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National Living Wage: Under-25s

Volume 640: debated on Thursday 3 May 2018

Motion made, and Question proposed, That this House do now adjourn.—(Wendy Morton.)

I hope that you have made yourself comfortable for my four-hour speech, Madam Deputy Speaker, as I intend to take us up to half past 5. I can see some people panicking. They should not worry—I will not do that.

I am very grateful for the opportunity to raise the UK Government’s disappointing decision to exclude under-25s from the national living wage. Before I do so, however, it is important at the outset to make a clear distinction between the UK Government’s so-called living wage and the real living wage. The fact is that the UK Government’s living wage is a con trick, and at just £7.83 an hour, their con trick living wage falls desperately short of the real living wage, as set by the Living Wage Foundation.

The Living Wage Foundation takes into account the cost of living and other factors and recommends that living wage employers pay a minimum of £8.75 an hour, or, for London, £10.20 an hour—so straightaway we have an issue whereby the Government’s so-called living wage is not actually a living wage. However, the real issue I want to press the Minister on relates to the deliberate and discriminatory decision to exclude under-25s from being paid the national living wage.

Does my hon. Friend not find it ironic that if there were local elections in Scotland today, someone aged 16 could vote in them, yet they would not qualify for the adult rate of the national minimum wage?

Indeed. My hon. Friend tempts me down the route of talking about taxation without representation. Perhaps we can return to that in the next four hours, but I shall press on with my speech for the time being.

At the moment under UK law, the only safety net that someone under 25 has is the national minimum wage. That means that if they are aged between 21 and 24, they can be paid just £7.30 an hour. Someone aged between 18 and 20 can be paid just £5.90 an hour, and someone aged under 18 can be paid just £4.20 an hour. Even worse, an apprentice can earn as little as just £3.70 an hour. I will return to the issue of apprenticeships later.

The Government and no doubt the Minister will be at great pains to tell us today that the reason wages are lower for under-25s is that they want more jobs to be created. They say that lower wages reduce youth unemployment, but I would argue that the economic evidence does not back that up. When we drill down into the research, we see that only two countries in the European Union have separate minimum rates of pay for over-25s. One, of course, is the United Kingdom, and the other is Greece, where youth unemployment is at 40%.

The Government like to say that the UK has hit record levels of employment and that they are doing good work to tackle youth unemployment. However, I want to convince the Minister today that the UK Government should take a different path and instead follow the lead of the Scottish National party Scottish Government. Our fair work agenda is not just warm words; it is concrete action to lift people out of poverty and into prosperity.

First, the SNP Scottish Government are a living wage employer and pay their staff a real living wage of at least £8.75 per hour. Secondly, we have the Scottish business pledge, which has attracted support from hundreds of companies that have signed up to nine key principles, which include paying a real living wage, not using zero-hour contracts and investing in youth. I want to focus particularly on that third principle of investing in youth.

At 16 years old, I decided to leave high school and begin my working life. I never went to college or university but instead undertook an apprenticeship with Glasgow City Council. Ten years on from completing that apprenticeship, I am immensely proud to have been elected as an MP, providing a voice again for my home community. However, one thing that I am not willing to do is come here and simply pull the ladder up behind me. Pay equality matters to me, not just because I am a young MP and a former apprentice, but because I believe, with every fibre of my being, that work is the best route out of poverty. The Prime Minister has said the same herself. She says that she wants to build a country that works for everyone. I presume that by “everyone”, she means people under the age of 25. That is why the Government must take action urgently to ensure that people are paid the real national living wage, regardless of their age.

The UK’s Equality Act 2010 rightly provides for a number of key protected characteristics. It prohibits discrimination on the grounds of gender, race, sexual orientation or disability. How, therefore, can we be in this ludicrous position in which people under 25 are paid less simply for being a particular age? We would not say that someone should be paid less because that person was a woman; we would not say someone should be paid less because that person was black; we would not say that someone should be paid less because that person was gay; and we certainly would not say that someone should be paid less because that person was disabled. The UK Government, however, operates a system under which employers are actively encouraged to pay under-25s less because they are younger.

Is it not another economic fact that those under 25 often face the same costs as those over 25—for example, rent or other housing costs, food costs, utility bills and the like?

