Minimum wage 'pricing young people out of the workforce'

  • Businesses warn that employing teenagers is becoming a less attractive prospect

The minimum wage is pricing young people out of the market', businesses have warned.

The British Chambers of Commerce called for a freeze and then reduction in the lowest rate for young people in Britain.

They said yearly increases were making teenage workers and trainees less attractive to employers.

Priced out: Young shop assistants may be less attractive to employers as the minimum wage rises

Priced out: Young shop assistants may be less attractive to employers as the minimum wage rises

The advice came as the Government increased the minimum wage across the country by 2.5 per cent this weekend.

The minimum wage increased this weekend by by 6p to £4.98 for 18- to 20-year-olds, and by 4p to £3.68 for 16- and 17-year-olds, while the rate for apprentices has gone up by 10p to £2.60.

Adam Marshall, director of policy at the British Chamber of Commerce, said: 'Youth and development minimum wages for under-21s need to be frozen.

'The relentless upward march of all three rates is making employers more reticent to take on young people.'

Young people will find it harder to land a first job, businesses said, with the rates putting off firms who would typically focus on youth development.

Changing minimum wage in the UK since 1999 (Wikimedia Commons)

Changes in UK minimum wage since 1999 (Wikimedia Commons)

Mr Marshall said that he had been contacted by concerned employers, especially in the retail sector were minimum wage is common, saying that the increases were limiting the number of young people they could take on.

He said that with less money available, stricter employment regulations and higher National Insurance rates, youth employment were becomnig less attractive to businesses.

'With 1million young people out of work and employers taking cuts to their wages, it is time for us to have a conversation,' he said.

He emphasised that he did not think the adult minimum wage should be frozen at this time because of financial pressures and rising inflation.

'The distinction is important,' he said. 'Many young people do not face the full cost of living so the inflation argument is less strong.

Cash injection: Companies are less likely to employ increasingly expensive young workers

Cash injection: Companies are less likely to employ increasingly expensive young workers

The Low Pay Commission backed up his argument and said they would make recommendations to the Government in March or April.

Minimum wage increased by 15p to £6.08 per hour for adults and women were the main winners.

Almost 900,000 workers - most of them female - received a rise under the hike.

But although the boost will slightly decrease the pay gap between men and women, inequality in wages remains pronounced in top positions, with only 14 per cent of FTSE 100 company directors being women.

However the TUC predicts that the pay hike will inject £230million into the economy because of higher tax rates and NI rates and lower benefits bills.

TUC general secretary Brendan Barber said: 'This rise will put extra cash in the pockets of the UK's lowest-paid workers when they can ill afford to have their pay squeezed by inflation.

'Cuts in public services and benefits are hitting the working poor the hardest and this increase is not enough to protect them from falling living standards.

'The minimum wage has already helped hundreds of thousands of families without causing significant job losses and its success has shown that despite much scare-mongering from some employers, sensible labour market regulation is good for business.'

But there could be even better news for those on low pay next year, as unions are pressing the Low Pay Commission to be 'bolder' with some leaders recommending a 'living wage' of more than £8 an hour.

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