https://minimumwage.blog.gov.uk/2015/10/13/the-minimum-wage-for-younger-workers-why-is-the-level-different/

The minimum wage for younger workers - why is the level different?

Why should younger workers get paid less than older workers for doing a similar job?

This is a recurrent question faced by the Low Pay Commission in relation to the minimum wage, which has lower rates for 16-17 year old workers and 18-20 year old workers than those aged 21 and over. It is a question about to become more pressing still with the introduction of the National Living Wage for workers aged 25 and over, which means those aged 21-24 may effectively become a new age band.

The LPC’s goal has up until now been to recommend rates of the minimum wage that are as a high as possible, without damaging employment – whatever the age of the workers. The existing age structure of the minimum wage reflects evidence that younger workers are more at risk of being priced out of jobs than older workers, with worse consequences if they end up unemployed.

Young construction workers
Young people exploring careers in construction

Research has shown that youth unemployment has scarring effects, with a wage penalty for early spells out the labour market apparent in reduced earnings into people’s 40s.

It also reflects a more subtle consideration. Education plays a critical role in enabling higher earnings and job security. The minimum wage has been designed to address exploitation in work, without encouraging young people to enter the labour market full-time who might otherwise stay at school, or college.

These two points come together in relation to long-term trends in the youth labour market, where higher proportions of 16-20s have been staying in education year on year since the 1990s – such that those looking for a job straight away are part of a smaller pool, facing competition from increasingly well-qualified older workers.

The evidence supporting a lower wage floor for younger people includes a tendency to higher youth unemployment in countries which do not vary the rate.

It also reflects the reality that average wages of younger workers are sharply lower than those of older workers, perhaps a consequence of lower average experience, higher training costs or a weaker bargaining position. Younger workers disproportionately work in retail, hospitality and other low-paying sectors. Typical hourly earnings for 16-17 year olds were £5.15 in 2014 and £6.53 for 18-20 year olds (both excluding apprentices). This compares to £11.74 for workers aged 21 and over.

One leading indicator of the impact of the minimum wage tracked by the LPC is its value relative to average earnings – the so-called ‘bite’. The Government has set a target for the NLW to reach 60 percent of median hourly earnings for workers aged 25 and over by 2020 – a figure that will give the UK one of the highest value minimum wages in the world. But the bite for younger workers is already far above this level. It was 72 per cent in 2014 for 16-17 year olds, and 76 per cent for 18-20 year olds. (We have excluded apprentices: the figures are slightly higher including them). These figures are based on the lower age rates. Were the adult rate to apply, the bite would already be 100 per cent for 16-17s and 97 per cent for 18-20s.

A final piece of evidence supporting a lower wage floor is research on the LPC’s record. From 1999-2011, growth in the value of the minimum wage outpaced growth in median earnings for 16-17 years old and 18-20s, especially in the period 2007-2011. But from 2011-2014 we reluctantly recommended lower increases in the minimum wage in light of evidence of high unemployment and falling real wages following the recession. Initial econometric research by London Economics – inevitably tentative in its conclusions but nonetheless suggestive – has found that the slowdown and freeze in the youth rates succeeded in supporting employment of younger workers. It found for example that 16-20 year olds were 2.5 percentage points more likely to be employed compared with individuals aged 21-22 as a result of the slowdown in the youth rates.

Younger workers

None of this means that the LPC is relaxed about the pay of younger workers. Quite the opposite – the high bites of the youth rates testifies to our concern to push the level as far as the market can bear and we have previously committed to larger increases for younger workers than for adults when economic circumstances permit (ie, a period of catch-up). But younger workers are at the sharp end of the minimum wage: the group most at risk from any negative effects, where the consequences if things go wrong are very serious.

It is also important to recognise that the availability of lower rates of the minimum wage for younger workers does not mean that employers have to use them. The minimum wage is a floor, not a ceiling.  Many firms have chosen not to vary pay rates by age including most of the big retailers. Indeed, around one in ten young workers were paid at their respective youth rate in 2014, while three in ten 16-17 year olds, and seven in ten 20 year olds, were paid above the adult rate.

National Living Wage

All of this has new salience in light of the introduction of the National Living Wage which will require the LPC to recommend to government the level of the adult rate, in future applicable to workers aged 21-24 only.

