The government is considering slowing plans to equalise the minimum wage for younger workers with that of over-21s, as youth unemployment reaches its highest level in more than a decade. Ministers have not abandoned the commitment, but sources indicate the timetable could change.
The debate comes as official figures show a sharp rise in joblessness among 18 to 24-year-olds. With nearly one in six young people out of work, pressure is mounting from business groups who argue that rising labour costs are deterring employers from hiring inexperienced staff.
Under current rules, workers aged over 21 must be paid at least £12.21 an hour, while those aged 18 to 20 receive £10. Labour pledged in its election manifesto to remove these age bands and ensure adults of all ages receive the same rate before the next election.
According to the Office for National Statistics, youth unemployment stood at 16.1 per cent at the end of last year, the highest level since 2014. The overall unemployment rate rose to 5.2 per cent in the three months to December, up from 5.1 per cent in the previous period.
Rising Youth Unemployment Intensifies Pressure on Ministers
Figures released this week show that nearly one in six 18 to 24-year-olds are unemployed. According to the ONS, this marks the worst level of youth joblessness in more than a decade. The Resolution Foundation noted that youth unemployment in the UK is now higher than the EU average for the first time since records began in 2000.
Business groups have warned that recent increases in the National Minimum Wage are contributing to the problem. Since Labour took office, the minimum wage for workers over 21 has risen by 6.7 per cent, while the rate for 18 to 20-year-olds has increased by 16.3 per cent. From April, the younger rate will rise again by 8.5 per cent, compared with a 4 per cent increase for those over 21.
The Federation of Small Businesses found that 45 per cent of small firms employing 16 to 20-year-olds were recruiting fewer young workers as a result of the rate hikes. Tina McKenzie, the organisation’s policy chair, said that from April it will cost 26 per cent more to employ someone on the 18–20 rate than at the start of last year, meaning “the same wage bill that covered a team of five young people will soon only stretch to four”.
Kate Nicholls, chair of UKHospitality, described the rising number of unemployed young people as “heartbreaking”, arguing that increased costs had reduced opportunities in sectors that traditionally offer first jobs.
Government Reviews Timing of Equal Pay Commitment
Ministers are now reviewing whether to proceed with the planned equalisation of minimum wage rates. According to The Times, options under consideration include extending the implementation timetable until after the next election or equalising rates only for those over 20.
A decision could come within months when the government sets its annual remit to the Low Pay Commission, which advises on future wage levels. Government sources told reporters that rising youth unemployment figures had strengthened the case for a rethink, noting there was “no point increasing minimum pay for young workers if they haven’t got jobs to go to”.
Alan Milburn, who is leading a government review into young people not in work, education or training, said he would “look at” the impact of wage rises. He told the Times that 45 per cent of 24-year-olds not in employment, education or training had never had a job, adding that employers often view taking on young people as a risk because they are unproven.
Pat McFadden, the work and pensions secretary, said there were 381,000 more people in work since the start of the year, though he acknowledged there was “more to do to get people into jobs”, pointing to a £1.5 billion drive to tackle youth unemployment and plans to expand apprenticeships.
