The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Andrew Griffiths)
It is a great honour and privilege to respond to this debate, and I congratulate the hon. Member for Glasgow East (David Linden) on securing it. I am pleased to be able to contribute to it as the Minister responsible for the national minimum wage and for the national living wage, of which the Government are hugely proud. There have been age-specific minimum wage rates in one form or another since the national minimum wage was introduced by the Labour Government in 1999, and lower pay rates have always been in place for younger workers because the priority for them is to secure work and gain experience. A higher minimum wage for young people could adversely affect employment levels for that group by dissuading employers from taking on less experienced workers.
It was remarkable that, in the 17 or so minutes for which the hon. Gentleman spoke on this issue, he failed to mention the facts—the actual unemployment rates among young people—even once, so let me bring them to his attention. Unemployment is higher among young workers than among older workers. Specifically, between December last year and February 2018, unemployment among those aged 25 and over was at a record low of 3%, yet among 18 to 24-year-olds the unemployment rate was 10.3%, and more than one in four 16 and 17-year-olds are unemployed. The hon. Gentleman says that we should focus on individuals rather than on statistics, but those statistics clearly show the impact that his policy would have on those young people’s ability to get into work.
Chris Stephens
The Minister highlights the UK Government’s appalling record on youth employment. Can he explain to me—we have asked this question repeatedly—why the Conservative Government took the decision to introduce an additional age tier to the national minimum wage rates, and why the age of 25 was picked?
Andrew Griffiths
The Government have always listened to the expert advice. In particular, we listen to the Low Pay Commission, which is made up of employers, academics and experts in the field and trade union representatives and is specifically devoted to protecting the rights of workers, including young workers. It is the commission that says that this policy is right and that sets the lower rates after considering all the facts.
Kirsty Blackman
The Minister has laid the stats before us, saying that the unemployment rate is 3% for over-25s and over 10% for under-25s. Does he not agree that that shows that the system he is presiding over is broken, and that something needs to be done to fix it?
Andrew Griffiths
No, I think it shows two things. It shows that the hon. Lady does not understand the labour market, and it shows the difficulties that young people have in demonstrating that they have the necessary skills, in gaining the necessary experience and in convincing employers to take a risk in taking them on and giving them an opportunity.
The hon. Member for Glasgow South West talked about our record in relation to unemployment. I will just remind the House that we are seeing record levels of employment in this country, and that unemployment rates are lower than we have seen for 40 years, so I will take no lessons from him.
Several hon. Members rose—
Andrew Griffiths
I think I have given way quite enough, so I will make a little progress. Forgive me, but I am sure that Members will have an opportunity to come in shortly.
Academic evidence shows that the youth labour market is much more sensitive to economic shocks than the labour market in general, and that young people can be exposed to longer-term scarring effects from prolonged spells of worklessness than others. As I said, the independent Low Pay Commission backs up that research. Its 2015 report, which I urge the hon. Member for Glasgow East to educate himself with, cites New Zealand research that found a 3% to 6% fall in the employment rate for 16 to 17-year-olds two years after a 28% increase in the real value of their minimum wage. The hon. Gentleman talked about fairness, but there is nothing fair about making it harder for young people to get on the jobs ladder.
David Linden
The Minister will remember that I referred to Katie, a young girl who was struggling to get the bus fare to go to work. How does that tie in with what he says? She is struggling to get to work; she does not have the pay to get to her job. Is that part of the reason why young people cannot get into work?
Andrew Griffiths
I recognise the hon. Gentleman’s point, but it would be even more difficult for Katie were she not to have a job. That opportunity, that experience, that foot in the labour market is hugely important. The hon. Gentleman would deny Katie the opportunity to get vital work experience and make her way in the jobs market.
We are rightly more cautious about young people when setting the pay floor, and a lower minimum wage for younger workers is in keeping with international comparators. The hon. Gentleman referred to two countries, but let me clarify something and educate him a bit. Just under two thirds of OECD countries that have a statutory minimum wage have special rates for young people. Minimum wages are adjusted for young workers in France, Ireland, Belgium and Luxembourg, among many others. He may want to look into that.
Pricing young people out of the labour market by setting their minimum wage too high would be detrimental to the workers whom the policy was intended to benefit. That said, the Government set only the minimum pay threshold, and I commend businesses that choose to pay their younger workers higher rates of pay, and in some cases pay them the higher national living wage. Indeed, in April last year, 88% of 16 and 17-year-olds, 90% of 18 to 20-year-olds and 92% of 21 to 24-year-olds were paid above their age-applicable minimum wage. Those are the facts, whether the hon. Gentleman likes them or not. As a matter of fact, 86% of 21 to 24-year-olds were paid at or above £7.50 an hour, which was the national living wage for the over-25s.
Chris Stephens
The Minister is doing his best to do a pantomime villain routine, but he seems to be confusing himself. Will he clarify whether he is suggesting that under-25s are better off working in the public sector? Will he confirm that in his Department the under-25s get the same rates of pay as the over-25s?
