{"id":449909,"date":"2026-02-28T07:51:08","date_gmt":"2026-02-28T07:51:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/449909\/"},"modified":"2026-02-28T07:51:08","modified_gmt":"2026-02-28T07:51:08","slug":"the-scourge-of-youth-unemployment-in-britain","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/449909\/","title":{"rendered":"The scourge of youth unemployment in Britain"},"content":{"rendered":"

How bad are the youth unemployment figures?<\/p>\n

Youth unemployment figures make grim reading. Government data released earlier this month shows that the UK unemployment rate<\/a> rose to 5.2% in January \u2013 the highest rate for five years.<\/p>\n

But in the last quarter of 2025, the unemployment rate for 16-to 24-year-olds rose to 16.1%.<\/p>\n

<\/p>\n

That\u2019s higher than the Covid peak of 15.3% in late 2020 and the highest level for more than a decade. And for the youngest workers \u201316-and 17-year-olds who have left education \u2013 the rate is a shocking 34.2%.<\/p>\n

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Whatever measure you look at, there\u2019s clear evidence that younger workers are bearing the brunt of the UK\u2019s increasingly soft jobs market.<\/p>\n

For example, the number of payrolled employees in the UK fell by 134,000 in the year to January. But for younger employees (on this metric meaning younger than 34), the decrease was 174,000; for older workers there was a net increase.<\/p>\n

How does this compare globally?<\/p>\n

It\u2019s bad. For the whole of this century, it\u2019s been easier for young workers to find employment in the UK than in mainland Europe, hence the millions of young Europeans who made Britain their home.<\/p>\n

But now, for the first time that situation has reversed. According to the OECD think tank, the UK\u2019s youth unemployment rate now stands at 15.3% \u2013 higher than the EU\u2019s level of 15% and more than twice that of Germany.<\/p>\n

Yet for workers overall, the jobless rate remains higher in the EU than here, at more than 6%. It\u2019s only for younger workers that Britons are worse off.<\/p>\n

What\u2019s gone wrong?<\/p>\n

A mix of macro-economic factors, made worse by recent policy decisions by the Labour government.<\/p>\n

Youth unemployment has been a persistent and cyclical part of the UK labour market over many decades.<\/p>\n

Structural shifts in the post-war period, deindustrialisation in the 1980s and the global financial crisis<\/a> \u2013 all saw youth unemployment rise, and it has consistently been higher than overall employment.<\/p>\n

Recent years have seen a long period of low or no growth and lacklustre productivity<\/a>, combined with an inflationary spike and cost pressures on businesses.<\/p>\n

All of that tends to reduce hiring and young workers are often the first affected.<\/p>\n

However, there\u2019s no doubt that Labour has made things worse. And that\u2019s not merely the judgement of Labour\u2019s opponents: it\u2019s the publicly expressed view of Huw Pill, the Bank of England<\/a>\u2019s chief economist.<\/p>\n

What does the Bank of England\u2019s chief economist say?<\/p>\n

Huw Pill told a parliamentary committee this week that last year\u2019s increase in employers\u2019 national-insurance contributions, plus the drive to level up the youth rates of the minimum wage towards the main adult rate, \u201chave had a particular effect on young people\u201d aged between 16 and 21.<\/p>\n

This cohort of young people were already launching their careers at a difficult time in the aftermath of the pandemic, he says, and in the face of deeper structural changes such as the adoption of AI that policymakers might find \u201cdifficult to manage\u201d.<\/p>\n

What about the minimum wage?<\/p>\n

The minimum wage<\/a> has surged by 75% \u2013 in real terms, not merely nominal \u2013 since it was introduced by New Labour in 1999.<\/p>\n

Initially, the rates were \u00a33.60 per hour for the over-22s and \u00a33 per hour for 18-to 21-year-olds.<\/p>\n

With inflation<\/a>, those rates today would be \u00a37 and \u00a35.80. In fact, the minimum wage is now \u00a312.21 per hour for the over-21s (rising to \u00a312.71 in April); \u00a310 per hour for 18-to 20-year-olds (rising to \u00a310.85); and \u00a37.55 for 16-to 17-year-olds (rising to \u00a38).<\/p>\n

The policy was widely accepted as a success and adopted by the Conservatives, who had opposed it at the time as a jobs-destroyer.<\/p>\n

And indeed, since its introduction there has been little sign that it was hurting employment; in 2022 the headline joblessness rate hit its lowest since the 1970s, at 3.6%.<\/p>\n

So what happened?<\/p>\n

The Conservatives became so confident about the policy that in government they set a goal of raising the main minimum wage (rechristened the \u201cliving wage\u201d) to two-thirds of median earnings, making it one of the highest relative to earnings in Europe.<\/p>\n

They also phased out lower rates for workers aged 23-24 in 2021 and for 21-to 22-year-olds in 2024.<\/p>\n

Yet it\u2019s now clear that the inexorable rise of the minimum wage has reached a tipping point, with businesses loudly telling policymakers that it is stopping them from hiring young workers.<\/p>\n

Nor is it solely minimum-wage workers who are struggling: it\u2019s graduates, too.<\/p>\n

The soft economy, combined with the promise of AI\u2019s workplace abilities, has led to a graduate \u201cjobpocalypse\u201d in which companies have slashed or paused recruitment programmes, entry-level jobs are disappearing and graduate-level unemployment is at an all-time high.<\/p>\n

Why is this issue so important?<\/p>\n

Because people\u2019s early interactions with the labour market play a critical role in shaping their long-term futures.<\/p>\n

Researchers have consistently found that NEETs \u2013 people not in education, employment or training \u2013 are \u201cat risk of life-long socio-economic scarring, remaining at significantly elevated risk for worklessness and health problems for decades\u201d, says John Burn-Murdoch in the Financial Times<\/a>.<\/p>\n

In the UK, this group of young people who are increasingly disengaged from not only the economy<\/a>, but also the rest of society, has doubled in just over a decade from 4.5%-9% of those aged 20-24.<\/p>\n

Alan Milburn, the Blair-era cabinet minister, is now conducting an inquiry into the issue.<\/p>\n

\u201cWe\u2019re seeing something dramatic changing in the labour markets,\u201d says Milburn.<\/p>\n

Some 45% of 24-year-olds who are not in education, employment or training have never had a job.<\/p>\n

“If you haven\u2019t had a job by 24, that entails a long-term scarring effect and you\u2019re probably then stuck in a lifetime on benefits.\u201d<\/p>\n

Britain is \u201cfacing the existential risk of a lost generation\u201d \u2013 with all the economic and fiscal damage, and social and political turbulence, that will entail.<\/p>\n

This article was first published in MoneyWeek’s magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription<\/a>.<\/p>\n

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