National Minimum Wage

National Minimum Wage
74
changed following the recession. Finally, we review the impact of the decision to pay the
adult minimum wage rate at age 21 from 1 October 2010.
Youth Rates
3.5 There are two youth rates of the minimum wage: the Youth Development Rate and the 16-17
Year Old Rate. The Youth Development Rate was introduced in April 1999 at £3.00 an hour
and originally covered 18-21 year olds. Since its introduction, it has risen broadly in line with
the adult rate of the NMW. From 1 October 2011 the Youth Development Rate (now applying
to 18-20 year olds) was increased to £4.98, 82 per cent of the adult rate. The 16-17 Year Old
Rate was introduced on 1 October 2004 at £3.00 an hour. Since 1 October 2011 the 16-17
Year Old Rate has been £3.68 an hour, 61 per cent of the adult rate.
3.6 We received a number of consultation responses relating to youth rates, and these broadly
fell into two main categories: those who supported separate, lower youth rates, and those
who opposed them. Many of the stakeholders in favour of separate youth rates argued that
young people would be priced out of work by higher wages, and that young people’s
employment had already suffered disproportionately from the recession. White Horse Child
Care Limited stated that the cost of hiring untrained young people was now too expensive,
and many of the salons represented by the National Hairdressers’ Federation (NHF) now
viewed training young people as an ‘unaffordable luxury’.
3.7 A number of respondents argued that having separate youth rates of the NMW was age
discrimination. Save the Children, the National Union of Students (NUS) and Platform 51 all
called for a single rate for all employees aged 16 or older. They argued that people doing the
same work should get the same pay, regardless of age. They also argued that many young
people were financially independent, and paid the same prices for housing, food, and other
goods as adults, and should therefore be paid an equal wage. Most of the trade unions who
responded to our consultation were also opposed to separate youth rates for younger
workers, on the grounds of equality and fairness.
3.8 Since the formation of the Commission, we have believed that the minimum wage should
be set at a lower level for young people. The evidence continues to show that they are
more vulnerable in the labour market, and the threat of unemployment is greater for
younger workers. When in employment, young people should of course be protected
from exploitation, but we do not want the level of the minimum wage to jeopardise
their employment or training opportunities.
Earnings
3.9 We use data from the Annual Survey of Hours and Earnings (ASHE) to look at the level and
growth of earnings for employees. The latest ASHE data relate to April 2011, and cover the
October 2010 minimum wage upratings. These upratings increased the 16-17 Year Old Rate
by 2.0 per cent to £3.64, and the Youth Development Rate by 1.9 per cent to £4.92. They
were slightly below the 2.2 per cent increase in the adult rate, marking a small departure
from the previous approach when the upratings were broadly in line with the adult rate.