It’s been two weeks now since George Osbourne presented his new budget. There’s been plenty written in the papers and over social media around the welfare reforms and the impact of those proposed and other aspects of the budget. But here i am two weeks later and there are still many more questions for me than answers and I’m concerned about the impact of some proposals that on the face of it sound like good things.
So first the Living Wage – or more accurately a new tier for the minimum wage. You see we already have a National Living Wage (it’s currently £7.85 and there is a London Living Wage that is currently £9.15). George plans to introduce a new ‘Living Wage’ in April 2016 for all those over 25 years old of £7.20 an hour increasing to £9 an hour by 2020. So now we will have a minimum wage structure that looks like this (or there about as these are the 2014/15 rates):
Wokers 25 and over – £7.20 an hour
Workers 21-25 – £6.50 an hour
Workers 18-20 – £5.13 an hour
Workers 16-17 – £3.79 an hour
On the face of it this looks like a good thing right? Increasing the Minimum Wage for the majority of the workforce has to be a good thing? But what are the unintended consequences of this? Will we see increased age discrimination where workers under 25 are favoured by employers as they are more affordable then their older counterparts? Will we see those over 25 excluded from section or even dismissed once they hit the higher rate as companies who haven’t yet recovered from the economic downturn? Companies terminating contracts as they can’t afford to pay the increased costs associated with the increase in wages? A shift from the youth unemployment to increased unemployment in the over 25s?
And what sort of work will be offered to those under 25 – most work at minimum wage level is low skill. So will we see an increase in underemployment with those with A levels, higher education, degrees working as pickers and packers and cleaners?
In the real world £6.50 a week is £13,520 per annum based on a 40 hour a week contract. This assumes that people are in full time work not part time or flexible hours. Ok we’ve had an increase in the personal allowance so much of this is tax free but after tax and NI lets say you could take home £1k per month. If you are lucky you are living with parents and they are either letting you stay there rent free or only charging you a nominal amount – or you could be renting a room in a shared house. Let’s be optimistic and say that you are spending £400 a month on rent and bill. That’s before you’ve eaten, or travelled to work, bought shoes or clothes, paid insurance – heaven forbid you want to save for something or even contribute to a pension. And what about having children or if you’re unwell? Not so ill you can’t work but ill enough that you have to fork out up £8.20 per prescription.
Look it’s always been tough – I remember my first job I paid 50% of my take home pay on rent. But I was in central London, walked to work, tube travel was affordable and had a final salary company pension (thank you Civil Service).
But wait we have a double whammy for those under 21 (well a triple whammy but I’m not going to talk about housing benefit here) – if you are seeking employment and receiving benefits you have to undertake work experience. Yep that’s right in order to get your benefits if you are under 21 years old you need to undertake work experience. I’m assuming this is unpaid, I’m assuming there isn’t a government organisation somewhere set up and ready to offer meaningful work experience to the thousands of young people who this will impact?
So employers need to provide this. Employers who want to make a difference and support young people above and beyond the way they are already supporting them will need to put in place work experience programmes to facilitate this government scheme. Honestly – who is in a position to do this? Other than the pickers and packers, the shelf stackers which employers will be able to offer work experience above and beyond the scheme we already have in place to 18-21 year olds NEETS?
Where’s the support for this initiative? Where is the government programme to help this happen? How can we ensure that it isn’t just about free labour where they would be receiving the minimum wage?
Don’t think I am against this – I think that work experience can be invaluable but not forced through in this way. Young people blackmailed to undertake low skilled work to access welfare. Yes lets get young people to work but lets given them support and skills and opportunity – where’s the carrot here? All I see is stick.
It’s early days, the headlines lack substance and we are awaiting details. But I’m concerned, it’s already really hard for young people to get work and opportunity and I’m unsure that either of these proposals are the answer. That all we are doing is shifting the unemployment bubble from the younger end of young people to the middle.
We’ll wait and see – wait for guidance on implementation and hope that the government listen to employers when they work this through.