Age Discrimination: National Living Wage

Geraint Davies Excerpts

Wednesday 8th June 2016 Westminster Hall

[Alison Thewliss (Glasgow Central) (SNP)]

It is great to see you in the Chair this afternoon, Mr Davies. I congratulate the hon. Member for Halifax (Holly Lynch) on securing this important debate, which is significant to many young people across these islands.

It is my gran’s birthday today. She has seen many forms of discrimination removed during her 96 years on the planet, on race, religion and sexuality. There has been so much progress, particularly for women, but there remains a persistent issue of inequality, endorsed by the state, when it comes to age. The differing rates of the minimum wage reflect a situation whereby young people are actively discriminated against because of their age.

In the Scottish National party, the equalisation of the minimum wage has been our policy for many years. While I was convener of the SNP’s youth wing, Young Scots for Independence, a resolution was moved at the SNP conference in 2006. It stated:

“Conference notes that the minimum wage is pegged at different levels dependent on age. Conference believes the current system to be grossly unfair and discriminatory and resolves, in an independent Scotland, to equalise the minimum wage levels.”

Much to my regret, we have not managed to achieve that independent Scotland yet. Nor have we achieved devolution of employment law so that the Scottish Parliament might make that change for itself. I still believe, though, that there is no justification for this grossly unfair and discriminatory practice. YSI renewed the fight on that issue at conference in 2013, giving the SNP’s backing to the Scottish Youth Parliament’s excellent “One Fair Wage” campaign.

I wish to dispel a few myths on the reasons behind the staggering of the minimum wage rate. The Low Pay Commission said in its 2013 report that

“we do not want the level of the minimum wage to jeopardise their”—

young people’s—

“employment or training opportunities.”

I just do not buy that. Young people have a range of options in front of them: work, study, apprenticeships. All that the staggering of the minimum wage ensures is that, whichever choice young people take up, whether it is employment on its own or in support of their studies, they are not legally entitled to the same wage as an older colleague in the same job. That is patently unfair.

Apprentices are faced with a rate of only £3.30 an hour. In many places that would not even cover their bus fare to get to the job, which is an absolute scandal. Do the Government believe that apprentices do not need to eat and do not have bills to pay? That rate compounds existing disparities. Analysis in the Department for Business, Innovation and Skills research paper on the evaluation of apprenticeships shows that apprentices are far more likely to come from a lower socioeconomic background. If the Government actually believe that work and training are means of getting out of poverty, apprentices should be much better supported than the current national minimum wage rates suggest. Decent employers offer comparable rates to their apprentices, but they are not legally obliged to do so.

Going further, under-25s have no discount on their bills, on their purchases in shops or on their rent. There must be recognition that an equal day’s work deserves an equal day’s pay. Those in the 16 to 17-year-old bracket at £3.87 an hour may well do the same work as someone in the 18 to 20 bracket at £5.30 an hour or someone aged 21 to 24 earning £6.70 an hour. None of them is entitled to the holy grail of the pretend living wage at £7.20 an hour, and of course none of them is a true living wage, as determined by the Living Wage Foundation, of £8.25 an hour. Research by the Scottish Parliament’s information centre shows that workers under the age of 18 will earn roughly £6,500 a year less than someone over 25. It further highlights that 18 to 20-year-olds will find themselves £3,705 worse off and apprentices will be £7,605 worse off than workers aged 25 or over.

The Government hide behind the myth that the staggering of the minimum wage reflects young people’s lack of experience. The Chief Secretary to the Treasury made that assertion again yesterday:

“For younger workers, the priority is to secure work and gain experience.”—[Official Report, 7 June 2016; Vol. 611, c. 1016.]

Again, that does not stack up. How can it possibly be fair that, by the letter of the law, a young person could start a job at 16 and work there for eight full years to gain the entitlement that a 25-year-old would have walking in on their first day? It is not about experience at all; it is about age discrimination sanctioned by the state.

I mentioned in a previous debate on the living wage on 18 April that I have a constituent who feels that she was dismissed due to being an older worker in a bar. She was on a zero-hours contract and was phoned on the day of her shift to be told that her services were no longer required. That coincided with the introduction of the new higher rate of the minimum wage. My constituent cannot prove it, but it smells very fishy. The response I received yesterday from the Minister for Skills was absolutely woeful. There is no action, and no changes are being made.

As the hon. Member for Halifax said, the staggering of the minimum wage rate gives unscrupulous employers perverse incentives to choose to hire younger workers, perhaps in industries such as catering, cleaning and retail that have a relatively high turnover of staff. Those workers are being exploited, too. Employers can dodge their obligations and try to manipulate the system to save cash, as younger, less experienced workers are less likely to bring a case successfully to an employment tribunal, even if they can pay the fees in the first place. Such employers are likely to get away with it.

The SNP is calling on the UK Government to raise the minimum wage for young people and apprentices or, if they will not do so, to give that power to the Scottish Government to do it for themselves. As part of the SNP’s commitment to fair work, we passionately believe that the living wage should be paid as widely as possible, including to apprentices and young workers. The Scottish Government have done a huge amount of work to persuade businesses in Scotland to take it up. We now have a very high success rate of employers paying the living wage to their employees. We fully support the living wage campaign, and we recognise that the living wage can make a real difference to the people of Scotland. Our Government are a fully accredited living wage employer, which sends out a hugely important signal that the UK Government should also take up.

