National Minimum Wage

National Minimum Wage
14 In contrast to their previous findings that were limited to the pre-recessionary period, their new
research found a flatter age-productivity profile than age-earnings profile, estimated across the
full 2003-2010 period that they considered. Their wage equation results showed that wage
differentials between age groups had narrowed slightly within industries in the post-recession
period, relative to pre-recession, but that the productivity of young workers relative to older
workers had declined. Although they noted that the productivity results were not statistically
significant, they concluded that young workers’ wages had increased more than their
productivity contribution would warrant in the post-recession period, relative to workers in their
30s and 40s.
15 In a comprehensive overview, Crawford, Greaves, Jin, Swaffield and Vignoles (2011)
investigated the impact of the minimum wage on the employment and education choices of
young people. Their results generally confirm the findings from previous research
commissioned by the Commission and elsewhere. They found that local wage and
unemployment rates appeared to play only a minor role in determining young people’s labour
market and education participation. The most important factors were found to be a young
person’s academic ability and family background.
16 The research found little impact of the introduction of the 16-17 Year Old Rate on the
probability of staying in full-time education, the probability of being NEET (not in education,
employment or training), and the probability of employment for those not in full-time
education. They did, however, find some statistically significant evidence that the minimum
wage had increased the probability of working among full-time students in low-wage areas
relative to high-wage areas. When investigating the outcomes for 18 year olds they again
found little evidence of significant effects before or during the recession on education or
employment outcomes. They concluded that future changes in the minimum wage were
unlikely to significantly affect young people’s main choice between education and
employment. Further they also found no evidence that the reduction in age of entitlement to
the adult rate had affected education or labour market choices for 21 year olds compared
with 20 year olds, although this was based on data from only the first few months after the
change.
17 We also undertook some analysis to assess how pay structures for young people had
changed during the recession. Our 2011 Report had noted that the wages of youths had
grown more slowly than those of adults. We worked with the Chartered Institute of
Personnel and Development and Incomes Data Services (IDS) to identify how large firms,
predominantly in retail and hospitality, had rewarded staff by age through the recession and
into recovery. Two contradictory trends were identifiable: in some cases companies had
tended to move away from age-related rates towards paying the adult rate of the NMW from
age 18, or from 16 or 17; other companies, however, had introduced youth rates or reduced
the differentials between their existing youth rates and the statutory minima. IDS (2012)
noted that in the retail sector there was a clear link between company performance and
approaches to pay. Retailers that struggled in the recession tended to make greater use of
youth rates; those that had coped better tended to pay adult rates from age 16 or 18.
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