Business warning over Labour 'tit for tat' minimum wage hike

11 May 2019, 11:27 | Updated: 11 May 2019, 14:35

Businesses have warned that a "tit-for-tat" over the minimum wage could damage jobs after Jeremy Corbyn announced Labour plans to increase pay for young workers.

Mr Corbyn confirmed proposals to extend the party's £10 minimum wage policy to 16 and 17-year-olds during a speech in Birmingham today.

The increase would be "nothing less than life-changing" for young workers and could see them earn an extra £2,500 per year, he said.

Currently, workers under the age of 18 are paid a minimum wage of £4.35 an hour, compared to £8.21 for those over 25.

The government reviews the minimum wage rates each year, under the advice of the independent Low Pay Commission.

Business leaders have accused the Labour leader of using the minimum wage as a "political football" and say the changes could result in a loss of jobs for teenage workers.

A spokesperson for the Federation of Small Businesses said: "We must eradicate low pay. But politicians from all parties should not simply be competing in a tit-for-tat as to who can offer the most people the biggest hikes.

"Our research shows that the average small business has already seen £60,000 of increased annual business costs due to public policy changes since 2011."

They added: "One in seven small employers has a team member aged 16-17, providing crucial opportunities for young people all over the UK - and changes must not lead to them losing their jobs, or hours, to afford an eye-catching political promise."

Mr Corbyn said in his speech that current "youth rates" amount to discrimination and that the work of young people should be "properly valued".

"Equal pay for equal work is hardly a controversial idea, so why are we discriminating against young people?" he said.

"You don't get a discount at the shops for being under 18. But if the person serving you on the other side of the counter is young, they could be on half the wage of their colleagues.

"It's time to end this discrimination. Young people's work should be properly valued, not exploited by employers to cut their wage bill. If they're doing the job, pay them the wage - the real living wage."

But Professor Len Shackleton from the Institute of Economic Affairs think tank said Labour's announcement was part of a "bidding war" with the Tories.

He said politicians preferred to "pluck pay increases out of the air" rather than consulting the Low Pay Commission.

"This would mean doubling the pay of young people who understandably have fewer skills and less experience than older colleagues," he said.

He added the consequences for employment would likely be "grim".

Matthew Percival, head of employment for the Confederation of British Industry (CBI), said the current "youth rates" help to reduce youth unemployment.

He warned: "The minimum wage is an important part of the UK labour market and must not be used as a political football."

However, trade union GMB backed the move, with general secretary Tim Roache saying: "Spot on. Rent, your bus fare, the shopping - none of those things cost less because you're under 18.

"How can it be right that two workers doing the same job earn different wages? It's discrimination, plain and simple.

"This announcement from Labour sets that right."

Labour MP and shadow chief secretary to the Treasury Peter Dowd also defended the policy, saying it aimed to create fairness.

He told BBC Radio 4's Today Programme: "It's not about saying this person has exactly the same experience, it's about a minimum wage.

"It's not a question of saying everybody gets £10... if people want to pay more, that's a matter for them, but we have got to be equitable in this situation.

"At the end of the day, young people are entitled to be paid reasonable wages."