My hon. Friend has made a powerful and valid point, which I shall come to later.

I hope very much that when the Minister comes to the Dispatch Box, he will not trot out the usual lines, which fall apart when subjected to any scrutiny. Let me deal with one or two of them now. For example, Ministers tell us that younger workers have less experience and should therefore receive less pay. Unfortunately, younger workers do not get a discount on their shopping, fuel or rent when it comes to paying their bills. One area in which young people do qualify for help is housing benefit, but only after a recent screeching U-turn from the Government on their abhorrent policy of excluding 18 to 21 year-olds.

The discriminatory exclusion of under-25s from the national living wage takes no account of how people actually live. For example, by the time I was 25—which was actually not that long ago—I had already been married for three years. I owned a house, and I was a father. I urge Ministers to look at the actual data rather than rehashing old arguments, and to consider the economic case for including under-25s in the national living wage.

The point that my hon. Friend is making about experience is very important. When I was 18 I started work in a pub on the same day as someone who was 25. Neither of us had worked in a pub before, so we had exactly the same level of experience, but the 25-year-old was eligible for the 25–year-old’s minimum wage, while I was paid the 18-year-old’s minimum wage. Does my hon. Friend agree that that was just unfair?

Absolutely. That is what drives the Scottish National party’s fair work agenda. It is about fairness, and about lifting people out of poverty. I thank my hon. Friend for her powerful intervention.

The example given by my hon. Friend the Member for Aberdeen North (Kirsty Blackman) was indeed powerful. Is this not another powerful example? If a 17-year-old is working in a fast-food restaurant flipping hamburgers next to someone who is 37 and doing the same job, there is a massive disparity between their wage rates.

My hon. Friend is absolutely right. What he has said takes us back to the central point that a fair day’s work should result in a fair day’s pay.

If the Minister looks at the data, he will see that 2.5 million young people do not live with their parents. That is 2.5 million young people paying for shopping, rent and utilities. Statistics from the Office for National Statistics show that approximately 20% of mothers are under the age of 25. The discriminatory exclusion from the national living wage means that they must get by on poverty pay.

The current national minimum wage—and we should bear in mind that that legislation was passed in the last century—is not only a clear example of direct age discrimination, but an example of discrimination based on class. It flies in the face of the very concept of social mobility. How can a 22 year-old first-year apprentice on a miserable £3.70 an hour be socially mobile? That is what the law currently allows, as is stated on the UK Government’s website. That is what an employer who is thinking about employing an apprentice is encouraged to do.

A recent report by KPMG showed that one in five people are struggling to escape from low pay. For example, one in four women earns less than the real living wage. Put simply, that means skipping meals, living in debt and using payday loans just to get by. The fact is that there is a solid evidence base out there that makes the case for equal pay for under-25s.

Does my hon. Friend agree that there could be a positive impact on productivity? If people are having to work extra jobs and cannot afford to eat, they will be less productive, but if they were paid a living wage, they would do better work for their employers as a result.

My hon. Friend makes a powerful point. If an employer pays someone under 25 the real living wage, that sends a message of real encouragement to the employee; there is clearly a productivity point here.

I commend and thank the Young Women’s Trust, which produced an excellent report last year entitled “Paid Less, Worth Less?” I have placed a copy of the report in the Library of the House this afternoon, and its testimonies make pretty stark reading. I will share just one today. It comes from Katie, a 19-year-old from Newcastle:

“I was a customer service apprentice in a small shop—only me, another apprentice and my manager worked there.

I had to do a lot—serve customers on the till, clean the store, display the products, update the online store, pack and post online orders and more.

I was paid £2.73 per hour, which went up to £3.30. I got paid on a Friday at the end of the month. The next week I was skint.

I remember one day I had 40p for dinner, so I got one doughnut from M&S.

My manager noticed and offered to buy me a McDonalds.

I felt so stupid.

A quarter of my monthly income was spent on bus fare getting to and from work. It was a struggle.”

It is sometimes easier for us in this House to focus on statistics rather than people, but Katie’s story succinctly and eloquently outlines the pay inequality that still exists in the UK in 2018.

