Generally, minimum wages are set at lower levels for young workers. The argument is that young workers may need more training and high minimum wage may discourage firms employing them.
UK National Minimum Wage Rates from April 2019
- £8.21 – 25 and over
- £7.70 – Age 21-24
- £6.15 – Age 18-20
- £4.35 – Under 18
- £3.90 – Apprentice rate.
The post which has attracted the most comments is this post on the National Minimum wage for workers aged 16 and 17. It was actually in response to a question of whether a minimum wage for young workers would increase labour market participation. But, most comments have focused on whether it is justified to pay young workers a lower minimum wage than those over 22.
Reasons for Setting A Lower Minimum Wage for Young Workers
- Young workers have less experience and therefore a lower MRP (Marginal Revenue Product). As they have lower productivity, economic theory dictates a lower wage.
- Young workers may need more training to develop skills and work experience. The costs of training need to be borne by lower wages otherwise the firm couldn’t afford to pay young workers and train them. In a way, this is like the old apprentice scheme where young workers were paid a low wage during their training period.
- If the NMW for 16 year old workers was the same as 22 year old workers. It would be much more difficult for 16 year olds to get a job because firms would rather pay the more experienced workers.
- During a recession, many firms would struggle to pay more than £3.57 for 16 year olds.
- Firms can, of course, pay more than a minimum wage. If they think 16 year olds are doing as good a job as 22 year olds, they could give same wage.
Reasons to Pay Young Workers the Same as Adults
- As many commentators point out, many 16 year old workers are doing the same job as adults. Therefore, if they are doing the same job, it seems unfair to pay a different wage.
- Firms may substitute 16 year olds for 22 year olds. I know of certain fast food restaurants where young workers are given preferential treatment for overtime compared to 22 year old workers. This is because 16 year olds are much cheaper to employ. This makes it more difficult for 22 year old workers to get employment. Arguably, 22 year olds need a job more than 16 year old workers living at home.
It would be really very hard to justify a minimum wage of nearly £6 for 16 year old workers. If this was implemented, firms would be reluctant to employ young people and there would be far few job opportunities.
One issue that may need addressing is the correct implementation of the minimum wage. If some comments are correct, many young workers (e.g. in hairdressing salons) are getting paid far less than the statutory minimum wage.
2 thoughts on “Why set a lower Minimum Wage Rates for Young Workers?”
Hi. You may also add:
1) Younger workers may not take their work as seriously as adults. This is because they do not have commitments
2) Marginal costs (MC) will increase at a relatively faster rate than marginal revenue (MR) if greater proportion of young school leavers are considered
There is no justification for two people doing the same work and liable for the same taxes on their wages being paid a different rate for the job just because of their age.