Minimum wage hikes are making it harder for teenagers to get jobs - I fear the consequences
New unemployment figures make grim reading for young people struggling to get a foot in the door into the world of work – but I fear there may be worse to come.
Overall unemployment has now risen to 5.1 per cent but young people are particularly affected, with 85,000 more 18-to-24-year-olds now unemployed and an extra 28,000 others between the age of 16 and 17 also in the same boat.
There are of course many factors that go into hiring and firing decisions but one of the key culprits may be the Government’s decisions around minimum wage rises for young people.
In the 2024 Budget, the minimum wage for 16 and 17-year-olds from April 2025 was increased by 18 per cent to £7.55 an hour and for 18 to 20-year-olds by 16.3 per cent to £10 an hour. Those over 21 got a still substantial but lesser increase of 6.7 per cent to £12.21.
That was all accompanied by a major cut to the point at which from companies pay National Insurance contributions on workers from £9,100 to £5,000 per year.
In short, employing an inexperienced young person instantly became a lot more expensive for businesses like shops, pubs and restaurants.
The impact is already starting to show. The number of people in hospitality jobs has dropped by 2.5 per cent in a year – five times the national average. Jobs in the retail world dropped three times the national average by 1.6 per cent.
The Office for Budget Responsibility said it “remains unclear” whether these reductions are directly down to the living wage and National Insurance changes or “wider economic conditions”. But it stated that sharper falls in employment “are evident among lower-paid sectors”.
Despite those flashing warning lights, last month’s Budget saw Rachel Reeves double down. From April 2026, there will be a further six per cent increase in the minimum wage for 16 and 17-year-olds from April to £8 an hour. There is an 8.5 per cent increase to £10.85 per hour for 18 to 20-year-olds and a 4.1 per cent increase for those over 21 to £12.71 per hour.
It may be well-intentioned and look good on paper but if you run your own business, the obvious reality is you will have to think much more carefully before employing a teenager. A new report this week from the Resolution Foundation urged the Government to take “a more cautious approach” on raising youth wages to protect their employment prospects in the wake of a jobs downturn “highly concentrated among the young”.
The situation takes me back to the day I finished my GCSEs in 2003. I saw a sandwich shop by my school was advertising for summer staff, walked in on a whim and managed to get a job on the spot. I wasn’t the greatest employee they ever had but I learnt a lot. It also paved the way to my next job during college working as a hotel waiter.
After becoming firm friends with one of my hotel colleagues, we ended up going to the same university and living in the same student house. One of our flatmates was from Sheffield and introduced us all to her best friend from home – the person who is now my wife.
That course of events all came from someone taking a shot on giving a young person their first job. Doing so is now a much harder calculation for businesses.
The minimum wage for 16-year-olds didn’t begin until October 2004 and was initially set at £3 per hour – the equivalent of £5.47 per hour today.
Companies are instead being asked to pay £8 an hour from April and it will be little surprise if an increasing number decide it is not a risk worth taking. I worry about the opportunities this generation of teenagers will miss out on as a result.
Chris Burn is head of business and features for The Yorkshire Post