Katie is not the only one. Only last week, following an oral question from me in this House, the Chancellor wrote to inform me that there are approximately 22,000 apprentices in the UK being paid just £3.70 an hour. Surely no self-respecting Minister thinks £3.70 is a decent hourly rate; I do not think any of us would be happy to turn up here and get paid just £3.70 an hour.

There are also particular sectors in the employment market where deliberate wage depression is a major issue and could have a major impact on the sustainability of business, particularly when free movement of people is restricted post Brexit. These sectors include retail and hospitality, which are often largely staffed by young people.

I would hope that the Minister would distance himself from the comments made by the Secretary of State for Digital, Culture, Media & Sport who back in January 2016 said younger workers would not get a pay rise because they are “not as productive” as older workers. It would take a particularly brave Minister to repeat that, especially on an election day.

Finally, the Minister might be worried about how businesses would react to under-25s being included in the national living wage. However, let me assure him that there is clear polling evidence from YouGov, on a sample of some 4,000 HR managers; they think that young people should be paid the same as older people for work. Some 79%—that is four in five—of employers think there should be equal pay regardless of age, as do 77% of small and medium-sized organisations. Some 80% of employers also said that young people make a bigger, or the same, contribution as older workers, and that on the whole younger workers came with a fresh perspective and injected some energy.

Most employers when asked said they would not cut back on hiring young people if the national living wage was extended to under-25s. Indeed, the New Policy Institute found in a report commissioned by Unison on the topic that, historically, raising wages for people under the age of 21 in the UK has not harmed their employment outcomes. So the evidence is clear and so is my message to the Government today.

Does my hon. Friend agree that the policy is a false economy, too, because if those under 25 were given the real national minimum wage rate, that would boost the economy as it would boost the spending power of those aged under 25?

My hon. Friend is right: giving under-25s that spending power would boost the economy and could help kick-start the economy.

As an employer, I have taken on a number of young people on internships, and I have paid the real living wage, not the Government’s pretend living wage, regardless of their age. I found that they made a very valuable contribution to my office and a real positive difference. Has my hon. Friend got experience of doing similar?

I am grateful to my hon. Friend for leading me down that particular path, which I had not quite thought of. She will be aware, as will my hon. Friend the Member for Glasgow South West (Chris Stephens), that I am going through the process of recruiting for the first ever John Wheatley intern—a young person will come to work in my office. I believe passionately that if we are to get more people into politics, we need to open up that process; it cannot just be the same people taking on political interns. When I started the process of advertising for that internship, I was conscious of the need to advertise it at the real national living wage. Last week, I set up seven or eight interviews, and I am sorry to have to tell the House that I got a phone call this afternoon to inform me that one of the young guys I was due to interview had sadly passed away. I want to take this opportunity to pay tribute to Scott, who is no longer with us.

The evidence is clear for equalising the national minimum wage to include the under-25s, and my message to the Government is also clear: if we want to build a country that works for everyone, we need to end this discriminatory pay inequality. The Government need to pay a real national living wage, and they need to pay it to the under-25s too.

It is a great honour and privilege to respond to this debate, and I congratulate the hon. Member for Glasgow East (David Linden) on securing it. I am pleased to be able to contribute to it as the Minister responsible for the national minimum wage and for the national living wage, of which the Government are hugely proud. There have been age-specific minimum wage rates in one form or another since the national minimum wage was introduced by the Labour Government in 1999, and lower pay rates have always been in place for younger workers because the priority for them is to secure work and gain experience. A higher minimum wage for young people could adversely affect employment levels for that group by dissuading employers from taking on less experienced workers.

It was remarkable that, in the 17 or so minutes for which the hon. Gentleman spoke on this issue, he failed to mention the facts—the actual unemployment rates among young people—even once, so let me bring them to his attention. Unemployment is higher among young workers than among older workers. Specifically, between December last year and February 2018, unemployment among those aged 25 and over was at a record low of 3%, yet among 18 to 24-year-olds the unemployment rate was 10.3%, and more than one in four 16 and 17-year-olds are unemployed. The hon. Gentleman says that we should focus on individuals rather than on statistics, but those statistics clearly show the impact that his policy would have on those young people’s ability to get into work.