If we had control over employment law in Scotland, I am certain that we would improve the pay of people in our nation, including those who happen to be under 25. My gran waited a long time to see discrimination broken down; I hope my daughter does not have to wait very long.

[Geraint Davies (in the Chair)]

I call Jim Shannon to share his thoughts.

[Jim Shannon (Strangford) (DUP)]

I have plenty of thoughts, and I am glad to share them. It is a pleasure to be called to speak in this debate. I enjoyed the setting of the scene by the hon. Member for Halifax (Holly Lynch), whom I congratulate on securing the debate. It is also a pleasure to be one of two males who will contribute.

It is hard to argue with the principle, ideal and intent of the national living wage. We want everyone in our country to have a life free from poverty and a job that compensates them properly for their labour, which is the purpose of the national minimum wage. In Northern Ireland we have some of the highest levels of poverty in the whole United Kingdom, so the minimum wage is an important issue for us.

We are a nation of shopkeepers, and I am descended from a family of shopkeepers. Margaret Thatcher said that we were a nation of shopkeepers—I am not sure whether we are as much as we used to be, but we still have a lot of shopkeepers. As the hon. Lady said, we are debating the principle of rewarding those who put in the graft by getting up to go to work and work hard for their family, but we would not be having this debate if there were not outstanding issues with the minimum wage changes.

We have all heard that small businesses across the country are worried that they will have to pick up costs that they cannot afford and, as a result, may have to lay off workers, who are not just employees but friends and family. That is an important issue. While seeking to improve the wages of people in the 18 to 25 bracket, we have to ensure that the businesses that employ them are able to pay those wages—it is important that we achieve that.

My constituency office—other Members will say the same—has been visited by many 18-year-olds who are setting up home together. That is good, and we want to encourage them, so we help them as best we can with housing. We hope that their wages will be enough for rent, food, heat and enjoying some time together as a young couple starting off. The hon. Member for Glasgow Central (Alison Thewliss) said that an 18-year-old could be doing the same job as a 25-year-old to the same level of expertise and ability but receive a lesser wage, which is grossly unfair.

Evidence from the Association of Convenience Stores shows that it is extremely concerned about the prospect of the national living wage reaching 60% of median earnings, which is currently projected to be £9 an hour. Retailers report that that is likely to change their staffing structures and affect store profitability. Some 25% of shop owners work more than 70 hours a week, and 20% do not take any annual leave. The May 2013 “voice of local shops” survey indicated that a majority of independent retailers, some 55%, believe that they earn less than the national minimum wage when taking into account the hours they work. Shop owners might not be earning the wage they need, but they do it because they have done it all their life and they want to create some employment for those around them. There are other reasons for doing it as well.

The Chancellor has taken that into account and has offset various business costs such as corporation tax and national insurance. The Government are cutting the burden of business rates by some £6.7 billion over the next five years. Provided that that does not affect tax receipts, it is a most welcome move that will help business owners across the country by freeing them of some of the shackles and obstacles that ambitious and striving small and medium-sized enterprises face in their quest to succeed and expand. The national living wage will hopefully not have the impact that SMEs once feared, but only time will tell. We will see how that works.

It is easy to jump to the assumption that there may be a form of discrimination, as the hon. Member for Glasgow Central said. Many of us feel that there might be discrimination, and in some cases there may well be blatant discrimination. It is about getting fairness so that people get a wage that reflects their labour and the sweat on their brow. That is what I am keen to see. There are mortgages or rent to pay, as well as childcare costs, family expenses and possibly pension savings, because now when people get a job they are often entered into a pension scheme almost straight away; indeed, people are encouraged to join pension schemes, by the Government among others. It is also important to have a pound or two set back for a rainy day. The hon. Lady referred to her grandmother. My grandmother and my mother are the same in this regard; they always had a pound or two set back for a rainy day, or the “what if?” category. When something goes wrong, it is good to be prepared for it.

Those are just a few of the costs that people have to factor in after being paid as they get older. Before the national living wage, people on the old-style minimum wage also factored those things in. It is true that there are some 21 to 24-year-olds who have all those expenses and more, which why it is important and welcome that the Low Pay Commission will continue to monitor, evaluate and review pay conditions for younger workers when it makes recommendations for future changes to the national living wage. I am keen to hear the Minister’s response to the debate, particularly on how he sees the Government monitoring, evaluating and reviewing those conditions. If those conditions are not right, what will happen?

The fact that changes to the national living wage are possible shows that there is room for movement. I believe that the Government have created some flexibility for the changing, adaptation and correction of the national living wage; the Minister will confirm whether that is the case or not. I hope that what is on the table now will not be, by any means, the end goal. There have to be some possibilities for movement, to secure better conditions for those on the minimum wage.

