Tuesday, November 21, 2006

Minimum wage

Compass Youth are calling for an end to the 'Development Rate' of the minimum wage, under which it is legal to pay workers aged 16 to 21 at a lower rate than those over the age of 21.

The argument against this is that if employers had to pay the same rate to everyone, irrespective of age, they would not hire unskilled and unqualified young workers, leading to a rise in youth unemployment. This is an argument which is worth considering, but which would have more substantially more force if employers actually offered training and support to young workers who they are paying the lower wages to.

This is an area of regular debate for the Low Pay Commission, with the trade unions calling for equalisation and the CBI against. 84% of 18 to 21 year old workers already get paid at or above the adult rate of the minimum wage, and the Commission suggests that the lower rate should apply to 18 to 20 year olds, on the grounds of their lower levels of skills.

I can see the case for leaving a lower rate for the moment for 16 and 17 year olds, and looking at what the effect would be of a higher minimum wage on people carrying on in full time education. An equalisation of the minimum wage for young people at this age might also need, for example, an equivalent increase in Educational Maintenance Allowances.

This issue of training and skills is particularly important because there are a lot of workers who find work, immediately discover that all the support which the government has put in place to help reduce unemployment is taken away from them, and find it really hard to stay in work, with the result that they lose that job, spend time out of work looking for another job which they stay in for a few weeks or months and so on.

If the argument from employers that they need to be effectively compensated for hiring unskilled workers is going to be accepted, then they need to help these workers gain more skills and get the training that they need. It is a nonsense that this argument about a lack of skills results in young people with plenty of qualifications and skills being paid less than £5.35 an hour, while the people who this policy is designed to help don't get the training and support that they need to help them out of poverty.

The policy of equalising the minimum wage is a good one, but alongside it needs to be more support for people who might end up losing out.

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