The Minister highlights the UK Government’s appalling record on youth employment. Can he explain to me—we have asked this question repeatedly—why the Conservative Government took the decision to introduce an additional age tier to the national minimum wage rates, and why the age of 25 was picked?

The Government have always listened to the expert advice. In particular, we listen to the Low Pay Commission, which is made up of employers, academics and experts in the field and trade union representatives and is specifically devoted to protecting the rights of workers, including young workers. It is the commission that says that this policy is right and that sets the lower rates after considering all the facts.

The Minister has laid the stats before us, saying that the unemployment rate is 3% for over-25s and over 10% for under-25s. Does he not agree that that shows that the system he is presiding over is broken, and that something needs to be done to fix it?

No, I think it shows two things. It shows that the hon. Lady does not understand the labour market, and it shows the difficulties that young people have in demonstrating that they have the necessary skills, in gaining the necessary experience and in convincing employers to take a risk in taking them on and giving them an opportunity.

The hon. Member for Glasgow South West talked about our record in relation to unemployment. I will just remind the House that we are seeing record levels of employment in this country, and that unemployment rates are lower than we have seen for 40 years, so I will take no lessons from him.

I think I have given way quite enough, so I will make a little progress. Forgive me, but I am sure that Members will have an opportunity to come in shortly.

Academic evidence shows that the youth labour market is much more sensitive to economic shocks than the labour market in general, and that young people can be exposed to longer-term scarring effects from prolonged spells of worklessness than others. As I said, the independent Low Pay Commission backs up that research. Its 2015 report, which I urge the hon. Member for Glasgow East to educate himself with, cites New Zealand research that found a 3% to 6% fall in the employment rate for 16 to 17-year-olds two years after a 28% increase in the real value of their minimum wage. The hon. Gentleman talked about fairness, but there is nothing fair about making it harder for young people to get on the jobs ladder.

The Minister will remember that I referred to Katie, a young girl who was struggling to get the bus fare to go to work. How does that tie in with what he says? She is struggling to get to work; she does not have the pay to get to her job. Is that part of the reason why young people cannot get into work?

I recognise the hon. Gentleman’s point, but it would be even more difficult for Katie were she not to have a job. That opportunity, that experience, that foot in the labour market is hugely important. The hon. Gentleman would deny Katie the opportunity to get vital work experience and make her way in the jobs market.

We are rightly more cautious about young people when setting the pay floor, and a lower minimum wage for younger workers is in keeping with international comparators. The hon. Gentleman referred to two countries, but let me clarify something and educate him a bit. Just under two thirds of OECD countries that have a statutory minimum wage have special rates for young people. Minimum wages are adjusted for young workers in France, Ireland, Belgium and Luxembourg, among many others. He may want to look into that.

Pricing young people out of the labour market by setting their minimum wage too high would be detrimental to the workers whom the policy was intended to benefit. That said, the Government set only the minimum pay threshold, and I commend businesses that choose to pay their younger workers higher rates of pay, and in some cases pay them the higher national living wage. Indeed, in April last year, 88% of 16 and 17-year-olds, 90% of 18 to 20-year-olds and 92% of 21 to 24-year-olds were paid above their age-applicable minimum wage. Those are the facts, whether the hon. Gentleman likes them or not. As a matter of fact, 86% of 21 to 24-year-olds were paid at or above £7.50 an hour, which was the national living wage for the over-25s.

The Minister is doing his best to do a pantomime villain routine, but he seems to be confusing himself. Will he clarify whether he is suggesting that under-25s are better off working in the public sector? Will he confirm that in his Department the under-25s get the same rates of pay as the over-25s?

I will confirm to the hon. Gentleman that not once in this debate has the Scottish National party mentioned the impact that such a change would have on businesses.

I have given way plenty enough; we will move on.

The Government have increased the national minimum wage for young people to record levels. As I am sure the hon. Member for Glasgow East is aware, last month the Government gave the lowest-paid workers an above-inflation pay rise, as the national living wage and all the national minimum wage rates increased in real terms. The national living wage increased by 33p, to £7.83, meaning that a full-time worker on the national living wage will see their annual earnings rise by more than £600. Following increases to the personal allowance threshold and the minimum wage, a full-time worker earning the national living wage will be taking home over £3,800 a year more after tax. That is something this Government have delivered and are incredibly proud of.

