I’ve always backed the minimum wage – but not anymore

It’s time to ask a difficult question: is Britain’s minimum wage – or whatever they’re calling it these days – now too high? And is it now time to press pause?

As someone who has long argued for an end to poverty pay, and therefore for a higher minimum wage, as well as for the plight of younger people on a lower rate to be taken seriously, this is not an easy subject to tackle.

I have also been previously employed in multiple low-wage jobs: pushing supermarket trolleys; working in a warehouse and in a bar; delivering newspapers; stacking lettuces on the back of a tractor; and pruning fruit trees. I still have a scar from the latter, where I took off a small piece of my finger along with the errant branch.

Needless to say, the wages were dismal. All this was before the Blair government – in its early years, when it showed it was perfectly possible to have a competent Labour administration – defied the business lobby and brought Britain into line with the rest of the developed world.

The move did not, as that government’s more unhinged critics suggested, lead to a jobs apocalypse. On the contrary, businesses managed perfectly well under the new regime.

It wasn’t long before politicians of all stripes began to ask whether it was right for the taxpayer to subsidise low-wage employers through welfare payments.

They correctly concluded that the state should get out of the business of topping up poor pay. At one point, the Tories and Labour were engaged in what I once described as a “welcome war”, competing to offer the best rates to a largely supportive electorate.

But times have changed. The economic situation has greatly deteriorated, and employers’ costs have been rising fast, with government policy playing a significant role.

The cost of this is being shouldered by the most vulnerable participants in a labour market that has turned colder than this week’s miserable weather forecast.

The Resolution Foundation warned last year that young people are bearing the brunt of Britain’s jobs downturn. Nearly a million are classified as Neets – not in employment, education or training. The Office for National Statistics also found that young people were struggling to hold on to work, recording an 85,000 increase in unemployment among those aged between 18 and 24 in the three months to October – the biggest jump since November 2022.

Britain’s overall unemployment rate hit 5.1 per cent in December, the highest since 2016, if one excludes the pandemic period. It is forecast to rise further. Ministers are said to be increasingly alarmed at the number of young people out of work. They are right to be.

The hard truth is that young workers, with little or no prior experience, are risky hires. When the economy is weak and taking people on becomes more costly, employers inevitably focus on what they perceive to be safe bets. With unemployment rising, it is easier for them to do exactly that.

The employment squeeze is particularly acute in sectors that have historically welcomed young people: retail, hospitality, and the like. These industries have provided millions with the opportunity to build an employment history and gain experience in the working environment. The problem is that the burden of Rachel Reeves’s tax rises has disproportionately fallen on these sectors.

We have reached a tipping point. The government simply has to find ways to make it cheaper and easier to hire people – the direct opposite of what it is currently doing. It pains me to say it, but that means an end to sizeable increases in the minimum wage. This is not a permanent position. It can and should be revisited when the economy has improved.

Many people argue that it is immoral to expect waiting and bar staff to run around after us for a pittance, and I have some sympathy with them. But the bigger risk now is that the only running around they are able to do is on the weekly trip to Jobcentre Plus. There is little point in meeting your “job coach” if there are no jobs to be had.

Businesses that want to join the voluntary living wage – which is set based on the cost of living – can still do so, and I would encourage those with the capacity to take that step. Seeing the Living Wage Campaign logo next to that of a business tells me it is an organisation deserving of my custom. It is also likely to have its pick of workers when the labour market eventually recovers. People naturally gravitate towards employers that pay them well.

Six months of experience pulling pints on the national minimum wage may be all it takes for a young worker to be able to join them. Experience does that for you. But we need to create the conditions that allow youngsters to gain that experience in the first place.