Deputy Prime Minister Angela Rayner is moving forward with plans to raise the minimum wage for 18 – to 20-year-olds, despite warnings from business leaders that the policy could harm youth employment.
Under current rules, workers aged 21 and over are entitled to a minimum wage of £12.21 an hour, while those aged 18 to 20 receive just £10. Rayner has asked the Low Pay Commission (LPC) to explore eliminating this £2 gap, calling the age-based pay bands discriminatory.
The move is part of a broader Labour strategy to win support from younger voters, particularly in light of growing competition from Nigel Farage’s Reform UK, which is currently leading in some polls. Labour has also proposed lowering the voting age to 16 ahead of the next general election a move Rayner says would strengthen democracy.
Wage reform in line with Labour manifesto – Rayner
Rayner said the wage reform will help make low pay a thing of the past and is in line with Labour’s manifesto pledge to give all adults equal minimum wage rights.
Meanwhile, business groups have voiced strong opposition. Critics warn that increasing wages for younger workers could lead to job losses, particularly in sectors like hospitality, which often provide entry-level jobs for young people.
Kate Nicholls, CEO of UK Hospitality, said the proposal risks backfiring, “We understand the aim of fair pay, but you can only have fair pay if you have a job. Right now, those jobs are being taxed out of existence,” she said, referencing the recent £25bn rise in National Insurance (NI) costs for employers.
According to UK Hospitality, the sector has already lost 84,000 jobs in the past six months. Nicholls warned that now is not the time to make big jumps in employment costs, especially in a fragile economic environment.
Jane Gratton of the British Chambers of Commerce (BCC) echoed the concern, noting there are nearly one million young people not in employment, education, or training.
“Employers want to help, but rising employment costs make it difficult. If minimum wages for young workers increase too quickly, it could reduce opportunities for those trying to enter the labour market,” she said.
The backlash also centres on changes to employer National Insurance contributions. Chancellor Rachel Reeves recently lowered the threshold at which employers must start paying NI to £5,000, which has pulled more part-time workers into the tax system. Critics argue that this move has significantly increased costs for businesses and discouraged hiring.
Nicholls argued that while Labour’s original promise to equalize minimum wages was made in a different economic context, recent tax changes have drastically altered the employment landscape.
“All the warning signals in the labour market are flashing red,” she said. “Now is the time for caution, not new costs.”
Despite the opposition, Rayner maintains that the plan will benefit the economy and workers. “This remit is the next milestone in our plan to get more money in working people’s pockets, raise living standards across the UK, and grow the economy,” she said.
The Low Pay Commission will now be tasked with outlining a path to equalize minimum wages across age groups and is expected to report back with recommendations.
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