The Labour government faces mounting pressure to abandon its pledge to eliminate youth minimum wage rates as Britain confronts a sharp rise in young people neither working nor studying.
The Resolution Foundation has warned that continuing to equalise minimum wage rates across age groups could price vulnerable young people out of entry-level positions. The number of 16- to 24-year-olds classified as “Neet” (not in education, employment or training) has surged by 195,000 over two years to 940,000, approaching the 1 million mark last seen in 2012.
Labour promised during the election campaign to scrap what it called “discriminatory” lower wage rates for under-21s. Chancellor Rachel Reeves began implementing this through last year’s autumn budget, delivering a substantial 16.3% increase to the minimum wage for 18- to 20-year-olds in April, bringing it to £10 per hour. This far exceeded the 6.7% rise for workers aged 21 and over, whose rate now stands at £12.21.
However, the Resolution Foundation is now urging Reeves to halt further wage equalisation, warning that “any increases in the rates would need to be especially cautiously considered in the current economic environment to prevent young people from being priced out of entry into the labour market.”
The crisis extends beyond wage policy. Rising disability and ill health are major drivers of youth unemployment, with over a quarter of Neets now classified as inactive due to sickness or disability—more than double the 2005 rate. Unemployment has become the leading reason for Neet status among both men and women, replacing family caring responsibilities, which accounted for half of young women Neets two decades ago but now affects just one in five.
Business leaders have also blamed Labour’s £25 billion increase in employer national insurance contributions and employment rights reforms for dampening hiring activity.
The government is attempting to address the challenge through a “youth guarantee” announced by Reeves, offering every young person access to education or training, alongside “trailblazer” schemes in eight English mayoral authorities.
Louise Murphy, senior economist at the Resolution Foundation, emphasized the urgency: “Otherwise, we risk a cohort of young people slipping through the cracks into a lifetime of lower living standards.”
A government spokesperson defended the policy, stating the strengthened minimum wage aims to “support business growth through reduced staff turnover and by helping to achieve higher productivity.”
