The National Minimum Wage for young people is to be increased from £3.20 an hour to £3.50 from 1 October 2001, Trade and Industry Secretary Patricia Hewitt announced today.
The Government's decision to accept the Low Pay Commission's recommendation means that 140,000 young people across the UK will see their pay packets boosted by £10.50 for a 35 hour week, a 9 per cent increase. Ms Hewitt also said that the rate will rise again to £3.60 from October 2002.
The Government confirmed that the youth rate will continue to apply to workers aged 18 to 21. This takes into account the need to encourage employers to recruit and develop young people taking their first steps in the labour market. The priority must be to deliver the Government's aim of employment opportunities for all. Applying the adult minimum wage rate to 21 year-olds from October 2001 would have resulted in a 28 per cent increase in the hourly cost of employing someone of that age.
Announcing the Government's decision, Patricia Hewitt said:
"This increase will benefit thousands of young people in every part of the UK.
"The rise strikes the right balance between making a real difference to young workers without damaging the economy or jobs. This is a sensible increase that raises minimum standards but doesn't jeopardise the employment prospects of 18-21 year olds.
"This increase is in line with average earnings growth and the increase in the main rate of the minimum wage since the introduction of the NMW in April 1999.
"The Low Pay Commission is confident that the increase will not have a detrimental effect on either the economy or the business sector. The effect on the total UK wage bill will be 0.01 per cent."
The Government has also agreed to give the Low Pay Commission permanent status, and a remit in the short term to set up a number of comprehensive research programmes and monitoring exercises, which look in more detail at the longer term effects of the National Minimum Wage. This research will help inform the Commission's analysis and recommendations in its future reports.
Ms Hewitt added:
"The minimum wage has been a spectacularly successful policy. The Government wants its success to continue.
"The Low Pay Commission has made an exceptional contribution to eradicating poverty pay. I commend its chairman Professor Sir George Bain and all the Commission's members on their work.
"Both employers' and employees' representatives have made clear that they would welcome the Commission being granted permanent status, and I am happy to put it on a permanent footing."