I think I have given way enough.

The national living wage will rise further to reach 60% of median earnings in 2020, subject to sustained economic growth. We have awarded younger workers in receipt of the national minimum wage the biggest hourly pay rise in more than a decade. In particular, 20 to 24-year-olds saw a 33p increase in their hourly rate to £7.38, meaning a full-time worker in that age group will see their earnings rise by £600 a year, like those aged 25 and over in receipt of the national living wage. Those aged 18 to 20 saw an annual increase of 5.4% to £5.90, and those aged 16 and 17 are now entitled to a minimum of £4.20 an hour, an annual increase of 3.7%. Finally, apprentices aged under 19, or those aged 19 and over in the first year of their apprenticeship, saw an increase of 5.7%, the largest annual increase of all the hourly rates. In total, we believe that more than 2 million workers, 400,000 of whom are young workers under 25, have directly benefited from the latest increases in the national minimum wage.

My previous dealings with the Minister were in Committee on the Parental Bereavement (Leave and Pay) Bill, and I came into the Chamber today with a due amount of respect for him. The patronising tone he has taken in this debate demeans his office, and I hope he will reflect on that afterwards.

The Minister should have a wee seat, because I am not finished.

Will the Minister put it on record that a 21-year-old first-year apprentice can still be paid just £3.70 an hour? Would he be happy being paid £3.70 an hour?

I spend a lot of time talking to apprentices, and I see the vast contribution that apprenticeships make to those young people. Apprenticeships provide them with the opportunity to earn and learn, to gain vital experience and to have on-the-job training while following a vocation. That is hugely important. I have spoken to apprentices, and they value the apprenticeship scheme. They are building their careers thanks to it.

Raising the national minimum wage forms part of our long-term industrial strategy to boost productivity and to create good jobs and greater earning power for all parts of the United Kingdom. That is absolutely central to creating an economy that is fair and that works for young people.

All the increases were recommended by the independent Low Pay Commission, in line with the annual remit issued by the Government. The world-renowned LPC brings together business and worker representatives to form a consensus on the appropriate minimum wage rates. As ever, I thank the LPC for the extensive research, consultation and analysis it undertakes throughout the year to inform its recommendations.

Previous LPC reports discussed various pieces of research showing that higher youth wage rates can have a negative impact on employment rates. Consequently, in the annual remit, the Government asked the LPC to recommend the highest increase in national minimum wage rates that were possible without damaging the employment prospects of low-paid young workers by setting them too high. The Government will continue to take the LPC’s advice when setting all the wage floors in order to ensure that minimum wage rises are balanced between rewarding workers and ensuring that they are not priced out of employment. We are not complacent, and that is why I am pleased that the LPC will conduct a review of whether the current structure of the youth rates best supports our aim. I look forward to the LPC’s advice on the matter in spring 2019.

I recognise the hon. Gentleman’s concerns about young people, but the Government are committed to supporting them. Specifically, the Department for Education is reforming technical education by introducing T-levels to equip young people with the relevant skills to reach their potential, and the Department for Work and Pensions has launched the youth obligation support programme for 18 to 21-year-olds who are making a new claim for universal credit. The programme provides valuable intensive support to help people move into work. The DWP announced at the end of March that all 18 to 21-year-olds in receipt of universal credit will be entitled to claim support for housing costs, and that change is currently in the process of being implemented.

This Government are committed to building an economy that works for everyone, including young people. By having a lower national minimum wage for under-25s we are protecting young workers, to help them gain crucial experience, as well as supporting their transition and progression from education into the jobs market. Getting on to that all-important first rung on the jobs ladder has to be the priority. The independent Low Pay Commission will continue to make recommendations on the national minimum wage, and I look forward to its advice in spring 2019 on whether the current structure of the youth rates best supports the youth labour market. This Government have the economy, the country and the interests of young people at their heart.

On a point of order, Madam Deputy Speaker. During his speech, the Minister perhaps inadvertently misled the House by saying that France has different pay levels for young people. What opportunities are available for him to correct that, as I believe it is not actually true?

I am sure that if the Minister felt he had inadvertently misled the House, he would say so.

Question put and agreed to.

House adjourned.