Recently the Official Opposition, backed by the Green Party, tabled motion M534 calling for all workers at least 18 years old to receive a set living wage exceeding 10 pounds. The motion which was written by Labour Party lily-irl on the surface seems like a good policy but unfortunately fails to understand the rationale behind having a lower wage ceiling for younger workers and adopting the policy advocated by the motion would only harm younger working right now those on the job hunt.
First off the main reason for having a lower minimum wage floor for younger workers is to protect employment. A body of evidence from studies and even from the Low Pay Commission itself shows that higher wage floors for younger workers disproportionately negatively affect employment. Thus the whole point of a lower minimum for younger workers is to ensure we can have the highest possible competitive for young workers without risking their job prospects. If we were to adopt the policy proposed by the motion those directly affected by the increase would be those working part-time. Younger workers are much more likely to be part-time workers compared to older workers, and at the same time, female part-time workers would gain disproportionately be negatively affected. In reality, Labour’s policy would only harm the very people they seek to protect.
Further analysis shows that negative employment effects for younger workers are most adverse in times of recession. So by pushing the wage higher in time of recession when jobs are lost we will younger workers again being adversely impacted at a larger scale than we would have otherwise. Now the defenders of the policy might say such negative effects can be controlled, expected, or only exist in the short term. The issue with that line of reasoning is that the negative impact on younger workers we will see when we push a higher wage will be long-term and perhaps even life-long. The more time young-workers spend out of work which will happen as a result of pushing a higher wage, the larger ripple effects in the form of lower wages decades into their career. One analysis from the University of Bristol shows that this “scarring effect” can have a negative effect of 12 to 15% in form of lower wages even at the age of 42.
But even the backers of the motion fail to the fact that the current needs of workers are being taken into account as time passes. The last major piece of legislation the Commons has passed on the subject is B775 which requires the Low Pay Commission to submit an annual report outlining their recommendations to change the minimum wage for all workers. On top of that, the Secretary of State is required to bring forth proposals in line with what the Low Pay Commission suggests in their report. This has worked well for the country so far and there is no need to try and mess with this system when no apparent shortcomings exist, certainly, the author of the motion has not mentioned any arguments against this system in their speech.
Now we examined the negative effects the proposed policy would have, but the backers of this motion also fail to understand the current job market and its relation to wages. The leader of the opposition in her opening speech proclaims that “The labor of young people is not inherently worth less than that of older people.” The truth of the matter is that is already the reality in the job market. A survey by the Low Pay Commission showed that less than 10% of workers 16-24 were paid at the relevant youth wage rate. In fact, a survey of employers found that rather than use age as a rigid structure for wages, most employers based their pay on a number of factors such as flexibility in hours, competition, and affordability. The fewer than 10% of youth workers who are paid the relevant rate are likely to be paid that that level due to a number of factors like their experience and flexibility rather than being pigeonholed into a lower wage simply due to their age.
Thus in practice, we will see that the motion’s proposed policy would have little positive effect has around 90% of youth workers are paid more than the wage floor currently set. Those who are making at the wage standard will be the ones who see the brunt of the negative effects possibly losing their jobs and having decades of their wage growth ruined. The Leader of Opposition closed her speech by saying “That a Briton who works full-time should not have to work multiple jobs in order to make ends meet.” If we adopt Labour’s plan young workers may soon find themselves without any jobs at all.