UK youth jobless rate hits 10-year high amid wage hikes

LONDON, ENGLAND — Britain’s youth unemployment rate has surged to its highest level in a decade, reaching 16.1% in the final quarter of 2025. The sharp increase is forcing the Labour government to reconsider its policy of phasing out lower minimum wage rates for younger workers, Reuters reports. 

The jobless rate, up from 13.8% in the middle of 2025 and considerably higher than the record low of under 9.2% during the pandemic, has pushed the United Kingdom youth joblessness level above the eurozone average.

Impact of wage hikes on UK retail and hospitality

The worsening of the youth labor market appears to be due to the compounding effect of the government-imposed costs on businesses, which have impacted low-wage earners who are usually employed by businesses. 

Over the past three years, the minimum wage rate has risen by 46% to £10 (US$13.46) per hour for trade workers under 20, and will be increased by the same amount in April to £10.85 (US$14.61) per hour. 

Vacancies in the low-paying category have decreased much more than those in the high-paying category over the last three years, yet this is not reflected in Germany or France.

The UK leads the pack in weakening job postings for lower-paid roles. As Jack Kennedy, Senior Economist at job site Indeed, notes, “That does definitely illustrate the extent to which low-wage postings in the UK have been hit by policy changes: the National Insurance increase, the minimum wage increases, and so forth.”

Ben Caswell, a Senior Economist at the National Institute of Economic and Social Research (NIESR), further indicated that the fastest increases in unemployment will be in the hospitality and retail industries during April to October 2025, two industries that largely depend on younger workers.

“It’s definitely impacting younger workers more,” Caswell noted. 

Gareth Jones, Managing Director of In-Comm Training Services, confirmed that manufacturing and engineering firms, particularly smaller ones, are now reluctant to hire apprentices, questioning the logic of paying unskilled labor the same as semi-skilled alternatives.

Labour’s dilemma: Fair pay vs. youth job access

The declining figures have posed a major political problem for the Labour government, which has pledged to abolish lower minimum pay rates for 18- to 20-year-olds, but whose policy is currently under serious scrutiny. 

Although the minimum wage for those 21 years of age and above has increased by 29% over the past three years to £12.21 (US$16.40), which is among the highest in relation to income in Europe, large percentage increases for younger employees could be rendering them unable to work.

To young job-seekers, demoralization has set in with the climate. Alex Kelly, a 19-year-old film student working at a bar in London, gave the application process a stinging critique, saying it is a terrible experience and that most of his online applications go unanswered, and that many of his peers have since given up. 

A government spokesperson notes that the minimum wage is increasing to ensure low-paid employees are properly compensated. 

However, Nye Cominetti, an Economist at the Resolution Foundation, a low-earner-oriented think tank, admitted that the evidence linking minimum wage increases to unemployment is not cast-iron, but is sufficiently solid to merit caution.

“In a world where the youth labour market looks rocky … big increases in the youth minimum wage rate are probably the wrong way to go,” said Cominetti, encapsulating the core challenge facing policymakers.

This surge in UK youth unemployment underscores a critical dilemma for the future of work: in striving for fair pay, governments risk pricing young, inexperienced workers out of the market entirely, forcing a difficult reevaluation of how to protect both wages and entry-level job access.