Questions we are currently mulling – and which will be informed by the results of our recent consultation – include: on what basis we recommend pay levels for 21-24 year olds? How should the future adult rate be affected by a higher NLW rate for those aged 25 and above?

On the one hand, those aged 21-24 have much lower pay and higher unemployment than workers aged 25 and above, as well as the highest bite of any age group – at 79 per cent. On the other hand, older workers are now set to have a higher wage floor, meaning younger workers could have higher pay than they otherwise would and still be relatively attractive to employ. A number of larger firms have said they are unlikely to differentiate pay by age for workers aged 21-24 – partly on legal, and employment relations grounds, but also because they are uncomfortable with treating people in their early 20s differently from those in their mid-20s.

Still time to have your say

The LPC will be working its way through these, and other arguments, in the coming weeks and months. If you would like to have your say, our written consultation is now closed, but we are currently undertaking a programme of visits around the country to meet workers and employers, as well as meetings with interested stakeholders one-to-one. We would love to hear from you.

Current and future wage rates

Current NMW structure Current Rate Future NMW (from April 2016)
Adult rate (21+) £6.70 National Living Wage (25+) £7.20
Adult rate (21-24) £6.70
Youth Development Rate (18-20) £5.30
16-17 Year Old Rate £3.87
Apprentice Rate* £3.30

*Applicable in year 1 for all apprentices; the age appropriate rates then apply for workers 19+.

20 comments

  1. Alex

    Raise the minimum wage for 18+ year olds were adults with lives its unfair were paid less. Im 20 this year and earn 5.53 I live alone pay tax yet I am paid less for no reason other than law makers thinking I should live at home!

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  2. Matthew Naylor

    Age discrimination!

    I am 22 with more qualifications and experience then others but get paid less!

    The name national living wage ?

    Does this mean those under 25 should not be allowed to live? And just struggle?

    What a joke !!!

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  3. George

    Well it is a total cop out. The new policies on education and certain funding options cut. The education argument is null and void for those who are from poorer backgrounds. Therefore where i stay. This is now an opportunity for greedy employers to exploit. No other reason than that. So over 25. Scrapheap. The worst is when same day. you get an interview. One so far this past year. And not usually a reply. Experience not even an issue, but despite it usually being of at least some importance. The interview. Haha...was told i would hear in 3 days. I tried to phone, but call not available for person. Then a letter, post-marked, Letter they should be made to provide data, of ratio of what age bracket passed interview. IT was not advertised as age restricted job?? dated, well after it was posted???So, it was ok to waste my time. Deliberately, and with intention. I see that as theft. I am on the scrapheap, despite..education..no easier time on the benefit than being a younger unemployed person. I have children. I am on verge of breakdown. These companies, are using this to their advantage. How do you report abuses. And such things as this.

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  4. Gareth

    18 year olds should get equal pay!

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  5. Ryan Towell

    There is no way that the government can justify paying under 21's up to nearly £3 less than somebody who older for doing the same job. They might think that all under 21's are in education but that is simply not the case. As an independent 20 year old, the wage I that get means that I get less expendable income after I have paid rent and bills. It's extremely disheartening.

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  6. Ahane

    I'm 17 sweat out just as much as my 21 year old brother in the same job doing the same thing and still get paid less. This does not seem right to me !!

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  7. Katie

    I don't believe that younger people should be paid less than older people.
    I'm 18 and I do the exact same job as those aged 25+. Why should I be paid less? We all have lives to live. Age should not matter.
    Some people my age have houses, children and other responsibilities which means they require monday. We should not be discriminated against because of our age.

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  8. George, 34

    UK is an old fashioned state where discrimination still rules.

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  9. sarah

    This is another shameful example of the UK government putting the burden of austerity on young people. 'Subtle considerations' are not justifiable reasons for explicit discrimination against a weak social group. Under 25s often want to start their own family and have every right to do so but policies like this are making it impossible to live independently. If they are not counted as a fully-fledged citizens then they should not be taxed as such.

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  10. Mr Wage Wai Tu Lo

    It's about time the Government sorted this mess out once and for all.

    Two Young Adults, 17 and 18 both on different pay scales yet their circumstances are identical.
    Both have the same job responsibilities in the same company, both live at home with their Parents, Both in full time education, both single yet a difference of £1.55 approx in pay.

