Burnham eyes youth minimum wage rethink as jobs crisis bites
Andy Burnham’s government is considering slowing planned minimum wage rises for young workers amid concerns that higher employment costs are making businesses more reluctant to hire them.
Downing Street and the Treasury are examining whether the rapid increase in wages for under-21s has contributed to Britain’s youth jobs crisis, Bloomberg first reported, as ministers prepare to publish a review into worklessness in the coming weeks.
The rethink would mark a shift from Labour’s 2024 manifesto promise to remove what it called “discriminatory” minimum wage age bands and eventually bring younger workers onto the full adult rate.
This year, the minimum wage for workers aged 21 and over rose 4.1 per cent to £12.71 an hour. But the rate for 18 to 20-year-olds jumped more than twice as quickly, rising 8.5 per cent to £10.85, while the rate for 16 and 17-year-olds climbed six per cent to £8.
Ministers are now looking at whether narrowing that gap too quickly has made entry-level staff more expensive at a time when almost one million 16 to 24-year-olds are neither working nor studying.
A government spokesperson said ministers remained committed to closing the gap between adult and youth wages but had asked the independent Low Pay Commission (LPC) to consider employment opportunities when recommending future increases.
“We are determined to help young people into work and deliver on our manifesto commitment to make work pay,” they said.
The potential change of tack will be closely watched by retailers, pubs and restaurants, which employ large numbers of younger workers and have repeatedly warned about rising labour costs.
It also comes just a week after Burnham’s government named and fined hundreds of employers, including Tesco, B&Q and Whitbread, for breaches of existing minimum wage rules.
Ministers look to Dutch youth wage model
Officials are examining the Netherlands, where the minimum wage falls sharply with age, according to Bloomberg.
Dutch workers aged 21 and over are entitled to €14.99 an hour, compared with €7.50 for an 18-year-old and €4.50 for a 15-year-old.
The country also has far more young people combining work with education. Around 74 per cent of Dutch 15 to 29-year-olds work while studying, the highest rate in the EU.
Just 4.8 per cent of young people in the Netherlands are outside work or training, compared with 13.6 per cent in Britain, according to figures cited by the Department for Work and Pensions.
Former Labour cabinet minister Alan Milburn, who is leading the government’s review into youth worklessness, travelled to the Netherlands this week to examine its approach.
He said that his recommendations could include slowing or even reversing planned wage increases, saying ministers needed to “make it as easy as possible” for companies to employ young people.
Before Burnham entered Downing Street, ministers were already divided over whether rapidly increasing the youth minimum wage was making it harder for younger people to get a foot in the door.
The LPC said earlier this year that it had not seen “robust evidenc” that higher youth rates were responsible for deteriorating employment.
Labour’s manifesto did not set a deadline for bringing the youth rate in line with the adult minimum wage, giving Burnham room to slow the process without formally abandoning the pledge.
But doing so is likely to draw opposition from Labour MPs and unions which have pushed for younger workers to receive the same minimum hourly pay as older colleagues.