Tories urged to back five-year minimum wage freeze to tackle youth unemployment
A report from the Prosperity Institute, endorsed by shadow business minister Andrew Sharpe, calls for a five-year minimum wage freeze at £12.71 - a step it says would lift youth employment but cost low-paid workers almost £9,000.
Tories urged to back five-year minimum wage freeze to tackle youth unemployment
A Conservative frontbencher has put his name to a proposal to hold down the pay of the country's lowest earners. Andrew Sharpe, the shadow business minister, has endorsed a report from the Prosperity Institute that calls for a minimum wage freeze lasting five years - a move that could cost low-paid workers almost £9,000.
The proposal and its endorsement
The thinktank paper's central recommendation is to freeze the national living wage at £12.71 for five years. It also proposes abolishing the Low Pay Commission, the independent body that recommends the yearly increase.
Sharpe backed the findings, pointing to low rates of work among young people. His endorsement noted that almost 1 million young people are not in education, employment or training, and called the report timely.
The government should adopt them in full
, he said of the recommendations.
What the report recommends beyond the freeze
Alongside the wage freeze and the abolition of the Low Pay Commission, the paper sets out wider labour market changes:
- Returning employer national insurance contributions to pre-April 2025 levels.
- Reinstating the two-year qualifying period for unfair dismissal, which was abolished under Labour's Employment Rights Act.
The authors argue the freeze would pay off in jobs. They claim a five-year freeze could result in about 270,000 more young people in work, and that each 1 percentage point increase in the minimum wage reduces the youth employment rate by 0.37 percentage points.
The cost to low-paid workers
The report's authors said they do not present the findings as costless to workers. On their own estimate, purchasing power would be eroded by 9% to 12% over five years - a cumulative loss of about £8,900 for those affected.
That calculation rests on projected inflation of 2% to 2.5% over the period. A freeze at £12.71 would therefore leave the rate unchanged in cash terms while prices continued to rise.
Labour's response and the minimum wage's path
Kate Dearden, a Labour business minister, criticised the proposals as tin-eared and said they showed a pattern from the Conservatives of disparaging the minimum wage.
It's clear that Kemi Badenoch's top team are determined that the lowest paid workers should be worse off.
She added that, in her view, the party had not changed. Labour has previously promised to equalise minimum wage rates by giving 18- to 20-year-olds the full rate, but rising youth unemployment has fuelled debate at the top of government over how fast it should meet that promise.
The Low Pay Commission last year recommended a 4.1% increase in the main rate and an 8.5% rise in the youth rate. The rates now stand at £12.71 and £10.85 respectively.
Earlier this year ministers changed their guidance to the LPC to reflect government concerns over unemployment among young people, hoping for a lower recommendation to help employers hire younger staff. The commission, for its part, said it is not aware of any robust evidence that higher youth rates have contributed to these falls.
The LPC will deliver its recommendation for the financial year starting 1 April 2027 in October, though ministers are not bound to accept it.
