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Minimum wage up by 25p – measly or magnanimous?

Since Saturday 1st October 2016, the National Minimum Wage has increased by 25p an hour

This is the highest increase ever in real terms, but it is getting a mixed reception. Is 25p an hour actually going to make it easier to recruit to lower-paid posts?

The millions of workers who are on this wage can thank the Low Pay Commission for their rise and look forward to further rises next year as the government tries to drive up the pay of the lowest-paid employees; however, there is an ongoing debate over the three-tier wage structure. At the bottom of the pile are 16- and 17-year-old employees, who will receive 13p extra an hour, bringing them up to £4.00 an hour. 18- to 20-year-olds will receive £5.55, while 21- to 24-year-olds will receive £6.95.

The TUC is strongly against different rates for younger workers, arguing that they should be getting the same pay if they are doing the same job as older employees. You can see their point – paying people according to how much they are considered to need sets an unusual precedent.

The minimum wage debate has been somewhat overtaken by the living wage developments. The recommended living wage for over-25s is £7.20 an hour and the intention is to get this to a level of 60% of the median wage in the next three years.

Many people are unsympathetic to the claims of employers that a rise in the minimum wage will destroy their businesses; however, they have support from Professor Peter Urwin from Westminster Business School.

He is the director of the Employment Research Centre and says that lower-paid workers are facing job losses both as a result of technological developments and jobs being offshored. His view is that increasing the wages of the lowest-paid provides an incentive to business owners to get the jobs done in other ways, such as by sending them overseas or getting them done by machines.

This means the lower-skilled, lower-earning employees are the ones being marginalised by globalisation. Urwin says that raising minimum wages is therefore not the way to go.

Few of us want to go to a pub and be served by a robot, which is perhaps why the trade body for the pub industry asked the Low Pay Commission not to raise minimum wages and instead to wait until April 2017; however, the CBI described the rise as ‘sustainable’, highlighting that there are different views even among employers and businesses.

So far there is little evidence that the living wage has affected recruitment levels; indeed, the level of UK employment is currently the highest for 45 years. Many organisations have no employees on the minimum or living wage; therefore, their recruitment plans are completely unaffected by these developments.

Be that as it may, the debate as to whether it is right that a 17-year-old should earn substantially less than their older co-worker for doing the same job will continue.

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