Tues, 20 March 2012

The government’s decision to freeze the minimum wage for young people aged 16 to 20 “is exactly what is needed” given the UK’s “catastrophic youth unemployment”.

That is the view of Albert Ellis, chief executive of global provider of professional recruitment and outsourcing services Harvey Nash, following the announcement yesterday that the minimum wage rate for 18-20-year-olds will remain at £4.98 an hour, and the rate for 16-17-year-olds at £3.68 an hour, after the government accepted the independent Low Pay Commission’s (LPC) recommendations.

Ellis tells Recruiter: “I am very pleased and this is the right decision; it effectively this holds down wage rates in an increasingly competitive global market.

“In fact, taking inflation into account this is a real cut in minimum wages, which is exactly what is needed with catastrophic youth unemployment.”

Ellis adds: “Nobody is suggesting for a minute that low minimum wages are desirable long term in a functioning prosperous economy or politically easy to justify.”

However, he says that until the minimum wage rises in countries such as China, which is “unlikely” in the short term, “the reality is we have to hold down entry-level wages, which in effect pay expenses and a small wage, while employees can train and gain experience”.

Business organisations and employment experts are split on the impact of the decision to freeze the minimum wage for this group. While the CBI and the British Chambers of Commerce are supportive, others such as Institute for Employment Studies, question whether the decision to hire or no hire someone is so sensitive.

The new rates will come into effect on 1 October 2012