum wage for 16- to 20-year-olds next year as an “out of touch” response to the job crisis facing young workers.
Vince Cable, the Liberal Democrat business secretary, announced on Monday that the minimum wage rate for those aged 21 years and above will increase by 11p to £6.19 an hour from October, but will be frozen for younger workers to ensure the rate of minimum pay does not impede job creation.
While Labour and unions criticised the freeze on young workers, the Confederation for British Industry hailed the decision to freeze the minimum pay of young workers but condemned the decision to increase the adult minimum wage by 1.8%, claiming that this would “add significantly to the cost of doing business”.
Cable said the government had accepted the Low Pay Commission’s (LPC) recommendations on the minimum rate of pay for workers in different age bands, which he insisted strike “the right balance between pay and jobs”. The rate for 18- to 20-year-olds will remain at £4.98 an hour, and at £3.68 for 16- and 17-year-olds. The rate for apprentices will increase by 5p to £2.65 an hour.
The Lib Dem minister said that while the decision to freeze the rate for young workers had been a “very hard decision”, he believed here was no point raising the minimum rate for young people if it meant it would be harder to get a job.
“In these tough times freezing the youth rates has been a very hard decision – but raising the youth rates would have been of little value to young people if it meant it was harder for them to get a job in the long run.”
Ian Murray, shadow business minister, said the government should focus on policies to create more jobs rather than cutting wages.
He said: “Youth unemployment is at the highest rate since records began, with over a million young people unable to find work. So it is disappointing that the only response from this out of touch government to the job crisis facing our young people is to impose a real terms cut to their wages.
“This is the first time that the development rate for young people will not rise. The Low Pay Commission’s recommendation represents a vote of no-confidence in the government’s handling of the economy and the prospects for recovery.”
The Trades Union Congress said there was no evidence the minimum wage had an adverse impact on jobs, and warned that young people may now view the rate as exploitative.
Brendan Barber, TUC general secretary, said:
“It is wrong to deny young people an increase this year, as there is no evidence that the minimum wage has had an adverse impact on jobs. The reason why firms have not been hiring enough new workers is because they lack confidence in this government’s ability to set the UK on course for a sound economic recovery. There is now a real danger that young people will view minimum wage work as exploitative.
“Many of the businesses that are calling for the minimum wage to be frozen are also complaining about the lack of consumer spending. Boosting demand is vital – but this will not be achieved by squeezing the low-paid even further.”
David Norgrove, the chairman of the LPC, said: “We believe we have struck the right balance between the needs of these workers and the challenges faced by employers.”
The national minimum wage for adults and the rate for 18- to 20-year-olds has been increased every year since being introduced under Labour in 1999 at rates of £3.60 and £3.00 respectively.
A minimum wage rate for 16-17-year-olds was first introduced In 2004, and was frozen for one year before rising each subsequent year to its current level of £3.68.
Though the Conservatives voted against minimum wage legislation in 1998, David Cameron later conceded in 2005 that the minimum wage “turned out much better than many people expected, including the CBI”.
In 2009, he lauded Boris Johnson’s efforts to encourage companies to sign up to the London Living Wage, currently £8.30 an hour, to reflect the high cost of living in the capital and to help lift more Londoners out of poverty.
Paul Kenny, general secretary of the GMB, said: “This government announcement comes in the week of increasing speculation that the tax rate for people earning over £150,000 a year will be cut.
“Clearly the theory is that you have to increase the take-home pay of the well paid to get the economy moving while you need to cut the pay of the lowest paid to achieve the same desirable result. What total and arrant nonsense.”
John Longworth, director-general of the British Chambers of Commerce (BCC), welcomed the decision to freeze the rates for younger workers, but warned that raising the adult minimum wage rate would add to the cost of doing business.
“In his budget on Wednesday, the chancellor should offset the hike in the national minimum wage by scrapping the huge business rate rise which will affect many businesses from April. This rate rise will stop many from employing more people, whether on minimum wage or above.”
John Walker, national chairman of the Federation of Small Businesses, said: “We support the Low Pay Commission’s underlying thinking that the priority must be to ensure young workers get employment and that the rates for these workers should remain unchanged until the economy picks up.
“However, we would have supported a larger increase in the apprentices rate, both in recognition of the value apprenticeships can have for firms and to encourage more young workers to enter into these schemes.”
Source: https://www.theguardian.com/ – March 2017