News: 3rd April 2014

IEA calls for abolishment of minimum wage for young people

IEA calls for abolishment of minimum wage for young people

The Institute of Economic Affairs (IEA) has led calls for the abolition of the National Minimum wage for apprentices, under 18s and under 24s out of work for more than one year in the UK, in a bid to tackle persistently high youth unemployment.
 
The body’s new report, ‘The Minimum Wage: silver bullet or poisoned chalice?’, uncovers the adverse effects resulting from continued real increases in the National Minimum wage; including the rise in zero-hours contracts and unpaid internships, choosier employers and an emerging employment black market.
 
Scrapping the National Minimum wage would make young employees more attractive to employers, according to the thinktank.
 
The report suggests the current national framework is “too blunt an instrument”. The current system is likely to have substantial effects on private sector employment prospects in UK regions. For example, in Wales, the National Minimum wage is 70 per cent of median hourly earnings in the private sector, compared to just 42 per cent in London.
 
Mark Littlewood, director general at the IEA, said: “For too long the Government has been preoccupied with the idea of guaranteeing a ‘living wage’ without looking at the facts.
 
“Youth unemployment is still precariously high and the best way to combat this is to make young, unskilled workers more attractive to employers.
 
“An ever increasing minimum wage creates a wealth of unintended consequences and the result is that among the group of people the measure aims to help, very few actually feel any benefit at all.”
 
The report also indicates the National Minimum wage has increased significantly relative to earnings. Since its inception in 1999, the minimum wage has soared by 75 per cent, while average earnings have only risen by 61 per cent, and the Retail price Index by 53 per cent.
 
The IEA is calling for a suspension of the minimum wage for those under age of 24 who have been unemployed for more than one year, for the first year of their next employment. This would encourage employers to favour them over older, more-skilled workers.
 
It is also asking the Government not to expand the remit of the Low Pay Commission; suggesting its focus must be on providing acceptable wage floors without jeopardising private sector employment.



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