§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville)My right honourable friend the Secretary of State for Trade and Industry (Ms Hewitt) has made the following Written Statement.
In July 2003 I asked the independent Low Pay Commission to report on the national minimum wage by the end of February 2004.
The Government are today publishing the commission's 2004 report and I would like to take this opportunity to thank the chair of the commission. Adair Turner, and its other members for their work on this very important issue.
We asked the commission to consider two issues. We asked it to look at possible fine-tuning of the minimum wage rates proposed for October 2004, in the light of the latest economic position; and we asked it, following the recommendation in its fourth report last spring, to look at the possible introduction of a new minimum wage rate for 16 and 17 year-olds.
The commission has concluded, first, that the overall economic outlook remains favourable, with growth being slightly higher than forecast last year and the labour market remaining robust with high employment and very low unemployment. In addition, employment across low-paying sectors as a whole is continuing to grow and there seems to be little or no evidence that the minimum wage is having an adverse impact on these sectors. On the basis that the commission believes these recommendations are affordable for business and will not have any significant effect on levels of employment, the Government have accepted the recommended rate increases for 2004.
The commission has also considered whether to introduce a new minimum wage rate for 16 and 17 year-old workers. It has found continued evidence that some jobs in this age group offer very low rates of pay and little or no training, and concluded that it is important to introduce a minimum wage for 16 and 17 year-old workers in order to stop exploitative rates of pay.
However it is clearly important to set any rate for this group cautiously. Unemployment and employment levels for 16 and 17 year-old workers are substantially worse than those for those aged 18 to 21. The commission believes that a rate of around £3.00 per hour would have negligible impact on young people's decisions on whether to remain in education, and the national implementation of education and maintenance allowances this autumn will encourage young people to stay on in education after they have completed compulsory schooling. The commission has therefore recommended that a rate should be 11WS introduced for 16 and 17 year-olds, at £3 in October 2004. The Government have accepted this recommendation.
The commission has also considered the position of young apprentices. Many young apprentices earn less than £3 an hour at 16 and 17, and many 18 year-old apprentices earn less than the development rate of £4.10 an hour. We are very concerned to ensure that employers continue to offer apprenticeships and, recognising the need for caution, the commission has recommended extending the current exemption for apprentices aged under 19 to cover 16 and 17 year-old apprentices as well. It has also recommended extending this exemption to cover participants on specified pre-apprenticeship programmes. The Government have accepted this recommendation.
I have placed copies of this Statement, the report from the Low Pay Commission and our regulatory impact assessment in the House Libraries.
Summary of recommendations in the Low Pay Commission's 2004 report and the Government's response
National Minimum Wage Rates
The adult rate of the minimum wage should be increased from the present hourly rate of £4.50 to £4.85 in October 2004.
12WSAccept. This increase will take place on 1 October 2004.
The youth rate (which applies to 18 to 21 year-olds) should be increased from the present hourly rate of £3.80 to £4.10 in October 2004.
Accept. This increase will take place on 1 October 2004.
Young People
The Government should introduce a minimum wage for 16 to 17 year-olds, set at an hourly rate of £3 in October 2004.
Accept. We will introduce a new minimum wage rate for 16 to 17 year-olds on 1 October 2004.
Apprentices aged 16 and 17 and participants on specified pre-apprenticeship programmes should be exempt from the new rate.
Accept.
Awareness
The Government should consider specific channels to promote awareness of the minimum wage for young people.
Accept. We will consider this point when developing the publicity campaign to inform people of the new rates this autumn.