It is important that we do not disadvantage anyone financially in all of this activity, but at the same time we cannot disadvantage those who need the wage increase the most and those who are trying to get on in their life. Let us encourage our young people. That is why we are here; that is why we are MPs. We want to encourage our constituents, and our young people in particular. There needs to be careful monitoring of how the national living wage plays out in reality for those in the lower pay brackets, to ensure that no one is being disadvantaged by the structures.

I conclude by saying that close monitoring of the situation should allow for appropriate adjustments to be made. It is imperative that it continues in the future and that all essential amendments are made in a timely fashion, to ensure that the national living wage is the success that the Government, the hon. Member for Halifax and the rest of us here today want it to be.

[Geraint Davies (in the Chair)]

I want to begin calling the Front-Bench spokespersons at 5.20 pm, so I invite Liz McInnes to speak for eight minutes or so.

--- Later in debate ---

[Cat Smith (Lancaster and Fleetwood) (Lab)]

As ever, it is a pleasure to serve under your chairship, Mr Davies. I congratulate my hon. Friend the Member for Halifax (Holly Lynch) on securing this important debate. She absolutely hit the nail on the head when she said this policy is a kick in the teeth for young people. That comment was certainly well received by the Chair.

The Government are sending a worrying message about the generations by pitching them against each other. They are leaving an open goal. They are saying to young workers, “You are not as valuable as older workers.” During the debate we have heard some worrying examples of employers trying to circumvent the fundamental purpose of the increase in the minimum wage by deliberately hiring under-25s. What we have not heard, and I hope the Minister will rectify this, is an indication of a clear strategy from his Government as to how they will ensure that the so-called national living wage is not used by a small number of unscrupulous employers to manage out staff aged 25 or over or to change terms and conditions in a way that would fly in the face of provisions enshrined under the Equality Act.

As part of the shadow Equalities team, I must say that it does not come as a huge surprise that the Government have once again failed to consider equality. We have a Prime Minister who has referred to equality impact assessments as “pointless reports” and “bureaucratic nonsense” and who refuses to conduct a cumulative impact assessment of Government policies on women since 2010. In lieu of that, the Labour Equalities team commissioned research from the House of Commons Library that showed that, as of the Chancellor’s last Budget, 86% of the net savings to the Treasury through tax and benefit changes since 2010 have come out of the pockets of women. The Government appear to talk the talk on equality, but they fail to put in place the fundamental work to ensure that, advertently or otherwise, certain groups in our society do not end up the losers as a result of Government policy.

The Government could have worked in collaboration with key partners such as the Living Wage Foundation or the University of Loughborough to help to pilot the higher rate minimum wage before it went live, but instead it was rushed through so that the Chancellor could score a political hit at the Budget with a shiny new policy. The Government have self-appropriated the term “living wage” to mean their age-restricted minimum wage. That is what it really is, as it is based on median earnings, while the Living Wage Foundation rate is calculated according to the cost of living. That cost of living is the same for young workers as it is for older workers. I have never met a landlord who is willing to rent out a property for less money to someone who is under 25, or a baker who is willing to sell a loaf of bread for less because the person wanting to eat it is under 25. It costs us all the same to live.

We have seen the Government pinch and misappropriate a term to describe a policy pushed through without any proper equality safeguards. Some of the key questions posed during the debate must be answered. What safeguards are in place to ensure that employers cannot manipulate the terms and conditions of their staff to make them worse off as a result of the new higher national minimum wage? What strategy is in place to ensure that workers under 25 are not exploited and that the provisions of the Equality Act are not breached? Will companies be named and shamed? Will there be financial penalties? The Government must put their declarations of being a party of equality into action and demonstrate they are serious about that by answering those basic questions and ensuring that safeguards are in place for young people and all employees in the workplace. Of course, all that could have been thought through much earlier, had the policy not been rushed in the first place.

Young people deserve a better deal than the one they are getting from this Government. What message are the Government sending to young people with wages low, maintenance grants for the poorest students cut and voter registration rules cynically changed to lock young people out of democracy? The number of young people owning their own home is at its lowest level since records began. University tuition fees have trebled. It seems very much that the Government are not on the side of young people, and I fear that the consequences will be severe.

Even the former Tory MP David Willetts, who now heads the independent Resolution Foundation, has said that the Government are creating a “country for older generations”, in which pensioners benefit from constantly rising incomes while the young, their families and children—under-25s can have a family and children—are battling constantly rising prices and falling incomes. He said:

“The social contract is a contract between the generations and in Britain it is being broken.”

The Government must not leave the next generation out in the cold and take them for granted. It seems that the policy of a minimum wage only properly kicking in at 25 has been dreamt up with an idea of young people who perhaps go through higher education and do some internships while living at home with their parents. The reality for many young people is that they are an adult at 18, leaving home and standing on their own two feet. I call on the Government to integrate equality into their thinking right across their policy, so that all groups in society are treated equally.

[Geraint Davies (in the Chair)]

Before I call the Minister, may I make it clear that my somewhat ambiguous utterance in response to one of the comments made by the mover of the motion should not be interpreted as an affirmation? I am completely impartial in my job. Over to the Minister.