Labour 'could drop minimum wage pledge' amid fears of triggering youth unemployment surge

Labour came to power promising to equalise the minimum wage for all adults before the next election - a departure from the current rates, which allow young workers to be paid less than their older colleagues.

Nearly one-in-six 18 to 24-year-olds are unemployed, according to figures released on Tuesday.

The figures represent the highest level of youth unemployment in a decade, with business groups warning ministers they are "pricing a generation of young people out of the workplace", according to The Times.

Some have warned that a wage increase for young people could cause a surge in unemployment, as recruiters would decide to hire older, more experienced candidates.

A decision on whether to scrap the pledge could come within months, as the Government waits for the opinion of the Low Pay Commission and its recommendations on whether to increase the National Living Wage again in April 2027.

Read More: UK unemployment hits highest level in nearly five years as wage growth slows

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Since Labour won the 2024 election, the National Minimum Wage has increased 6.7 per cent for those aged 21 and over.

In the same period, ministers have increased the rate for a worker aged between 18 and 20 by 16.3 per cent.

The pay rate for 18 to 20-year-olds will increase by a further 8.5 per cent on April 1, at the same time as a 4 per cent hike for those over 21.

The Federation of Small Businesses found that 45 per cent of small companies that employed young people aged between 16 and 20 were recruiting fewer workers as a result of the rate hikes.

Alan Milburn, the Labour grandee who is leading a Government review into the number of young Brits not in work, education or training, said he is going to "look at" the rises as part of his probe.

Milburn told reporters: “Obviously, when an employer takes on a young person, it’s always a risk for a very simple reason: they’re unproven."

“So what we’ve got to do is to make sure we’re minimising the risks and maximising the incentives … We risk a generation on the scrapheap.

"The system isn’t working: either on the demand side or the supply side. And that does entail radical change.”

Figures released by the Office for National Statistics (ONS) on Monday showed youth unemployment had risen to 16.1 per cent at the end of 2025, the highest level since 2014.

The Resolution Foundation said youth unemployment was higher than the EU average for the first time since records began in 2000.

Kate Nicholls, the chair of UKHospitality, told The Times that the number of youngsters without jobs was "heartbreaking".

“My industry has always been at the forefront of giving chances to people who are furthest from the labour market,” she said.

“To have those opportunities taken away because the government has taxed them out of existence is ludicrous and heartbreaking.”

Pat McFadden, the work and pensions secretary, said there were 381,000 more people in work since the start of this year, but added there was “more to do to get people into jobs”.

“Our £1.5 billion drive to tackle youth unemployment is a key priority, and this month we announced that we’ll make it easier for young people to find and secure an apprenticeship, which comes on top of our investment to create 50,000 new apprenticeships,” he said.