Business Secretary, Vince Cable has outlined proposals to increase the national minimum wage for apprentices, but there are those who say that the move will have very little real effect on young people. The proposal says that minimum rates of pay for apprentices in the first year of their course will be increased to match the national minimum wage for 16 to 17 year olds. This would be an increase from £2.73 to £3.79 per hour, affording around 31,000 apprentices a pay rise of just over £1 per hour.
The proposed increase is to be presented to the Low pay Commission (LPC), and if successful, will create a single minimum wage rate for 16 to 17 year olds, regardless of whether they are in employment or working on an apprenticeship. Not only will this benefit apprentices, but would also simplify minimum wage rates for employers, who currently pay apprentices depending on their age and how long they have been on their apprenticeship.
Speaking on the proposal, Vince Cable said, “With the economy on the road to recovery, all workers - including apprentices - should be able to share in the proceeds of growth. We want apprenticeships to remain an attractive option for young people deciding whether to earn whilst they learn or go straight into employment.” He continued, “This is why I propose putting apprentices on a level playing field with young people entering the labour market. Applied to current minimum wage rates, this would be an increase on first year pay of over a third, as well as simplifying a pay structure that all too often catches employers out.”
The recommendations will be presented alongside the 2015 National Minimum Wage rates for the government to make their decisions on any changes.
While the proposal looks to level the playing field for young apprentices when set against those school leavers who go straight into work, there are some who are questioning how effective this move is in real terms.
John Longworth, director general of British Chambers of Commerce (BCC), argued, “Most businesses value their apprentices highly, and already pay them significantly above the apprenticeship minimum wage rate. For that reason the proposed change will have minimal impact on businesses bottom line, but it must be up to the Low Pay Commission (LPC) to make evidence-based recommendations to ensure that wage rates are right for market conditions.”
Elsewhere, Susannah Clements, the deputy chief executive of the CIPD, suggested that most companies pay their apprentices above the minimum rate anyway, stating, “There is a business case for paying all apprentices above this current base minimum, as our research suggests that apprentices who are better paid are more likely to remain with the firm that has invested in their training.” She continued, “We also advise employers to increase the pay of apprentices as their training progresses, and thus their capabilities and performance increases,” adding, “We are supportive of the proposal for the Low Pay Commission to recommend increasing the minimum wage for apprentices.”
The proposed minimum wage rise for young apprentices will certainly look to lessen the gap between themselves and their peers who go straight into work, potentially encouraging more school leavers to take an apprenticeship rather than going straight into employment.
However, evidence shows that most employers pay more than the minimum wage rate, with 2012 demonstrating an average wage for apprentices in England as £6.00 for those who were either under 19 or in their first year of study.
There are also fears that a rise in the National Minimum Wage for starting apprentices may actually cause smaller companies to take on less, rather than more, apprentices. While a study showed that 20% of small businesses questioned planned to take on at least one apprentice over the next 12 months, Katja Hall, deputy director-general of CBI, says that a minimum wage increase could lead to less opportunities. Hall warned, “Companies already pay their share into training, so raising the cost of taking these young people on would be unwise and put off many smaller firms from getting involved.”
It seems that the real question lies in how much real impact the proposed increases will have on actual wages for apprentices, while there is also concern over how the rise will affect the number of apprenticeships that can be offered by smaller businesses.