POLITICS

George Osborne Is Following Greece's Model With His Lower Minimum Wage For Under-25s To Tackle Youth Unemployment

26/12/2015 17:02 GMT | Updated 26/12/2015 17:59 GMT

The Government’s plan to find jobless young people work by paying them a lower minimum wage has been derided as only economically troubled Greece has adopted the same plan.

Ministers justified excluding under-25s from the £7.20-an-hour National Living Wage (NLW), to be introduced next year, as being on a lower rate would make them more attractive to employers, and get them much-needed work experience.

But the TUC has seized on the 25-year-old threshold as being higher than in every economy in the developed world, and matched only by ailing Greece - where youth unemployment had been running at close to 50% and remains the highest in the eurozone.

The organisation, which has made a submission to the Low Pay Commission watchdog underlining its fears, argues it is “simply unfair” to have a two-tier pay rate.

The international comparison appears in a Low Pay Commission analysis, and the body is undertaking further research into the difference age-related pay scales make.

In France, the full rate kicks in at 18 year old. Germany, not listed since it has only recently introduced a minimum wage, has set the threshold at the same level.

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Low Pay Commission's international comparisons of when the full minimum wage kicks in

In its submission the TUC warned a lower rate will “demotivate younger adults” and defends under-25s as “ highly productive”.

Frances O’Grady, TUC general secretary, told HuffPost UK: “This group could simply receive the national living wage in full.

“Younger workers and apprentices must also see decent pay growth. It is simply unfair to hold their pay back while other see significant gains.”

“When younger workers are not paid fairly relations between older and younger workers become strained, particularly when they are earning different wages for the same work.

"The UK economy would also miss out on young workers’ spending power if their incomes were to grow too slowly.”

national living wage costa

Some employers, such as coffee chains Starbucks and Costa Coffee, have vowed to pay the higher hourly rate regardless of age

In this summer’s budget, Chancellor George Osborne announced a new minimum wage for over 25s would come into force from next April, starting at £7.20 an hour and increasing to £9 by 2020.

But those under 25 will be on the old minimum wage rates, meaning they are entitled to £6.70 an hour, down to £5.30 for 18 to 20 year olds and £3.87 for under 18s.

In October, Government Minister Matthew Hancock suffered a backlash after saying workers under the age of 25 are not “productive” enough to warrant being paid the new higher wage.

A Government report recently acknowledged younger workers missing out on the new higher minimum wage may still be frozen out of the job market.

The Department for Business, Innovation and Skills’ official impact assessment of the policy say higher pay for older workers could “reduce the likelihood of employees leaving their jobs”, undermining opportunities for youngsters.

The Low Pay Commission watchdog is to examine “uncertainties” over the impact of the NLW on under-25s, including whether employers “began substituting their older workforces with cheaper younger workers”, it says.

A Department for Business spokesman said: "For younger workers, the priority is to secure work and gain experience - something that is already reflected in the National Minimum Wage rate structure where the youth rate is currently £1.40 lower than the adult rate.

“Youth unemployment tends to be higher than for older workers so we’re rightly more cautious for this group.”