UK Youth Unemployment Strains Government Over Wage Promise

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The increase in youth unemployment in Britain has reached a decade-high, raising concerns for the center-left government over its strategy to gradually eliminate lower minimum wages for younger workers.

Recent official data revealed that the unemployment rate among 16-24-year-olds climbed to 16.1% in the last quarter of 2025, up from 13.8% in mid-2025, and far above the pandemic-era low of under 9.2%. This youth unemployment rate now surpasses that of the eurozone.

Many business associations and economists attribute this surge to the combined effects of the significant minimum wage hike along with increased employer social security contributions last April, compounded by broader economic challenges. The role of artificial intelligence advancements is believed to be a less direct factor here.

Vacancies for jobs near minimum wage in Britain have declined more sharply than in Germany or France over the past three years, according to Jack Kennedy, senior economist at job platform Indeed. “Britain quite noticeably stands out for weaker postings in low-wage roles,” Kennedy noted. “This decline clearly reflects the impact of recent policy changes—like the rise in National Insurance contributions, minimum wage hikes, and similar measures.”

Ben Caswell, a senior economist at the National Institute of Economic and Social Research, pointed out that the sharpest increases in unemployment between April and October 2025 occurred mainly in hospitality and retail sectors, affecting especially younger workers. Tech sector job losses, possibly related to AI, were also above average, though there’s little evidence suggesting firms are hiring more automation to offset higher labor costs.

Since Britain introduced its minimum wage in 1999, there was little indication that these wages hurt employment levels. In fact, the jobless rate fell to a historic low of 3.6% in 2022. The former Conservative government aimed to set the minimum wage at approximately two-thirds of median earnings, making it one of the highest ratios in Europe. It also phased out lower minimum wage rates for workers aged 23-24 in 2021 and for 21-22-year-olds in 2024.

Today’s main minimum wage rate stands at £12.21 ($16.40) per hour, a 29% increase over the past three years. The rate for 18-20-year-olds has risen by 46%, reaching £10 an hour and scheduled to increase to £10.85 in April. However, approaches to youth wages differ across Europe; for example, France maintains a relatively high minimum wage that isn’t lowered for young workers except in certain training roles, while the Netherlands pays 18-year-olds half the rate of those three years older.

Gareth Jones, managing director of In-Comm Training Services, observed that manufacturing and engineering firms, especially smaller companies, are becoming hesitant to hire apprentices. “There’s a lot of talk from employers questioning why they should pay unskilled workers nearly the same as semi-skilled ones,” he explained.

For many young people, securing employment remains challenging. Alex Kelly, a 19-year-old film student, works at a bar near his home in southeast London—a job he started washing glasses at age 16—but struggles with inconsistent hours and has been unable to find other positions that fit his study schedule. “The application process is terrible. Most online submissions go unanswered,” Kelly said. “Many friends have just stopped applying altogether.”

Elsa Torres, 20, a final-year business student in Liverpool, has been unable to find part-time work despite submitting 70 applications, after her previous employer—a gastropub—shut down. Reports indicate the government is now reconsidering its plan to phase out the lower pay rate for 18-20-year-olds, possibly delaying or dropping the initiative.

A government spokesperson stated that the minimum wage is increasing to ensure low-paid workers are fairly compensated. Future rates for 2027 will be decided later this year based on advice from a panel of business leaders, academics, and unions.

Nye Cominetti, an economist at the Resolution Foundation, emphasized caution, suggesting that rising youth minimum wages might be contributing to the high youth unemployment. “While not definitive, the evidence indicates that large increases in youth wages could be detrimental in a fragile job market,” he warned.