Youth Unemployment Crisis: How Government Policy is Pricing Young People Out of Jobs
Youth unemployment in the United Kingdom has reached its highest level in a decade, climbing to 15.9 per cent, with over 100,000 more young people out of work since January 2025. This alarming trend is not due to a lack of ambition among the younger generation but is largely driven by government policies that have made hiring entry-level workers prohibitively expensive for employers.
The Rising Cost of Hiring Young Workers
According to the Centre for Policy Studies, the cost of employing a young person aged 18 to 20 has increased by more than £4,000 since 2024. This surge is attributed to recent hikes in the minimum wage and taxes, which have stripped young people of their competitive edge in the job market. By phasing out age-related pay brackets in favour of a single adult rate, ministers are effectively eliminating the financial incentive for businesses to take a chance on inexperienced workers.
Why would a small business, such as a corner shop or a tech start-up, hire an 18-year-old BTEC student or a 23-year-old graduate at the same wage as someone with years of experience? The answer is increasingly clear: they won't.
Tax Burdens and Broken Incentives
From April, employer National Insurance contributions will rise to 15 per cent, with the threshold dropping from £9,100 to £5,000. This change means that hiring an 18-year-old now costs nearly as much as employing someone with five years of experience, adding an extra £615 in costs for minimum-wage workers before any pay rises are considered.
For young workers themselves, the financial incentives to work are severely undermined. A graduate earning just over £27,000 faces a combined tax rate of nearly 40 per cent, including income tax, National Insurance, and student loan repayments. Even more concerning, young people transitioning from benefits to work can face marginal effective tax rates as high as 70 per cent, meaning some end up working for the equivalent of 20p to 30p per hour in real income.
The Shift in Hiring Practices
As a result of these escalating costs, businesses have shifted their hiring strategies. Instead of investing in potential, employers now demand immediate returns, often requiring two years of experience for entry-level positions. This leaves many young people, including students and recent graduates, trapped in a cycle where they cannot gain the experience needed to secure jobs.
The narrative that young people are lazy is a convenient cover for a fundamentally broken entry-level economy. In reality, the state has turned hiring a teenager or fresh graduate into a commercial risk, leaving a generation struggling to start their careers.
Government Responses and Their Limitations
In response to the crisis, Work and Pensions Secretary Pat McFadden is expected to announce a new £1 billion employment package aimed at creating up to 200,000 jobs for young workers. This follows a previous £820 million "youth guarantee" introduced this spring, which includes schemes like the Youth Jobs Grant, offering businesses £3,000 for hiring unemployed 18- to 24-year-olds, and apprenticeship incentives for small and medium-sized enterprises.
However, these measures are largely temporary, focusing on subsidised roles and six-month placements rather than addressing the root cause: the high cost of hiring young people. Critics argue that without making it cheaper for businesses to employ young workers, no amount of government spending will rebuild the bottom rung of the job ladder.
A Call for Change
Young people like Samiksha Bhattacharjee, president of the University College London Libertarian Society, are vocal about their desire to work and build careers, not rely on government-subsidised schemes. They argue that the best solution is for the government to step back and allow the market to function naturally, reducing barriers to employment for the younger generation.
As youth unemployment continues to climb, it is clear that without significant policy reforms, the UK risks creating a permanent class of young dependents, disconnected from the world of work and unable to contribute to the economy.
