Wage boost for low-paid workers: Let’s not forget young people

Blog posts

4 Nov 2021

Cristiana Orlando, Health Foundation Research Fellow

Last week the government announced the annual increases in the National Minimum and National Living Wage, detailed below.

Group	Current rate (£/hr)	2022 rate (£/hour)	Cash increase	% cash increase
NLW (23+)	£8.91	£9.50	59p	6.6%
21-22 year olds	£8.36	£9.18	82p	9.8%
18-20 year olds	£6.56	£6.83	27p	4.1%
16-17 year olds	£4.62	£4.81	19p	4.1%
Apprentices*	£4.30	£4.81	51p	11.9%
* Applies to people registered for apprenticeships and aged under 19 or aged 19 or over and in the first year of their apprenticeship.

The increase to minimum wages come at a time of great transformation for the labour market and for workers across the UK. Job vacancies have reached a twenty-year high as unemployment continues to fall, indicating that the recruitment issues that all industries, and particularly youth-rich sectors such as retail and hospitality, are experiencing are predominantly tied to labour shortages, due to lower immigration resulting from Brexit and lower participation in work of older and younger workers. Furthermore, inflation is forecast to increase above four per cent, the £20 Universal Credit boost has come to an end, National Insurance will increase next April, and energy bills are rising across the country.

Current wage changes are in part a response to challenges in retention, particularly for industries where the minimum wage is more common as the standard rate of pay, and for those wanting to boost apprenticeship uptake to address skills shortages or to strengthen their skills pipeline. Predominately though, they are an attempt to mitigate increases in taxes and costs of living, although expert commentators suggest inflation is likely to counter any positive effect. When focusing on young people it becomes even more uncertain whether the current changes will achieve positive outcomes.

Forthcoming research by IES for the Health Foundation’s Young People Future Health Inquiry found that whilst young people’s priorities for good work are expanding, to include a fulfilling and stimulating job alongside fair and good pay, in reality, they struggle to access work with any of these qualities and are feeling less confident that they’ll ever be able to access decent work. In light of these findings, the minimum wage increase for young people is concerning. In particular, the 4.1 per cent increase for those aged 18-20, as these young people are often no longer ‘dependants’ and, in contrast to many in the younger age group, may not have access support from family. A wage increase which is offset, and even exceeded, by increased outgoings, creates a risk of increased economic insecurity and in-work poverty.

Similarly, the wage for apprentices and for young people aged 16-17 highlights how, despite the increases, these rates are still set at half that of workers aged 23+, a gap which can only partially be justified by lower experience and skills and which does not reflect aspirations of fair and good pay. In particular, young people in the 16 and 17 age group are most vulnerable. Among this group, those who have no recourse to parental support are entitled to benefits for only a limited period, while those from disadvantaged households face exacerbated financial issues as a result of the compound effect of low rates and higher costs of living.  

The traditional argument that justifies the lower wage floor for young workers is that it is necessary to protect employment for this group, as younger workers are ‘at higher risk of being priced out of jobs than older workers’ and so risk exclusion from the labour market. It is difficult to incentivise employers to recruit young people with less experience and lower qualifications and skills as they are reluctant to face the impacts of increased salaries and oncosts to their businesses. Therefore, there is a risk that further increases in minimum wage could lead to employers becoming less willing to recruit young people or apprentices. However, this argument still comes short of justifying the much lower wages – alongside giving young people opportunities to make a start in the world of work, we need to ensure these opportunities are fair, allowing them to live decently and support their wellbeing. 

In the current climate, employers are expressing strong recruitment intentions, and plan to continue the recruitment of new staff and investment in their businesses well into 2022. Labour shortages in youth-rich sectors are high, suggesting there is both the opportunity and incentive for employers to focus on young people. This may work in part towards encouraging employers to offer higher wages, but we cannot rely solely on employers’ good will. This is where we need to see greater government support for young people.

This support could include a youth allowance for 18–24-year-olds as they gain training and skills, including during apprenticeships, forms of non-work income, such as lifelong training accounts and shared wealth programmes, as well as widened eligibility for maintenance grant support for those who are not in education. If we truly want to end low pay and support young people to progress into better quality employment, we need to focus on giving them the chance to pursue better opportunities, and this starts with guaranteeing them a fair and stable income at every stage of their employment journeys. 

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Any views expressed are those of the author and not necessarily those of the Institute as a whole.