Andrew Griffiths
I will confirm to the hon. Gentleman that not once in this debate has the Scottish National party mentioned the impact that such a change would have on businesses.
Several hon. Members rose—
Andrew Griffiths
I have given way plenty enough; we will move on.
The Government have increased the national minimum wage for young people to record levels. As I am sure the hon. Member for Glasgow East is aware, last month the Government gave the lowest-paid workers an above-inflation pay rise, as the national living wage and all the national minimum wage rates increased in real terms. The national living wage increased by 33p, to £7.83, meaning that a full-time worker on the national living wage will see their annual earnings rise by more than £600. Following increases to the personal allowance threshold and the minimum wage, a full-time worker earning the national living wage will be taking home over £3,800 a year more after tax. That is something this Government have delivered and are incredibly proud of.
Andrew Griffiths
I think I have given way enough.
The national living wage will rise further to reach 60% of median earnings in 2020, subject to sustained economic growth. We have awarded younger workers in receipt of the national minimum wage the biggest hourly pay rise in more than a decade. In particular, 20 to 24-year-olds saw a 33p increase in their hourly rate to £7.38, meaning a full-time worker in that age group will see their earnings rise by £600 a year, like those aged 25 and over in receipt of the national living wage. Those aged 18 to 20 saw an annual increase of 5.4% to £5.90, and those aged 16 and 17 are now entitled to a minimum of £4.20 an hour, an annual increase of 3.7%. Finally, apprentices aged under 19, or those aged 19 and over in the first year of their apprenticeship, saw an increase of 5.7%, the largest annual increase of all the hourly rates. In total, we believe that more than 2 million workers, 400,000 of whom are young workers under 25, have directly benefited from the latest increases in the national minimum wage.
David Linden
My previous dealings with the Minister were in Committee on the Parental Bereavement (Leave and Pay) Bill, and I came into the Chamber today with a due amount of respect for him. The patronising tone he has taken in this debate demeans his office, and I hope he will reflect on that afterwards.
David Linden
The Minister should have a wee seat, because I am not finished.
Will the Minister put it on record that a 21-year-old first-year apprentice can still be paid just £3.70 an hour? Would he be happy being paid £3.70 an hour?
Andrew Griffiths
I spend a lot of time talking to apprentices, and I see the vast contribution that apprenticeships make to those young people. Apprenticeships provide them with the opportunity to earn and learn, to gain vital experience and to have on-the-job training while following a vocation. That is hugely important. I have spoken to apprentices, and they value the apprenticeship scheme. They are building their careers thanks to it.
Raising the national minimum wage forms part of our long-term industrial strategy to boost productivity and to create good jobs and greater earning power for all parts of the United Kingdom. That is absolutely central to creating an economy that is fair and that works for young people.
All the increases were recommended by the independent Low Pay Commission, in line with the annual remit issued by the Government. The world-renowned LPC brings together business and worker representatives to form a consensus on the appropriate minimum wage rates. As ever, I thank the LPC for the extensive research, consultation and analysis it undertakes throughout the year to inform its recommendations.
Previous LPC reports discussed various pieces of research showing that higher youth wage rates can have a negative impact on employment rates. Consequently, in the annual remit, the Government asked the LPC to recommend the highest increase in national minimum wage rates that were possible without damaging the employment prospects of low-paid young workers by setting them too high. The Government will continue to take the LPC’s advice when setting all the wage floors in order to ensure that minimum wage rises are balanced between rewarding workers and ensuring that they are not priced out of employment. We are not complacent, and that is why I am pleased that the LPC will conduct a review of whether the current structure of the youth rates best supports our aim. I look forward to the LPC’s advice on the matter in spring 2019.
I recognise the hon. Gentleman’s concerns about young people, but the Government are committed to supporting them. Specifically, the Department for Education is reforming technical education by introducing T-levels to equip young people with the relevant skills to reach their potential, and the Department for Work and Pensions has launched the youth obligation support programme for 18 to 21-year-olds who are making a new claim for universal credit. The programme provides valuable intensive support to help people move into work. The DWP announced at the end of March that all 18 to 21-year-olds in receipt of universal credit will be entitled to claim support for housing costs, and that change is currently in the process of being implemented.
This Government are committed to building an economy that works for everyone, including young people. By having a lower national minimum wage for under-25s we are protecting young workers, to help them gain crucial experience, as well as supporting their transition and progression from education into the jobs market. Getting on to that all-important first rung on the jobs ladder has to be the priority. The independent Low Pay Commission will continue to make recommendations on the national minimum wage, and I look forward to its advice in spring 2019 on whether the current structure of the youth rates best supports the youth labour market. This Government have the economy, the country and the interests of young people at their heart.
David Linden
On a point of order, Madam Deputy Speaker. During his speech, the Minister perhaps inadvertently misled the House by saying that France has different pay levels for young people. What opportunities are available for him to correct that, as I believe it is not actually true?