Alan Milburn to review rise in youth minimum wage | Economic policy

The future of the youth minimum wage will be reviewed as part of a major inquiry by former health secretary Alan Milburn into increasing inactivity among young people in England.

There is a risk of creating a “lost generation” of young people if the government does not address some “disturbing truths” about the labor market, a social mobility expert has said.

In an interview with the Guardian, he said the increased general welfare bill was “fiscally and economically unsustainable” but insisted any reform of the system must focus primarily on correcting social injustices.

Milburn’s intervention on the minimum wage reflects recent warnings from economists that the rise in youth rates, which the government is trying to equalize with the rate for adults, could lead to the “pricing out” of some entry-level jobs.

But the party is likely to be greeted with dismay by some Labor MPs and unions after promising to end “discriminatory” low minimum wage rates for young workers so all adults can have the same statutory wage floor.

In a warning to Labor on Friday, Unison’s new general secretary, Andrea Egan, wrote in the Guardian that “our union will make time for its inexcusable habit of supporting politicians who act against our interests, undermine our fundamental values ​​and make our lives worse.”

As Keir Starmer struggles against tough poll odds, Milburn, a veteran of Tony Blair’s government, suggested this government could still change its fortunes if it creates hope for the future. Transforming young people’s expectations could achieve this, he said.

But he said unless concrete action was taken, the UK risked abandoning an entire generation to a life of benefits and could push them away from mainstream parties and towards right-wing populism.

With decades of systemic failures and policy negligence in education and welfare, they face a “perfect storm” in the youth labor market after the Covid crisis, Milburn said earlier this week after launching his review into why a quarter of young people aged 16 to 24 are not in education, employment or training.

“You are erasing a generation, you are writing the future of the country,” he said. “You have this kind of downward escalator: Instead of creating an upward escalator that provides opportunities for people to learn and earn, we’re dragging young people into a life of benefits.”

The former cabinet minister does not hesitate to recommend radical reforms to the system in his final report to be published in the summer. He said he was prepared to examine the pressure on employers and the rapid rise in mental health claims.

Before the budget, those at the Treasury were among those concerned about the increase in young people’s minimum wage rates, amid fears that entry-level jobs could become priced out.

“We have to look very carefully at exactly this,” Milburn said. “In a fragile youth labor market, which has been fragile for many years, we need to ensure that public policy provides the right incentives for employers to employ more young people rather than fewer.”

When asked whether the government, which introduced national insurance in the last budget, was squeezing businesses too much, he said: “I heard that said. I will examine the evidence, we will come to a conclusion.”

Milburn also wants to address sensitive issues around young people’s mental health, which he cites as a reason for a sharp increase in sickness benefits in recent years.

“We have to be mindful that having anxiety or depression will automatically lead you onto the downward escalator to the world of benefits,” he said.

“Sometimes we run a real risk in debates about the development of a new currency saying that work is bad for people’s mental health, when in fact the opposite is true, which is that particularly good work is extremely good for people’s mental health.

“When I talk about these uncomfortable truths that criticism is going to have to confront, this is one of them.”

Health secretary Wes Streeting has ordered a clinical review into the diagnosis of mental health conditions in England, which will inform Milburn’s review.

But the Labor veteran said 16 to 24-year-olds were a “generation under pressure”. They faced a different world from their predecessors, who had a “social interaction” with the state that no longer existed.

“It’s very easy to play the blame game… but we have a job to act as guardians to ensure young people have the right opportunities ahead of them,” he added, saying government and business needed to step up.

They had a responsibility to prepare younger generations, in particular, for the “potential tsunami of tomorrow” (advancement in technology) that could send further shockwaves through the youth labor market.

“You can’t just say, like King Canute, we will resist the forward march of technology. That’s not possible. What we need to do is equip people to be adaptable, agile enough, flexible enough, and successful in the labor market,” he said.

Milburn said that as Labor lost support among young voters, many had become disillusioned with a political system that they felt had reinforced generational inequality. Milburn said young people were abandoning mainstream parties.

“If young people start to feel that society is not interested in the question of how they potentially intend to vote in the future, then there is an obvious response,” he said, suggesting they might turn to Reform UK instead.

“This should be something people want to avoid, especially those interested in progressive policies. It’s pretty clear that the social contract has been violated.”

Milburn, who is close to Streeting and is considered a potential successor to Starmer should he resign, called on the government to be more optimistic about what it can deliver. “The centre-left of politics only wins when it creates a sense of possibility for the future,” he said.

“So my very strong advice would be to create hope for the future. [review] It means saying that the future can be better than today and the past. It’s about making sure we invest in future generations. “The country’s biggest deficit is the scarcity of hope,” he said.

Work and Pensions Secretary Pat McFadden plans to propose further welfare reforms next year after the government withdrew key parts of the bill in June under pressure from Labor MPs.

Milburn, who reported his review to McFadden, said the government’s efforts to win MPs over welfare were “clearly” wrong. “Framing welfare reform as a cost-cutting measure was not a sensible approach and led to the inevitable outcome,” he said.

“If you want to reduce welfare bills, the only way to do that is to first give people more opportunities to learn and earn.”