Row grows over move to deny minimum wage to the young

THE plan to set a minimum wage at pounds 3.60 looks set to cause a rift between government ministers, with some seeking to ensure fewer workers are covered. While the Department of Industry is minded to accept the Low Pay Commission's submission, hawks in the Treasury and Number 10 are concerned it could be inflationary and cause substantial unemployment among young people.

The commission has proposed that those who are 21 or older should be paid pounds 3.60, that 18 to 21-year-olds should receive pounds 3.20 and that there should be no minimum for 16 to 18-year-olds. Government advisers believe lower rates could be extended to include all employees under 26, arguing that employers will be less enthusiastic about offering placements to participants in the New Deal programme if they have to pay the full rate.

News that some ministers might seek to limit coverage of the minimum will further enrage union leaders who yesterday rounded on the whole principle of lower rates for younger workers. John Edmonds, general secretary of the GMB general union, said the recommendation was likely to create social alienation and a "two-tier" system which would turn the under-21s into second- class citizens.

However, John Monks, TUC general secretary, said the figures were "a reasonable step in the right direction". Ken Jackson, of the Amalgamated Engineering Union, said it constituted a key element in the Government's plan to reform the welfare system and would encourage a high-wage, high- productivity economy.

The Confederation of British Industry regarded the recommendations as "acceptable" but the right-wing Institute of Directors said they could lead to job losses in some industries and increased costs and create inflation in others. Some businessmen declared their intention to switch from older employees to under-21s.

Mr Edmonds said he was "very disappointed" with the recommendation, since it meant 1 million young people would be excluded from the minimum wage. "The Government will be making a very large political mistake indeed, if it accepts that recommendation."

This is the second time within weeks that Mr Edmonds and some of his closest colleagues have clashed with officialdom. He has declared his intention to campaign against proposed laws on union recognition which insist on a 40-per- cent vote in favour of collective bargaining before it is granted.

Cabinet sources last night privately revealed irritation at what they believe is the negativity of some of the larger unions. Bill Morris, leader of the Transport and General Workers' Union, also attacked the proposals: "If you do the same job, you should get the same money, whatever your age."

Bharti Patel, of the Low Pay Unit, which has long campaigned for a statutory minimum, welcomed establishment of the principle but argued against lower rates for younger people.

The recommendations of the commission conflict with the views of Peter Mandelson, Minister without Portfolio, who let slip at the Labour conference in October that he favoured exemptions for 18-26 year-olds.

The commission, set up by the Government to advise on the wage threshold, has spent the past six months touring the country collecting evidence for its report. Ministers yesterday acknowledged they had received the document but said it was too early for the Government to reach a conclusion.

Tim Boswell, shadow trade and industry spokesman, said the recommendations would increase business costs and people's job prospects would be the "likely long-term losers". David Chidgey, trade and industry spokesman for the Liberal Democrats, said the commission had failed to consider regional variations. It would do nothing to lift thousands of workers in the South-east out of poverty.

It was estimated yesterday that the pounds 3.60 minimum would affect 1.5 million people, mainly women, in jobs such as shop workers, hotel staff, security guards and care workers. Alastair Hatchett, of Incomes Data Services, believes the impact of such a rate on official average earnings figures could be less than recent City bonuses of pounds 100,000 to pounds 500,000. Some regions will be affected more than others. While most London workers earn in excess of the recommended minimum, staff in the tourist industry at most resorts could see their pay rise a lot. The suggested rate compares with statutory floors in Belgium of pounds 4.20, France pounds 3.75, Luxembourg pounds 4.25 and the Netherlands pounds 3.96.

'I will have to look for a place overseas and will probably need to lose 80 staff'

FOR Trevor Hall, managing director and chairman of a knitting firm in Leicester, a minimum wage of pounds 3.60 is "another nail in the coffin" which will lead to job losses and force him to take his business abroad.

Mr Hall, who manages Commando Knitwear, in South Wigston, said: "I will go overseas. I have already gone down that road once. I made connections and then felt loyalty to this country." But this time he would have no qualms.

Mr Hall estimates that he will have to pay an extra pounds 2,000 a week in wages.

"This will not be incurred by paying the minimum wage to the lowest paid workers, but by paying the differential between unskilled workers and skilled workers." For example, if an unskilled worker's hourly pay was set to increase by 60p, skilled workers would expect the same pay rise, said Mr Hall, who employs more than 100 people.

"With the strong pound my export market has gone and my turnover last year was down by half a million pounds.

"We have never fully recovered. We have lost the market in Europe," he said. Most of his UK competitors were already having most of their stock made abroad, in countries like Romania, because it was so much cheaper.

The minimum wage would lead him to become an importer and to look for a place overseas. "I will probably have to loose about 80 of my staff," he said.

Suzanna Chambers

'I work for nothing but I'm not the sort of person who wants to remain idle'

NICOLA JAMES will derive no benefit from the pounds 3.60 an hour minimum wage because that is already her hourly rate.

Ms James, aged 32, a single parent with three young children, is unimpressed with the proposed statutory pay floor. She works as a catering assistant at the University of Wales, Swansea, and regards her take home pay of pounds 68 per week, for 20 hours' work, as "disgusting". University ancillary workers are among the lowest paid members of Unison, the public service union, which wants a national minimum wage of pounds 4.61 an hour.

Last year, during the university holidays, Ms James had to borrow pounds 1,000 to try to survive. She is still paying off the loan at pounds 14 a week. "I work for nothing really," she said. "But I'm not the sort of person to remain idle. I don't want to live off somebody else."

On top of her weekly pay, Ms James also receives about pounds 47 a week in Family Credit. She tries to keep her weekly food bill below pounds 30. Her gas and electricity bills come to pounds 10 each and school bus fares cost pounds 11.50. She spends pounds 20 on petrol for her car, which she needs to get to work and for her children.

Her rent is pounds 51.70 a week, but she is hoping to move to another house where her contribution to rent could be less than pounds 30. "I can only manage by robbing Peter to pay Paul," she said.

Barry Clement