Many of the university students graduating in the coming months are likely to feel short-changed when they start looking for jobs. Until they reach their 25th birthdays, and regardless of their qualifications, the minimum hourly rate they can be paid is £7.05 gross. That is 45p an hour less than the absolute minimum payable to someone 25-years-old and over, for the same job. The rates are even lower for those under 21 and under 18.
This is because the law allows age discrimination in minimum wages – but only for the low-paid. The exemption doesn’t apply if the person is earning over the National Living Wage (NLW) – introduced by the Conservatives in 2016. Yet, as of April 2017, 8.5% of the workforce is on one of the minimum rates.
A National Minimum Wage was introduced in 1998 by the Labour government to fulfil a manifesto pledge to tackle low pay and poverty. From the outset, distinctions were made for rates for apprentices, but the adult rate applied to those over 21 and not in full-time education.
When, in the face of a mounting campaign for a higher living wage, the Conservative government introduced the NLW in 2016, it decided to exclude under 25-year-olds and create a new age band for 21-24 year olds. Those over 25 saw an increase of 4.3% in the minimum wage while under 25s saw 3.2%. The NLW is a commitment to phase in a significant wage increase for those above 25 with a target of £9 an hour by 2020.
Where the parties stand
Three of the main parties have picked up the issue in their election campaigning. The Labour Party manifesto promises to raise the minimum wage to the level of the NLW for all workers over 18. The Green Party will proceed by scrapping age-related wage bands and raising the national minimum wage to living wage levels for all. The Scottish National Party manifesto is the most far-reaching and supports the Real Living Wage of £8.45 for all adults over 18.
The Liberal Democrats manifesto vows to promote the adoption of the living wage but is silent on the exclusion of under-25s from it. The Conservatives have pledged to increase the NLW to 60% of median earnings by 2020 and thereafter by the rate of median earnings – but there is no proposal to include under-25s. The UKIP Manifesto says it will enforce the living and national wages and increase the number of minimum wage inspectors. It says nothing about the under-25 exclusion.
Is the discrimination justified?
Although it has not yet faced a legal challenge, the under-25 exclusion could yet be challenged in court for unjustified age discrimination. An EU equality directive on this issue is still applicable while the UK remains part of the EU. It allows countries to legislate for age discrimination, but only where the discrimination fulfils a legitimate aim. Justification of discrimination must be specific and based on evidence.
In his July 2015 budget speech, the then-chancellor, George Osborne, gave no reason for the NLW applying only to working people over 25. A government evidence document published that autumn was more specific and justified excluding workers under 25 in “order to maximise the opportunities for younger workers to gain … experience”.
The government receives annual advice about pay from the Low Pay Commission which considers evidence from the labour market. In its autumn 2016 report, the commission found that the NLW had started to have an inflationary effect on median pay but that this effect was less pronounced for the under-25s. While noting an increase in employment for the 21 to 25 age group, it said that more younger workers were being hired. It didn’t explicitly say so, but it’s possible that this is because they were cheaper for employers to hire.
Since the Brexit vote, there are already reports of fewer takers for low-pay jobs that had previously been sought by young EU citizens. If this continues, it’s possible that a less crowded labour market may actually remove one of the arguments in favour of a lower minimum rate – because there will be fewer young workers competing for jobs, though this would depend in turn on the state of the economy.
Labour market policy generally and justifications for discrimination specifically must be constantly reviewed in light of changing social conditions. The exclusion does not look cogent and the evidence underpinning it could well change. In Europe, only Greece and the UK draw the line at 25.
Since the election was called, 1.05m 18- to 24-year-olds have registered to vote. Equal access to the NLW for those among them in low pay or risking it may not be the only issue they consider at the ballot box on June 8, but it may be one of them.