Age Discrimination: National Living Wage

Nick Boles Excerpts

Wednesday 8th June 2016 Westminster Hall

[The Minister for Skills (Nick Boles)]

Mr Davies, it is a pleasure to serve under your chairmanship. Whatever utterances you choose to make, I will still enjoy serving under your chairmanship.

I congratulate the hon. Member for Halifax (Holly Lynch) on securing the debate and for setting out her argument as clearly as she did. Hers was one of the more reasonable and well-founded arguments made, but listening even to her speech one would have thought it was not the Labour Government who introduced the idea of age-related minimum wages. Because you are, Mr Davies, like me, of a somewhat older generation than some of the contributors to the debate, you will remember that age-related rates were an integral part of the original National Minimum Wage Act 1998—Labour are right to be proud of that achievement. It was integral that the design should allow rates to vary up to the age of 26. That was done by the Labour Government explicitly to protect young workers in the labour market.

In advancing the argument that the national living wage is somehow an egregious act of discrimination, the Labour party and the hon. Member for Halifax have to accept that they are advancing the argument that the last Labour Government to win an election were a discriminatory Government. Although I am sure that the hon. Members from the Scottish National party would be only too happy to endorse that suggestion, I suspect that the hon. Member for Halifax and the shadow Minister, the hon. Member for Lancaster and Fleetwood (Cat Smith), would not want to go quite that far.

Let me turn to the impact on employment opportunities. Hon. Members seem to forget that there is a real reason why raising legal minimum wages for younger workers too quickly is a risk. When the last Labour Government—the same Labour Government who brought in the minimum wage with age-related bands—finally limped out of office in 2010, unemployment was high in general, but it was particularly high for young people. In the first quarter of 2010, more than 930,000 young people throughout the United Kingdom aged between 16 and 24 were unemployed. The unemployment rate was much higher as a percentage than the rate for people over 24.

I am glad to say that under the coalition Government and the current Government, we have managed to bring unemployment down not only for people over 24, but particularly for people under 24. Now, 307,000 fewer people between the ages of 16 and 24 are unemployed than when the last Labour Government completed their term in office. The risk of unemployment for young people is a sensitive issue because we all know that a protracted period of unemployment can have long-term negative effects on people’s chances as they go through life.

[Cat Smith]

Will the Minister give way?

[Nick Boles]

No. I heard a lot from the hon. Lady.

It is especially important that young people are given early opportunities, which explains the original construction of the national minimum wage. Opposition Members surely recognise that the Low Pay Commission is an independent body charged with advising the Government on what is a responsible increase for the national minimum wage. The commission is charged with looking in particular at what is called—forgive me for the rather unpleasant jargon—the varying bites of minimum wage rises. That refers to the percentage of the median wage for someone of that age that the national minimum wage would represent at that particular level. I am sure everybody can understand, because it is a matter of common sense, that the closer the national minimum wage rate for somebody of that age gets to the median wage, the greater the risk that raising the national minimum wage rate will reduce employment opportunities.

[Mhairi Black]

Will the Minister give way?

[Nick Boles]

I am not going to give way. I listened to the hon. Lady intently and I am trying to cover all the points raised in a longish debate.

It is critical to understand that although the national minimum wage bite—the percentage of the median wage—for 25 to 30-year-olds in 2015, before the national living wage came in, was only 59%, the bite for 21 to 24-year-olds was 78.7%. That is nearly 80% of the median wage, and that is before the substantial increase in the national minimum wage that was recently introduced for people under 25. There was a significant risk that, had the Government introduced the national living wage for everyone, including those under 25, that would have had a substantial and negative effect on those under-25s’ employment opportunities.

The hon. Member for Heywood and Middleton (Liz McInnes) referred to the apprentice minimum wage. It is important to note that in 2015 the apprentice minimum wage rose by 21%. We had inherited from the previous Government, which she supported, an extremely low apprentice national minimum wage. Employers make a substantial investment in apprentices, so we understand that it is important not to choke off their willingness to make that investment by setting legal minimum wages that are too high.

Nevertheless, in Government—at the time, the coalition—we felt that the level of the national minimum wage for apprentices was egregiously and unfairly low. On one of the few occasions when any Government of either, or any, stripe have rejected a recommendation of the Low Pay Commission, we rejected its recommendation for a small increase in the apprentice national minimum wage, and we instead increased it in one year by 21%, the equivalent of a £1,185 pay rise for a full-time apprentice working 40 hours a week. So we acted on the apprentice minimum wage.

We have taken the advice of the Low Pay Commission and also acted on the national minimum wage rates that apply to people under the age of 25. This year, we accepted all of the Low Pay Commission’s recommendations for national minimum wage rates to come into force from this October. The main national minimum wage rate for 21 to 24-year-olds will increase by 25p, or 3.7%—substantially more than inflation or, indeed, average wage growth—to £6.95 per hour. That is the largest single increase in the main rate of the national minimum wage since 2008, in cash terms, with the expectation of the highest level ever in real terms.

Finally, hon. Members from the various Opposition parties may debate how discriminatory legislation brought in by the Labour Government was, but this Government will continue to invest in apprenticeships; to create millions of jobs, in particular for young people; and to increase wages of all working people, under and over the age of 25, through the national minimum wage and the new national living wage.