National Minimum Wage

National Minimum Wage
84
Figure 3.7: NEET Rates, by Age, UK, 1998-2011
NEET rate (per cent)
20
18
16
14
12
10
8
6
4
2
0
Introduction
of the
NMW
Largest
uprating
Introduction
of the 16-17
Year Old Rate
1998 Q1
1998 Q3
1999 Q1
1999 Q3
2000 Q1
2000 Q3
2001 Q1
2001 Q3
2002 Q1
2002 Q3
2003 Q1
2003 Q3
2004 Q1
2004 Q3
2005 Q1
2005 Q3
2006 Q1
2006 Q3
2007 Q1
2007 Q3
2008 Q1
2008 Q3
2009 Q1
2009 Q3
2010 Q1
2010 Q3
2011 Q1
2011 Q3
Quarter
16-17 18-20
Start of
recession
21-24
Source: LPC estimates based on LFS Microdata, quarterly, four-quarter moving average, UK, Q2 1997-Q3 2011.
3.39 We have seen that the number of young people aged between 16 and 20 staying in FTE has
increased in recent years, and the number in employment has fallen. The next section of this
chapter looks at the labour market position of 21 year olds, who became eligible for the adult
rate of the minimum wage from 1 October 2010.
21 Year Olds
3.40 From 1 October 2010, 21 year olds have been entitled to the adult minimum wage rate. With
the adult rate rising to £5.93 an hour, this was an effective increase of 23 per cent in the
minimum wage entitlement of 21 year olds, from the previous Youth Development Rate of
£4.83 an hour. We look next at the labour market position of 21 year olds compared with
workers of a similar age, and assess if this large increase in their applicable minimum wage
has had an effect on the earnings or labour market position of 21 year old workers.
3.41 The latest evidence from ASHE 2011 shows that earnings at both the lowest decile and the
median for 21 year olds were closer to those of 22 year olds than 20 year olds. In addition,
81.5 per cent of workers aged 21 were being paid above the adult rate of the NMW in 2011,
compared with 81.0 per cent in 2010, suggesting that employers had been able to absorb any
costs associated with the change in the NMW entitlement of 21 year olds, and had not
moved to paying a higher proportion of 21 year olds the adult rate of the NMW.
3.42 Turning to their labour market position, we noted in previous reports that the employment
and unemployment rates of 21 year olds have very closely followed those of 22 year olds,
both before and after the recession. Figure 3.8 shows that this continues to be the case, and
there is a clear difference in how these rates have changed for 21 and 22 year old workers
20
18
16
14
12
10
8
6
4
2
0