Angela Rayner is urgent forward with plans to lift the minimal wage for 18–20-year-olds to match the grownup fee, regardless of warnings from enterprise teams that the transfer dangers pricing younger folks out of labor.
The Deputy Prime Minister has requested the Low Pay Fee to attract up proposals to scrap the £2-per-hour hole between the present minimal wage for 18–20-year-olds (£10) and people aged 21 and over (£12.21). The coverage, backed by commerce unions, kinds a part of Labour’s election pledge to “make low pay a factor of the previous” and take away “discriminatory age bands”.
The transfer can also be seen as a part of Labour’s technique to courtroom youthful voters amid polling good points by Reform UK. Final month, Rayner additionally set out plans to decrease the voting age to 16 earlier than the subsequent basic election.
Trade leaders say the coverage dangers accelerating youth job losses in sectors already hit by rising employment taxes. Kate Nicholls, chair of UKHospitality, mentioned hospitality has shed 84,000 jobs previously six months, partly as a result of £25bn employer National Insurance rise launched final autumn.
“We perceive the Authorities’s goal of honest pay, however you’ll be able to solely have honest pay in case you have a job that truly pays,” Nicholls mentioned. “Now just isn’t the time to make huge jumps in employment prices.”
Pubs, resorts and eating places – key employers of younger folks – have been “hammered” by the tax modifications, she added, warning that the brand new wage rise might destroy much more entry-level jobs.
Jane Gratton, deputy director of coverage on the British Chambers of Commerce, mentioned nearly a million younger individuals are at the moment not in employment, training or coaching. “Employers wish to assist, however the rising cost of employment makes that very troublesome for a lot of corporations,” she mentioned. “If wages rise too quick on this age group, it might imply fewer alternatives.”
The enterprise backlash has been intensified by Chancellor Rachel Reeves’ resolution to decrease the brink for employer Nationwide Insurance coverage contributions to £5,000, pulling extra part-time employees into the scope of the tax.
Nicholls mentioned the change is disproportionately affecting youth employment and part-time work. “All of the warning indicators on the labour market are flashing pink. Now could be the time for warning, not going too far,” she mentioned.
Regardless of enterprise considerations, new YouGov polling exhibits sturdy public help for equalising the minimal wage for over-18s. Two-thirds (67%) of respondents imagine 18–20-year-olds ought to obtain the identical minimal wage as these aged 21 and above. Solely 22% help a decrease fee, whereas 11% are not sure.
Rayner insists the coverage will enhance disposable incomes and progress. “This remit is the subsequent milestone in our plan to get extra money in working folks’s pockets, elevate dwelling requirements in each a part of the UK, and get our financial system rising,” she mentioned.
The Low Pay Fee is now tasked with setting out a path to align the youth and grownup minimal wage charges. If carried out, the change would hand a pay rise to tons of of 1000’s of younger employees – however enterprise teams warn it might additionally reshape the youth employment market.
Paul Jones
Harvard alumni and former New York Occasions journalist. Editor of Enterprise Issues for over 15 years, the UKs largest enterprise journal. I’m additionally head of Capital Enterprise Media’s automotive division working for shoppers comparable to Purple Bull Racing, Honda, Aston Martin and Infiniti.