Youth Rates: The National Minimum Wage for Younger Workers

Nathan Hudson-Sharp, Chiara Manzoni and Johnny Runge

National Institute of Economic and Social Research (NIESR) Topical Briefings, 2019, issue 4

Abstract: When advising government, the LPC's main objective in setting the Youth Rates is: “to ensure that the NMW's structure and the level of the youth rates enables young people to make a successful transition from education to employment, and to access roles which provide them with the work experience valued by employers.” LPC's advice reflects research that suggests younger workers typically occupy a more vulnerable position in the labour market, and their employment is at greater risk than older workers to changes in the minimum wage. 'Youth Rates' have therefore been thought of as protecting youth jobs, by avoiding risks such as employers recruiting older and often more experienced workers at no additional wage costs. Lower rates of pay are also thought of as promoting the long-term labour market position of young workers by ensuring they are not encouraged to leave education or training too early, and by encouraging employers to offer younger workers training on the job in lieu of pay to acquire skills and experience. Lower rates also reflect evidence that younger workers are more likely to be unemployed, and that spells of unemployment can be more damaging for young workers with long-term ‘scarring effects' on their future earning and employment. One of the main concerns about setting the NMW is that a high minimum wage could damage job growth and increase unemployment. The LPC therefore try to set the minimum wage at a level that does not reduce jobs, but at the same time high enough to prevent worker exploitation.

Date: 2019-11
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