![\"Rachel](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2026\/03\/1772708353_179_rachel-reeves.jpg\")
<\/p>\nEmployers could face a \u00a36,800 increase in costs for each young worker they hire under Labour proposals to abolish the youth minimum wage rate, according to analysis from the Institute for Fiscal Studies (IFS).<\/p>\n
The respected think tank calculated the Government\u2019s plan to eliminate what ministers have described as “discriminatory age bands” would place businesses under a 40 per cent real-terms rise in hiring expenses.<\/p>\n
Rachel Reeves\u2019 ambition to pay 18 to 20-year-olds the same hourly rate as workers aged 21 and over forms a central plank of Labour\u2019s manifesto commitments.<\/p>\n
The policy was originally championed by former deputy prime minister Angela Rayner, who directed the Low Pay Commission to chart a course towards wage equalisation by the end of this parliament.<\/p>\n
The proposals come as youth unemployment has risen to 16.1 per cent, marking the highest level for young Britons seeking work in a decade.<\/p>\n
Government ministers are expected to soften the policy in the coming weeks amid growing concerns about its potential impact on job opportunities for younger workers.<\/p>\n
The IFS warning follows similar cautionary notes from other economic research bodies, including the Resolution Foundation, which has urged a slower pace of increases to the youth wage floor.<\/p>\n
Lower pay rates for younger workers have been a feature of Britain\u2019s minimum wage system since its introduction under a Labour Government in 1999.<\/p>\n
Employers could face a \u00a36,800 increase in costs for each young worker<\/p>\n
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The think tank warned the current trajectory risks significantly increasing employment costs for businesses hiring young people.<\/p>\n
The Chancellor has already overseen substantial above-inflation rises in pay for younger workers.<\/p>\n
In April last year the rate for 18 to 20-year-olds increased by 16.3 per cent, lifting it from \u00a38.60 to \u00a310 per hour.<\/p>\n
A further 8.5 per cent rise is scheduled for April this year, taking the youth rate to \u00a310.85 per hour.<\/p>\n
![\"Business\"\/](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2026\/03\/business.jpg\")
Businesses may feel its too expensive to hire inexperienced staff<\/p>\n
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GETTY<\/p>\n
Workers aged 21 and over are due to receive a smaller 4.1 per cent increase, bringing their hourly pay to \u00a312.71.<\/p>\n
The IFS calculated these increases alone will add \u00a31,476.90 to employer costs for a part-time teenager working 16 hours a week compared with inflation-linked pay rises.<\/p>\n
For young workers on full-time 35-hour contracts, the additional real-terms burden rises to \u00a33,230 before any further equalisation measures take effect.<\/p>\n
IFS economist Nick Ridpath said employment rates have fallen more sharply among younger workers than among older age groups in recent years.<\/p>\n
![\"Young](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2026\/03\/young-person.jpg\")
Youth unemployment has risen to 16.1 per cent<\/p>\n
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GETTY<\/p>\n
Mr Ridpath said: “This is something that’s particularly important because this group has been the subject of a lot of focus in recent months.”<\/p>\n
The think tank also highlighted concerns about young people who are not in education, employment or training.<\/p>\n
Mr Ridpath added: “This is something that we think might cause particular scarring for these groups if they don’t get the attachment to the labour market they might need going forward.”<\/p>\n
His colleague Tom Waters said the organisation was not making formal policy recommendations but urged caution while the labour market remains fragile.<\/p>\n
“All else equal, you want to be less aggressive on the minimum wage when the labour market is weak.”<\/p>\n","protected":false},"excerpt":{"rendered":"Employers could face a \u00a36,800 increase in costs for each young worker they hire under Labour proposals to…\n","protected":false},"author":2,"featured_media":458764,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[84,1294,2222,229,1445,56,44208,54,55],"class_list":["post-458763","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-money","tag-politics","tag-rachel-reeves","tag-uk","tag-uk-politics","tag-united-kingdom","tag-unitedkingdom"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/458763","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=458763"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/458763\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/458764"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=458763"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=458763"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=458763"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}