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National minimum wage freeze: disappointing young workers or stimulating the youth labour market?

An article on today’s BBC news website has again highlighted the problem of rising youth unemployment, with the STUC accusing the Scottish and UK governments of failing to address youth unemployment. The latest unions’ labour market report indicated that in December 2007, 415 Scots aged between 18 and 24 had been in receipt of jobseeker’s allowance for over 12 months. However, in March 2012 this figure had risen to 5,210. When coupled with the total youth unemployment figure sitting around 100,000 in Scotland alone and 1,000,000 UK-wide, it is easy to see that job prospects for young people look increasingly bleak.
Meanwhile, the government recently announced this year’s changes to the national minimum wage with an increase of 11p for adults aged 21 and over to £6.19 per hour; yet confirmed a freeze on hourly wages for 16-17 year olds at £3.68 and 18-20 year olds at £4.98. Those taking part in apprenticeships will benefit from an extra 5p per hour, increasing their hourly rate to £2.65. These changes, which are due to take effect on 1 October 2012, follow hot on the heels of recommendations by the Low Pay Commission in February urging the government to impose a blanket freeze on the national minimum wage. The Low Pay Commission suggested that employers were reluctant to hire due to the consistent yearly increase in the minimum wage. Therefore, safe in the knowledge that their wage bills would likely remain constant until at least 1 October 2013, the argument is that imposing a wage freeze may stimulate economic growth by encouraging businesses to recruit.
However, the government did not go quite as far as recommended and instead appears to have chosen to disappoint young workers in particular by applying a minimum wage freeze for the under 20’s. Underlining the obvious dissatisfaction that will be felt by millions of young workers across the country, it would appear that such a decision amounts to age discrimination. Of course, even such direct age discrimination is capable of justification under the Equality Act 2010. This means that, if challenged, the government would have the chance to defend its decision as a proportionate means of achieving a legitimate aim. So what “legitimate aim” could the government have for denying young workers a wage rise? Spiralling youth unemployment, is the loud reply. The facts and figures on the BBC today certainly seem to confirm that youth unemployment remains a prominent and pressing issue… but then can the same not be said about unemployment in society at large? Although we were recently bombarded by government figures which suggest that overall unemployment had decreased in March, figures still remain unsustainably high with around 2.65 million people in the UK out of work. Taking into account this notable overall unemployment, it appears to us that, if challenged, it could be difficult for the government to justify its decision purely on the basis of youth unemployment. If the real reason for the national minimum wage freeze for young workers is to encourage employers to recruit young employees and reduce youth unemployment, surely in the current economic climate this reasoning applies equally to workers aged 21 and over?
In any event, it is difficult to see that this decision to freeze national minimum wage rates for young workers will have a particularly resounding impact on young people’s job prospects. For the sake of the tens of thousands of unemployed young workers in Scotland, we very much hope that this decision will have the desired effect and employers will feel able to increase their youth recruitment activity. Having said that, we admit we are sceptical. Instead, we suspect that this national minimum wage freeze may simply curtail the employment law rights of young workers rather than fulfil the promise of ‘an end in sight’ for the increasingly disheartening tale of youth unemployment.
For further information on any issues relating to Employment Law and the National Minimum Wage, please contact Robert Holland.