April 03, 2014
The National Minimum Wage (NMW) should be abolished for apprentices and under 18-year-olds in order to reduce youth unemployment, the Institute of Economic Affairs (IEA) has said.
That's the recommendation of the IEA's new report, The Minimum Wage: silver bullet or poisoned chalice?. It suggests that increases in the National Minimum Wage result in more zero-hours contracts, more unpaid internships, choosier employers and increased black market employment. And plans for a "living wage", it says, would price more young people out of a difficult jobs market.
The report also concludes that the current national framework is too blunt an instrument, given differences in average earnings across the UK. To tackle low-wage poverty, the IEA is calling for reform of the tax credit system.
The report makes a number of recommendations, including a proposal that the minimum wage is abolished for under-18s and apprentices, giving young people better access to in-work experience. It also suggests suspending the NMW for under-24 year-olds who have been out of work for a year or more in order to encourage employers to take on more young people.
Mark Littlewood, director general at the IEA, said: "For too long the government has been preoccupied with the idea of guaranteeing a 'living wage' without looking at the facts. Youth unemployment is still precariously high and the best way to combat this is to make young, unskilled workers more attractive to employers. An ever-increasing minimum wage creates a wealth of unintended consequences and the result is that among the group of people the measure aims to help, very few actually feel any benefit at all."