    Isn't it about time Prime Minister that you got to grips with this Unfair pay scale? If you want the backing of the people then do something for the people instead of Ripping them off!

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  11. leanne

    shocking that young people are exploited
    we do exactly the same work yet our age meens we are paided up to 5 pounds less this is totally unjust?

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  12. Mo

    Tell me why a 16 year old is being paid so much less than someone over 25 for the EXACT same job? At my job I was doing far more work than an older worker and yet being paid far less. Why? I still have to pay to survive. They seem to assume that those under 25 have parents or relatives to mooch off.

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  13. Sarah

    I'm 26 so this doesn't impact me but I still feel strongly that everybody, regardless of ave, deserves to be paid at least the minimum wage. Young(er) people still have bills and food to buy. Stop the exploitation!

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  14. Angie

    I'm 20 and have a young child to support but would still earn £5.55 if I went back to work. Me and my partner are struggling to save for a mortgage because it's pointless going back to work for under £6 an hour when childcare will cost me double what I'm earning. It's outrageous and an insult when we are doing exactly the same as someone who is just a year older!
    Not all 18-21 year olds live with parents. We have responsibilities and commitments too. In fact, I know a few 21+ year olds that still live with parents, no children and go out drinking most nights and have no bills to pay. It's totally wrong.

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  15. Elle

    In the 70s Women fought for parity of pay with their male colleagues who were doing exactly the same job arguing that it was sex discrimination to pay them less than men. They won. It seems to me that to pay young people less than older colleagues doing exactly the same job is blatant ageism, which I though was illegal. If Businesses cannot survive without slave labor perhaps they should not be operating at all. Young people must continue to make peaceful protest with regard to this injustice until their voices are heard.

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  16. Dave

    this is outrageous!!!!! Rase the wage

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  17. Victoria

    I can perhaps see the advantage for under 20s that lack experience but over that is a joke.

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  18. Rebecca

    My son is 20 this year. He works in hospitality here on the Isle of Wight and earns just £5.30 an hour. He has a flat to run and a fiance who has just given birth to their first child. He pays the same tax as older members of staff, works longer hours (because he is cheaper!) and can't claim Working Tax Credits. He is more experienced than some of his older team workers and has even had to give them on job training! He was told he had to work Christmas Day for £5.30 an hour or he would lose his job!

    In this day and age of anti-discrimination, this is the worst case of discrimination I have ever heard of because it is sanctioned by the government themselves!!!!! Shocking when you legally cannot discriminate against anyone and are encouraged to treat people as individuals and with respect (Equality Act 2010).

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  19. callum

    i think this is ridiculous! lowering younger peoples wages to increase the likely hood of them working to go to collage or uni is bu**sh*t! what if young people dont want to start working later and they want or need to start working now!? this is a high legal form of age discrimination and inequality, im 19 getting paid £6.08 on a 16 hour contract while im Privately renting living with my partner not being able to help much and your excuse for me not getting paid enough is because you want to keep me in collage?! im better than the older staff that have been there for 9 years! ffs life is sh*t and your not helping. fix up lifes expensive for those starting off. governments a joke, email me if i have it wrong...

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  20. Ashley

    "Why should younger workers get paid less than older workers for doing a similar job?"

    Correction: The same job, don't sugar coat it. Actually what about people like me? I'm a supervisor in a super market but because I'm 20 I still get paid less than the people I supervise. Youth development rate, that's just an insult, why does the 21 year old get 25% more than I do and the 25 year old gets 30% more for a less qualified job. My wage is £4,000 per annum less than my colleagues who do the same hours, who do a less qualified job, are entitled to a workplace pension and more government benefits. That £4000 is more than my years share of rent and utilities and that figure is only about to get worse come this April when the pay gap for me reaches £4500 so that's a council tax sized lump there too. So I live on what "an adult" has left over for food and what ever they fancy...

    "seven in ten 20 year olds, were paid above the adult rate."

    I see why now it's because I'm not an adult and I should be spending the next 5 years of my life sleeping on my mum's sofa?

    You look up equal pay and all you see is females get 90% of what men earn on average. What about the adults that get 70% of what of what the older adults get paid.

    It's discrimination!

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