Keep age-based minimum wage to help young people into work, says think tank

Ministers should abandon plans to equalise the minimum wage as the number of young people out of work or education threatens to reach 1 million, a think tank has said.

Last year’s budget saw Rachel Reeves announce plans to scrap lower minimum wage rates for under-21s, saying they were “discriminatory”.

But in a report on Tuesday, the Resolution Foundation urged the Government to change course to stop young people being “priced out of entry into the labour market”.

The warning comes as the think tank published research showing the number of young people not in employment, education or training (Neet) was on track to hit one million for the first time since the financial crisis.

Some 940,000 young people are now classed as Neet, with the figure having risen by 195,000 in the past two years.

Much of that increase has been driven by sickness and disability, which has doubled over the past 20 years and now accounts for more than one in four Neets.

But unemployment remains the single biggest reason for young people being Neet, affecting 47% of men and 32% of women in the category.

The Resolution Foundation also warned that young people who are Neet are “increasingly detached” from the workplace, with 60% having never worked compared to 42% in 2005.

Louise Murphy, senior economist at the Resolution Foundation, said: “The Government should redouble efforts to reduce the number of Neets by making it easier for young people to return to education if they drop out, or to get their first experience of work.

“Otherwise, we risk a cohort of young people slipping through the cracks into a lifetime of lower living standards.”

The think tank’s research also shows that, despite common perceptions, almost half of all Neets do not engage with the benefits system at all.

And while some have warned that AI has depressed the graduate labour market, it is those with low qualifications that are much more likely to be Neet.

As well as halting efforts to equalise the minimum wage, the Resolution Foundation called for changes to the work capability assessment to help young people get back into work, and a national “front door” to help them “re-engage with education and training”.

Meanwhile, a survey of employers by the Recruitment and Employment Confederation found businesses calling for more Government spending aimed at getting young people into work.

This included financial incentives such as wage subsidies or tax credits for businesses, funded work trials and money to help with non-work barriers such as transport or childcare.

Kate Shoesmith, deputy chief executive of the REC, said; “Uncertainty in the economy and high unemployment costs are holding back hiring – issues the Chancellor can absolutely address in next month’s Budget.”

A Government spokesperson said: “Every young person should have the chance to thrive. That’s why we’ve put in place the September guarantee, requiring local authorities to ensure all 16 and 17-year-olds receive an offer of a suitable place in education or training by the end of September each year.

“As part of our youth guarantee, we’re also testing innovative new approaches through our trailblazer programmes, which have just received funding for another year.

“This will ensure that every young person has the opportunity to earn or learn, so no one is left behind under our plan for change.”

The spokesperson added: “By strengthening the national living and minimum wage for 3 million workers across all age bands, we aim to support business growth though reduced staff turnover and by helping to achieve higher productivity.”