UK Labour confirms intention to abolish 'youth' National Minimum Wage


 

The following sets of rates apply for the national minimum and living wage from April 2019:

Rate

£

Adults (25+) the National Living Wage

8.21

Adult (21 – 24)

7.70

Youth Development (18 – 20)

6.15

16 – 17 Year Old (under 18 but over school leaving age)

4.35

Apprentice

3.90

 

These rates are set by the independent Low Pay Commission (LPC) that is comprised of representatives from trade unions, academics and business people with the remit (until 2020) that the National Living Wage should reach 60% of median earnings by that time.  The LPC have also said that they want to advise whether the existing “youth rate structure” supports this remit.

The future of the LPC and further remit post the April 2020 review will be announced at the 2019 budget.

However, in a speech at a Young Labour Party in Birmingham on 11 May 2019, Labour leader Jeremy Corbyn pledged that a future Labour government would:

  • Abolish the “youth” rate, i.e. for those under 18
  • Increase the Living Wage to £10 per hour

For SMEs, the increased cost of paying an increased hourly rate will be funded by “fiscal savings arising from a reduction in the amount that the Treasury pays out in in-work benefits”

This is confirmed on the Labour party’s website.

Global Payroll Association Comment

You could be forgiven to thinking that we had entered general election time with an announcement designed to target a voter population.  Whilst we can appreciate the discrimination angle of Mr Corbyn’s announcement, there do seem to be more questions than answers:

  • It is unclear to us about the “adult rate” (21 – 24) and also the apprentice rate
  • Fiscal support for paying at an increased rate is not the only a cost associated with an increase in pay. There are also things like increased pension contributions and increased national insurance to consider
  • Whilst younger workers will undoubtedly benefit, what about older workers with more experience, something the age bands respect at the moment. Is this going to lead to motivating one group of workers but demoralising another?

We live in unprecedented political times but this is definitely an announcement employers will want to keep an eye on and we wonder if this could impact the LPC’s remit for 2020 and beyond.