Minimum wage freeze proposal could disengage younger workers

Proposals to freeze the national minimum wage (NMW) for younger workers could disengage a generation already badly hit by the recession, employers have warned.

The Chartered Institute of Personnel and Development (CIPD) this week urged the government to “put jobs before pay rises” by curbing any increase to the NMW during 2010 for employees aged 16 to 21. The Department for Business has refused to rule out the idea, stating the Low Pay Commission would consider the recommendation.

However, Helen Giles, HR director at homelessness charity Broadway, warned freezing pay could lead to low staff morale among those who were already likely to be earning the least.

She told Personnel Today: “It’s important to pay people a reasonable wage. If they are disengaged they do not give their best and, ultimately, you are not boosting productivity. Yet again it’s the poorest working people in society who are going to suffer disproportionately.”

Gillian Hibberd, HR director at Buckinghamshire County Council agreed, and said the pay restraint should apply to all ages.

“All our evidence in the public sector is that younger people have been more adversely affected by the recession than other groups. We don’t want to exploit young people.”

Hibberd added she supported any moves to keep more people in employment, but pay freezes of any kind should apply “across the board”.

The latest unemployment figures out last month found there were 932,000 16- to 24-year-olds out of work in the three months to October 2009.

In a document outlining how to tackle youth unemployment, called Platform 2010, the CIPD said: “In a recession it is vital that the preservation and creation of jobs takes priority over pay increases.

“The current downturn is having a far bigger impact on young people than other age groups, and it is important to avoid any change that makes this group less attractive to employers, particularly SMEs [small and medium-sized enterprises].”

NMW rates

There are three levels of national minimum wage. The rates from 1 October 2009 are:

  • £5.80 per hour for workers aged 22 and older

  • a development rate of £4.83 per hour for workers aged 18 to 21 inclusive

  • £3.57 per hour for all workers under the age of 18, who are no longer of compulsory school age.

Source: HM Customs & Revenue.

However, David Coats, associate director of think-tank The Work Foundation, disagreed. “It won’t be enough [to tempt employers to start recruiting again],” he said. “What you need is to get the economy growing again and business investment rising and jobs being created.”

The Chartered Management Institute also said it was “unlikely” a freeze on the NMW would boost employment, but said it would support employers struggling to keep staff.

A Department for Business spokesman said: “The national minimum wage remains one of the most important rights for workers introduced in the past 10 years. As always, the independent Low Pay Commission will consider all the evidence and economic data before making their recommendations on the minimum wage rate – balancing the needs of workers and businesses.”

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