Rising youth unemployment has exposed divisions within the UK government over how quickly to fulfil Labour's manifesto promise to give 18- to 20-year-olds the full minimum wage. Business Secretary Peter Kyle is understood to believe that now is not the right time for the increase, while others argue there is little evidence that recent pay rises have affected employment levels.
Treasury Minister Torsten Bell told the BBC on Friday that the Low Pay Commission's annual report found no evidence that previous minimum wage increases for young people had impacted their employment. However, a landmark report by former Labour minister Alan Milburn this week revealed that the number of young people not working or studying has surpassed one million for the first time in over a decade, costing the economy more than £125bn a year.
Milburn warned that employers in low-margin sectors like hospitality and retail may be reluctant to hire young workers if wage costs rise too quickly. The government accepted a Low Pay Commission recommendation this year to raise the youth rate by 8.5% to £10.85, while the main rate increased by 4.1% to £12.71. Some ministers privately hope the commission's October recommendation for the 2027 financial year will be significantly lower.
The Low Pay Commission stated last month that it does not believe wage rises are contributing to higher youth unemployment, noting a lack of robust evidence. However, the government has already changed its guidance to the commission to prioritise employment rates over wage levels for young people. Ministers are not bound to accept the commission's recommendations, and further guidance changes could be made to slow the pace of increases.
Trade unions have urged the government not to backtrack on its promises. Kate Bell, assistant general secretary of the Trades Union Congress, said there is no good evidence linking the minimum wage to a jump in youth unemployment, describing the concern as a recurring talking point from business. The government maintains its commitment to equalising rates but has not set a timeline for doing so.
