Labour Retreats on Youth Minimum Wage Pledge as Young Britons Face Worst Job Market in a Decade

On the morning Rachel Reeves was asked — twice — whether the government would stick to its manifesto commitment to equalise minimum wage rates for younger and older workers, the Chancellor of the Exchequer chose her words with the care of someone who already knew the answer. She talked about apprenticeship places. She talked about further education. What she did not do was say yes .

That non-denial, delivered at a supermarket in south London on Tuesday, confirmed what Treasury insiders had already signalled to reporters: Labour's promise to abolish age-based differences in the national minimum wage system is being quietly shelved. A senior Treasury source told The Guardian that a slower equalisation was "all but certain," though the formal decision would rest with the Low Pay Commission, the independent body that sets minimum wage rates . Ministers will submit evidence to the commission in the coming months — evidence that, by all accounts, will argue for caution.

The backdrop is stark. Official figures show youth unemployment among 18-to-24-year-olds rose to a five-year high in the final three months of 2025 . Experts noted that excluding the pandemic-era spike, the figures represent the highest youth unemployment in eleven years . Ministers have expressed concern in recent months about the uptick, and two government sources confirmed they were examining slowing down the equalisation .

Labour's 2024 manifesto had pledged to equalise the minimum wage before the next general election. The policy was framed as a matter of fairness: at current rates, those between 18 and 20 are paid a minimum of £10 an hour, while those over 21 receive £12.21 . The argument carried moral simplicity and electoral appeal. But the intervening eighteen months have delivered an economy that refuses to cooperate with manifesto ambitions.

The Centre for Policy Studies calculates that from April, the combined cost of employing someone aged 21 and over will have risen by 15% since 2024. For 18-to-20-year-olds, the increase is 26%, or £4,095 per worker, which can decrease the risk employers are prepared to take on younger employees . That differential represents the gap between a manageable cost increase and one that fundamentally changes hiring calculus, particularly for small businesses operating on thin margins in hospitality, retail, and food service — sectors that disproportionately employ young people.

The business community has not been subtle about the consequences. Kate Shoesmith, director of policy at the British Chambers of Commerce, said over a third of firms — 37% — reported that the planned increase in pay for the youngest workers would deter them from recruiting . "On top of all the other costs that have been piled on business, and with youth unemployment already rising at an alarming rate, it would be a sensible move," she said. "It would ease the pressure on firms and allow them to give young people a chance to get a foot on the career ladder" .

Alex Hall-Chen, principal policy adviser for employment at the Institute of Directors, provided harder numbers. Her organisation's research found that 13% of business leaders had responded to significant increases in youth minimum wage rates by reducing employment of 16-to-20-year-olds relative to other age groups . "Slowing down the equalisation of the minimum wage would be an improvement on the current approach," she said, "but a more impactful step would be to pause the equalisation and assess evidence of its impact before making a final decision as to the future of the policy" .

Alan Milburn, the former Labour minister who chairs the government's young people and work review, offered perhaps the most alarming assessment. He told the BBC that rising youth unemployment posed an "existential" risk for the UK and could put "a generation on the scrapheap" . "This is not a short-term phenomenon, it's a long-term one," he said. "We're seeing something dramatic changing in the labour markets" . His review, due to report in the summer, is expected to propose structural reforms well beyond minimum wage policy.

Not everyone agrees that the minimum wage is the villain. Andy Prendergast, national secretary of the GMB Union, dismissed the suggestion that equalising minimum wage rates would destroy jobs as "nonsense" . "Employers tell us that every single improvement in workers' rights is going to cause a problem and time and time again they have been proved wrong," he said . The union perspective highlights a genuine tension: youth unemployment has been climbing for some time, driven by structural factors that predate Labour's wage pledge — the post-pandemic reshuffling of the labour market, the growing mismatch between young people's skills and employer needs, and the rise in economic inactivity among the young.

The political dynamics are uncomfortable for Starmer's government. Walking back a manifesto commitment — particularly one framed in the language of fairness and equality — invites accusations of betrayal from the left and charges of economic incompetence from the right. The slowdown would mean that Labour breaks its manifesto target of equalisation before the next election . Reeves herself, when pressed, pivoted to existing incentives: the apprenticeship rate of the minimum wage, no national insurance contributions for the youngest workers, and expanding further education and apprenticeship places . The chancellor did not deny a delay was being considered .

For the opposition, the retreat validates long-standing warnings. Conservative and business-aligned voices had argued from the outset that mandating equal pay for workers of vastly different experience levels would price young people out of the market. The fact that Labour is now effectively conceding the point — while insisting it is not — gives critics a powerful line of attack ahead of local elections.

The deeper question is whether slowing the equalisation will actually help. If youth unemployment is being driven primarily by structural shifts — automation, the gig economy's erosion of traditional entry-level roles, and a generation increasingly disconnected from formal employment — then tinkering with wage bands is treating a symptom rather than the disease. The Low Pay Commission will weigh the evidence when ministers submit it in the coming months, but the commission operates within a narrow mandate that does not extend to the broader labour market transformation Milburn has warned about.

A government spokesperson offered a line that captured the administration's uncomfortable position with inadvertent precision: "We are raising the national living and minimum wage so that low-paid workers are properly rewarded" . True enough — but conspicuously silent on the question of when, and for whom.

What is clear is that Britain's youngest workers are caught between two forces neither they nor any government fully controls: an economy that is generating fewer of the entry-level positions they need, and a political system that promised them equal treatment it may not be able to deliver. The manifesto pledge sounded like progress. The retreat sounds like reality.