Boost for Blair over pay for the young

A NATIONAL minimum wage does cost young employees' jobs, says an authoritative new report issued yesterday, vindicating the Government's controversial announcement of a lower minimum wage for young workers up to the age of 21.

The annual "Employment Outlook" from the Organisation for Economic Co- operation and Development says: "The balance of the evidence suggests some adverse effects on youth unemployment ... It seems desirable in countries which have a minimum wage to apply a lower rate to young people."

The OECD predicts that unemployment in the UK will start to rise next year as the economy slows, with 100,000 more people likely to join the dole queues. Last year, by contrast, Britain saw one of the biggest drops in joblessness among the 29 OECD member countries.

The report's conclusion on the wage rests on a study of the impact of a minimum wage on poverty and employment in the 17 member countries that already have it. Economists found that a minimum wage was "neither the solution to overall family poverty nor the general scourge on jobs that opposite sides proclaim".

As about four-fifths of low-paid workers outside the US do not live in poor households, the introduction of a minimum wage will have little impact on family poverty, the OECD says. But it might improve the incentives to look for work, and prevent earnings falling below socially acceptable levels.

The researchers found little impact on jobs overall, but did discover that a minimum wage destroyed jobs for the youngest workers. Regardless of the level at which it was initially set, a 10 per cent rise in the minimum for young people reduced their level of employment by between 1.5 per cent and 3 per cent.

A separate OECD study of the UK economy, due to be published later today, reinforces this. It says: "A high minimum wage would impact adversely and more strongly on youth employment opportunities."

The research backs Gordon Brown's concern that a higher level for the youth rate could have damaged the Government's "new deal" for young workers.

The report says 1997 saw the biggest rise in employment in member economies since 1993. The US, Canada, Mexico, Spain and Turkey recorded the biggest rises in employment, and the UK one of the biggest falls in unemployment.

Outlook, page 19