Labour is under pressure to reassess its manifesto commitment to abolish lower minimum wage rates for young workers, as concerns grow over the increasing number of 16- to 24-year-olds not in education, employment, or training (Neet). According to a recent report by the Resolution Foundation, the number of Neets has surged by 195,000 over the past two years, reaching 940,000 — the highest figure in over a decade and approaching levels not seen since 2012.
The thinktank warns that eliminating youth minimum wage tiers could potentially exclude young people from entry-level roles, especially as employers face rising labour costs and are already reducing hiring. Labour’s election manifesto criticised the “discriminatory” lower pay bands for workers under 21. In April, Chancellor Rachel Reeves initiated a 16.3% increase in the minimum wage for 18- to 20-year-olds, raising it to £10 per hour, surpassing the 6.7% increase for those aged 21 and over, who now earn £12.21 per hour.
However, the Resolution Foundation cautions that further wage convergence might lead businesses to cut back on hiring or favour older, more experienced candidates, particularly in the current economic climate. The report emphasises that any increases in rates must be carefully considered to avoid pricing young people out of the labour market.
The report also notes a shift in the reasons for young people becoming Neet. Ill health and disability have become more significant factors, with over 25% of young Neets now inactive due to sickness, more than double the rate in 2005. Previously driven mainly by caring responsibilities, especially among young women, unemployment is now the primary cause of disengagement from work or study across both genders.
Business groups have expressed concerns that recent policy changes have heightened hiring costs, pointing to Reeves’s £25 billion increase in employer National Insurance contributions, rising minimum wages, and expanded employment protections. They argue that further mandated wage increases for young workers could limit apprenticeship and trainee opportunities as employers become more selective.
In response to these challenges, Reeves announced a new “youth guarantee” at the Labour Party Conference in Liverpool, pledging to provide every young person with access to education, skills training, or employment support. The government is also trialling “trailblazer” employment schemes in eight English mayoral regions to better connect young people with work and training opportunities.
Louise Murphy, a senior economist at the Resolution Foundation, stressed the need for stronger interventions, warning of the risk of young people falling into a lifetime of reduced living standards. Meanwhile, a government spokesperson defended its policy direction, emphasising that strengthening the national living and minimum wage aims to support business growth through reduced staff turnover and higher productivity.
With youth disengagement on the rise and employers highlighting cost pressures, Labour faces a critical decision: proceed with full wage equalisation, potentially risking job losses, or reconsider its strategy to ensure wage growth is matched by increased entry-level opportunities. The approach Labour chooses could significantly impact the youth labour market for years to come.
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