Employers criticise proposal to extend minimum wage

Tony Blair faces a confrontation with business leaders over a proposal by ministers to extend the national minimum wage to 16 and 17-year-olds.

The move, designed to end exploitation of young workers, was welcomed by trade unions, but employers warned that it could increase red tape and costs.

The proposal was outlined in government evidence to the Low Pay Commission, which is due to complete an inquiry into extending the minimum wage at the end of February.

Patricia Hewitt, the Secretary of State for Trade and Industry, previously said she did not think the rules should be changed, because higher wages might encourage teenagers to take jobs rather than staying in education or training. But a Department of Trade and Industry report said: "It would be wrong to allow 16 and 17-year-olds in employment, the youngest workers, to be exploited through low wages."

The document does not propose a level for the new wage rate, but it warns that "there is a strong case for a cautious level" to prevent young people being tempted out of college courses and on-the-job training schemes. It says: "Sixteen and 17-year-olds in training are typically paid well below the rate of employees of the same age. Any minimum wage rate for this age group will need to reflect this difference to avoid jeopardising training opportunities."

The proposals follow a campaign by trade unions which led to ministers ordering an inquiry into extending the regulations.

Estimates suggest that nearly 660,000 people aged 16 and 17 are in work, with one in 10 earning less than £3.10 an hour. About 40,000 were paid less than £2.90 an hour. By contrast people aged from 18 to 21 earn a minimum of £3.80 an hour, while workers over 22 earn at least £4.50 an hour.

Research published last month by the shopworkers' union Usdaw suggested that some teenagers were paid as little as £1.25 an hour.

A spokeswoman for the TUC welcomed the proposals. She said: "We believe there should definitely be a minimum wage for 16 and 17-year-olds. They often have exactly the same level of responsibility as 18 and 19-year-olds. We think they need the same kind of protection as older workers."

Matthew Knowles, principal policy adviser for the British Chambers of Commerce, said: "We are pleased the Government has acknowledged the issues surrounding the minimum wage. We are very concerned that a minimum wage would encourage people to leave school because they would like some cash in their pockets. Our members would not want to exploit people, but we do not think the consequences of this change have been thought through."