Britain’s centre-left government is facing mounting pressure after youth unemployment climbed to a 10-year high, raising fresh questions over its pledge to phase out lower minimum wage rates for younger workers.
Official data released this week showed the unemployment rate for people aged 16 to 24 rose to 16.1% in the final quarter of last year, up sharply from 13.8% in mid-2025 and well above the pandemic-era low of under 9.2%. Youth unemployment in the UK now exceeds the average rate in the euro zone.
Business groups and economists point to a combination of factors behind the increase, including sharp rises in the minimum wage, higher employer social security contributions introduced last April, and broader economic headwinds. The impact of artificial intelligence on hiring remains less clear.
Jack Kennedy, senior economist at Indeed, said job postings for roles paying close to the minimum wage have fallen more sharply than higher-paid vacancies over the past three years — a trend that contrasts with patterns seen in Germany and France.
“The UK really stands out in terms of the weakening that we’ve seen in lower-paid job postings,” Kennedy said, attributing much of the decline to policy changes such as National Insurance increases and higher statutory pay floors.
Ben Caswell, senior economist at the National Institute of Economic and Social Research, said hospitality and retail — sectors that traditionally employ many young workers — recorded some of the steepest unemployment increases between April and October 2025.
“It’s definitely impacting younger workers more,” Caswell said, adding that while the IT sector has also seen above-average job losses, there is limited evidence that companies are widely adopting labour-saving technologies in response to rising costs.
Labour Party has pledged to abolish lower minimum wage rates for workers aged 18 to 20, continuing reforms initiated under the previous Conservative Party government, which had already eliminated reduced rates for older youth brackets.
Britain’s main minimum wage now stands at £12.21 per hour, a 29% increase over the past three years. For 18- to 20-year-olds, the rate has risen 46% to £10 per hour and is set to increase further to £10.85 in April.
While the minimum wage has historically shown little negative impact on overall employment — with Britain’s headline unemployment rate hitting a multi-decade low of 3.6% in 2022 — economists say the rapid pace of recent increases may be contributing to strains in the youth labour market.
Approaches to youth pay vary widely across Europe. France applies largely uniform rates across age groups, while the Netherlands maintains significantly lower wages for younger workers.
Gareth Jones, managing director of In-Comm Training Services, said some manufacturing and engineering firms, particularly smaller businesses, are becoming more cautious about hiring apprentices.
“There’s a lot of narrative around employers saying: ‘Why would we pay someone that’s completely unskilled that wage when we can get semi-skilled for the same or not too much more?’” Jones said.
For many young Britons, the labour market has become increasingly difficult.
Alex Kelly, a 19-year-old film student in southeast London, said he struggles to secure reliable hours at his bar job and has found it difficult to secure alternative employment that fits around his studies.
“The applying process is really awful. If you do it online, then most of the time you’re not even getting a response,” he said.
Elsa Torres, a 20-year-old business student in Liverpool, has submitted 70 applications for part-time work since the gastropub where she worked closed, but has yet to find a new job.
The Times reported that the government is considering whether to reconsider its long-term plan to eliminate the lower wage rate for 18- to 20-year-olds. A government spokesperson said the policy aims to ensure low-paid workers are “properly rewarded.”
Minimum wage rates for 2027 are expected to be determined later this year based on recommendations from an independent advisory body.
Nye Cominetti of the Resolution Foundation said evidence linking higher youth wages directly to rising unemployment is not definitive but strong enough to warrant caution.
“In a world where the youth labour market looks rocky, big increases in the youth minimum wage rate are probably the wrong way to go,” he said.