TUC: Young workers could miss out on £2,400 a year due to “unfair” minimum wage rules
25 Mar 2024 11:40 AM
The TUC recently (23 March 2024) published new analysis which reveals more than 700,000 workers aged 18-20 across the UK risk being left “hugely out of pocket” due to being paid a lower rate of the minimum wage. This means that as many as seven in ten workers aged 18-20 could lose out.
- NEW ANALYSIS: 18-20 year olds risk being “left hugely out of pocket” due to “unfair” minimum wage rates that penalise young workers
- Workers aged 18-20 could lose out on more than £2,400 a year when minimum wage rises to £11.44 this April
The minimum wage pay penalty facing workers aged 18-20 this coming year is an estimated £2,438 a year (for those who work 52 weeks a year), or £47 a week.
The analysis comes ahead of the TUC’s Young Workers Conference this weekend, which focuses on issues facing young workers.
Tiered rates must be “overhauled”
The TUC says that paying a lower rate to younger adults is “unfair” and that the tiered rates system must be “overhauled”.
Young workers are paid a lower minimum wage. The main minimum wage rate is currently £10.42 per hour for those 23 and over. However, it is £10.18 for 21-22 year olds, £7.49 for 18-20 year olds and £5.28 for under 18s.
From April, the minimum wage rises to £11.44 and will be extended to those aged 21 and 22 after the government accepted recommendations from the Low Pay Commission.
However, minimum wage workers aged 18-20 could be paid almost £3 less an hour than those aged 21 and over, with the minimum wage for workers in that age bracket rising to just £8.60.
The Low Pay Commission has also previously stated that the gap between youth rates and adult rates has widened and has said that there is a consensus on the commission that this should be addressed.
Labour’s New Deal
If it is elected into power, Labour has pledged to make sure the minimum wage is a real living wage that people can live on, removing discriminatory age bands to ensure every adult worker benefits - as well as banning zero hours contracts which disproportionately impact young workers.
The TUC says a Labour government would “transform” the lives of young workers with its New Deal for Working People.
TUC General Secretary Paul Nowak recently 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“But too many young workers are still being left hugely out of pocket because of outdated youth rates of the national minimum wage.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 18-20 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.”
Editors Note’s
- Methodology: This analysis uses the ONS Labour Force Survey (Q4 2023). It is based on average hours of work and earnings for low earning 18-20 year old employees. We define low earners as those 18-20 year olds paid below the incoming headline (22+) minimum wage rate of £11.44. We calculate how much above the current 18-20 minimum wage (£7.49) these workers are paid (14.8%). We assume the percentage difference between the minimum wage rate for 18-20 year olds and the average hourly pay of 18-20 year olds earning less than £11.44 remains constant once the higher 2024 rates are introduced. The minimum wage for 18-20 year olds will rise to £8.60 in April so we assume average pay for low-earning 18-20 year olds will rise to £9.90.
- Over this data period, Labour Force Survey data shows that 729,41718-20 year olds were paid below £11.44. In total there were 1,072,487 18-20 year olds employees. Key data are set out in the table below.
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Current minimum wage rate for 18-20 year olds (April 2023)
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£7.49
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Average hourly pay for 18-20 year olds earning less than 11.44
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£8.60
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% difference between April 2023 min wage rate and average pay (Q4 2023) for 18-20 year olds
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14.8%
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New minimum wage for 18-20 year olds from (Apr 2024 rate)
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£8.60
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Estimated average hourly pay under April 2024 rates
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£9.90
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Difference per hour between average estimated hourly pay and April 2024 18-20 year old NMW rate
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£1.60
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Average usual total hours worked per week for 18-20 year olds earning less than £11.44
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3. Hrs
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Annual difference in pay between low paid 18-20 year old workers and equivalent at main minimum wage rate (£11.44)
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£2,438
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- In his letter to the Secretary of State of 21st November 2023 the Chair of the Low Pay Commission set out to government that “In making our recommendations on youth rates, Commissioners were conscious that the gap between the youth rates and the NLW had widened in recent years. There was a consensus that this should be addressed.”
- About the TUC: The Trades Union Congress (TUC) exists to make the working world a better place for everyone. We bring together the 5.5 million working people who make up our 48 member unions. We support unions to grow and thrive, and we stand up for everyone who works for a living.
Contacts:
TUC press office
media@tuc.org.uk
020 7467 1248