The Recruitment and Employment Confederation (REC) has urged the Low Pay Commission to halt the narrowing of the gap between the national minimum wage and the national living wage, warning that further increases could make it harder for young people to find work.

In its submission to the commission, the REC argued that maintaining lower youth wage rates would help employers continue recruiting younger, less experienced workers at a time when youth unemployment was rising, and the government was seeking to reduce economic inactivity among young people.

The commission is expected to make its recommendations on minimum wage rates in October, with new rates typically announced around the Budget and taking effect the following April.

Shazia Ejaz, the REC’s director of campaigns, said employers wanted caution after “huge rises” in the minimum wage over recent years.

“With firms struggling with rising costs across the board, and youth unemployment rising, businesses want caution from government when it comes to minimum wage,” she said. “Recent upratings have squeezed margins and impacted investment and training opportunities, with some firms choosing ready-made experience over developing new talent.”

She warned that continuing to increase youth wage rates faster than adult rates could make it more difficult for young people to gain a foothold in the labour market, increasing the risk of long-term worklessness.

The REC also published the findings of a survey of 237 UK employers, conducted by Whitestone Insight in May, which found that almost half (45.9%) reported moderate or significant increases in business costs as a result of National Minimum Wage rises over the past three years. A further 25.5% said costs had increased slightly, while just over one in five (21.4%) reported no increase.

Among employers that said they had been negatively affected, more than a quarter (26.8%) said they had reduced recruitment or headcount, while 26.2% had scaled back expansion or investment plans. About one in five had limited staff training and development (20.8%) or held back pay increases for other employees (20.8%).

Ejaz said the findings showed that higher minimum wage costs were changing employers’ recruitment and workforce strategies.

“Our employer survey shows firms are having to adapt in ways that hamper the UK labour market’s chance to shift gears,” she said. “Around one in five businesses are cutting back on training or holding down wider pay rises, which weakens skills development and slows pay progression.”

She added that “moderate increases are needed to help fuel hiring and support a path to economic growth”, warning that abolishing youth wage rates could undermine the government’s ambition to get more young people into work.

 

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Source: www.personneltoday.com

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