‘Unfair’ system sees over 700,000 workers ‘out of pocket’ by £2,400 a year
The main minimum wage rate is currently £10.42 an hour for those 23 and over
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Unions are calling for an overhaul of the minimum wage system after reports suggest thousands of workers are left ‘out of pocket’.
More than 700,000 workers aged 18 to 20 face a “penalty” of thousands of pounds a year due to being paid a lower rate of the minimum wage, official data from The Trades Union Congress (TUC) shows.
The National Minimum Wage is the minimum pay per hour almost all workers are entitled to.
People classed as ‘workers’ must be at least school leaving age to get the National Minimum Wage.
They must be 23 or over to get the National Living Wage, although this threshold will reduce to 21 from April.
Workers aged 18 to 20 face losing out on an estimated £2,438 a year, or £47 a week, because of the lower minimum wage rate for their age group, said the TUC.
The National Minimum Wage is the minimum pay per hour almost all workers are entitled to.
People classed as ‘workers’ must be at least school leaving age to get the National Minimum Wage.
People classed as ‘workers’ must be at least school leaving age to get the National Minimum Wage
GETTY
They must be 23 or over to get the National Living Wage, although this threshold will reduce to 21 from April.
Workers aged 18 to 20 face losing out on an estimated £2,438 a year, or £47 a week, because of the lower minimum wage rate for their age group, said the TUC.
The organisation said that paying a lower rate to younger adults is “unfair”, and that the tiered rates system must be overhauled.
Paul Nowak, the TUC general secretary said: “Everyone should be paid fairly for the job they do, but too many young workers are still being left hugely out of pocket because of outdated youth rates of the national minimum wage.
“More than 700,000 workers aged 18 to 20 face this pay penalty – they are getting less than older workers for doing the same job.
“Young people up and down the country are being hammered by the cost-of-living crisis – like everyone else, they need more money in their pockets now.
“That’s why we’re backing Labour’s New Deal, which has pledged to introduce a real living wage for workers as well as banning zero hours contracts which blight the lives of many young workers. It’s time to put an end to low pay Britain.
”The amount someone gets depends on their age."
From April 1, the National Minimum Wage will apply to younger employees between school leaving age (16) and 20.
- For those 16 or 17, the National Minimum Wage will be £6.40 an hour, up from £5.28
- For those 18, 19 or 20, the National Minimum Wage will be £8.60, up from £7.49
Currently, people aged 21 to 22 have a national minimum wage rate of £10.18 per hour.
From April 1, employees aged 21 and over will be entitled to the National Living Wage. At the moment workers have to be 23 to qualify. The rate will be £11.44 an hour, up from £10.42. The Government says this is the largest ever cash increase to the minimum wage.
The National Living Wage and National Minimum Wage are both set by the Department for Business every year on the advice of independent advisory group, the Low Pay Commission.
UK wage growth has slowed from record highs, with average earnings, excluding bonuses, rising at an annualised rate of just 3.5 per cent in the three months to January from the previous quarter, official figures have shown.
Although the UK’s statutory wage floor is one of the richest in the world, economists believe the effects of further increases on falling price growth are “increasingly unpredictable”.
The Bank of England has waited to see signs that wage growth is slowing before making a move to reduce interest rates, and is expected to view the latest figures as another reason to begin that process this year.
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Falling price growth could be one of the reasons the bank decided to keep the base rate at 5.25 per cent for the fifth time in a row.
Ashley Webb, UK economist at consultancy Capital Economics said: “The fear is that the rise this year will contribute to stickier wage growth and inflation.”
Mr Webb noted that last year’s pay boost had coincided with the biggest monthly jump in consumer prices since 1991.
As businesses prepare to pass on the increase in pay, some say they are running out of ways to absorb higher wages in their margins, following a long period of intense cost pressures.
Jane Gratton, deputy director of public policy at the British Chambers of Commerce, a business lobby group said: “Businesses want to pay their staff a good wage . . . but there is a limit to how much new cost firms can absorb, before they have to start passing it on.”