Andy Burnham eyes minimum wage climbdown amid youth jobs crisis

The Prime Minister is weighing up whether to retreat from Labour’s 2024 manifesto pledge to abolish minimum wage age bands, which allow employers to pay workers under 21 less than older staff.

The potential change comes as unemployment among 16-to-24-year-olds has risen to 16.2 per cent, up from 14.2 per cent a year ago.

Government officials are reportedly examining whether efforts to bring younger workers’ pay closer to the adult minimum wage are discouraging businesses from hiring them at a time when the jobs market is already under pressure.

However, abandoning the pledge could trigger a backlash from Labour backbenchers, who supported the party’s manifesto commitment to end what it described as “discriminatory” differences in minimum wage rates for younger workers.

The adult minimum wage currently stands at £12.71 an hour after rising by 4.1 per cent this year. The rate for younger workers increased by a much larger 8.5 per cent to £10.85 an hour.

Labour had promised to scrap the tiered system altogether and ministers had been moving more quickly to close the gap between the different rates.

However, Whitehall officials are now considering other options, according to Bloomberg, including a system similar to the one used in the Netherlands.

Under the Dutch model, minimum wage rates vary significantly depending on a worker’s age.

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Those aged 21 and over receive 14.99 (£13) an hour, while 18-year-olds receive 7.50 and 15-year-olds can be paid as little as 4.50 an hour.

The tiered structure is designed to preserve incentives for employers to hire younger workers while still guaranteeing a minimum level of pay.

Both the Conservatives and Reform have already spoken out against above-inflation wage increases for young people.

Alan Milburn, a former health secretary under Sir Tony Blair, is preparing to publish a major report on the crisis of youth worklessness in Britain.

Mr Milburn travelled to the Netherlands earlier this week to study how the country is succeeding in getting more young people into employment.

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His interim report, released in May, highlighted how the number of young people not in employment, education or training has worsened considerably since the turn of the century. It also found that Britain performs poorly compared with other similar developed nations.

On Friday evening, Mr Milburn called for “tough love” towards young people on health and disability benefits who are capable of working.

Speaking to The Times, he described the current benefits system as “morally indefensible” and urged the Government to place obligations on young claimants to engage with state support for finding work.

Mr Milburn’s full report is expected to set out the most significant barriers preventing young people from entering the job market.

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It will also examine how the education system needs to change so that the skills young people acquire better match what employers actually need.

Kemi Badenoch, the Conservative leader, has previously argued that the Government must heed the concerns of business. “It’s not government ministers that create jobs, it’s business that creates jobs,” she said.

“We need to make sure that we set the minimum wage at a good level but we also need to make sure that their other burdens, their business rates, their corporation taxes, all of the things they do the endless regulation, the employment rights bill: they’re just sick and tired of so much happening.”

Any decision by Mr Burnham to retreat from the manifesto pledge could trigger a revolt among Labour MPs.