Labour Ministers are weighing up another policy reversal amid mounting concern over soaring youth unemployment, with Labour’s flagship plan to equalise the minimum wage for adults now under review.
The rethink comes after new figures from the Office for National Statistics showed that 16.1 per cent of 16 to 24 year olds are out of work, the highest level in 11 years. Youth unemployment in Britain has now climbed above that of the eurozone, intensifying pressure on the Government to respond.
According to reports, senior figures fear that pressing ahead with plans to abolish age bands in the minimum wage could further reduce job opportunities for young people. Business groups have warned that forcing employers to pay younger staff the same rate as older workers risks pricing inexperienced candidates out of the market.
Three Government sources told The Times that ministers are considering delaying implementation until after the next general election. Another option under discussion is to equalise pay only for those aged 20 and over, stopping short of full parity for all adults.
Labour pledged in its manifesto to remove what it described as discriminatory age bands, promising that everyone aged 18 and over would receive the same minimum rate. Currently, workers aged 21 and over are entitled to at least £12.21 an hour, while those aged 18 to 20 must be paid a minimum of £10. Pay for 21 to 22 year olds has risen by 33 per cent over the past two years.
The possible retreat would mark Labour’s 13th about turn since taking office 18 months ago. Keir Starmer has already reversed course on plans to cut disability benefits and winter fuel payments after a backbench revolt. He has also stepped back from proposals to cancel local elections and introduce mandatory digital ID, while Chancellor Rachel Reevesrecently abandoned a planned tax increase on pubs following industry backlash.
The latest uncertainty comes as employers brace for sweeping workplace reforms. It emerged this week that more than a third of bosses are planning to scale back recruitment in response to Labour’s workers’ rights package.
Critics argue that a combination of higher employment costs and increased regulation is discouraging firms from hiring, particularly younger staff. Labour’s decision to raise employers’ National Insurance contributions last April has also been cited by business leaders as a factor weighing on recruitment.
Andrew Griffith, the shadow business secretary, claimed that Labour’s economic approach was creating “a jobless generation”. Writing this week, he said ministers had sought to deflect attention from worsening employment figures by blaming artificial intelligence, global trends and post pandemic adjustment.
He pointed to official data showing that under Labour youth unemployment has surged to one in six young people. He claimed that many of the more than 200,000 jobs lost since Labour entered office had been among younger workers.
Mr Griffith also criticised the Government’s Employment Rights Act, describing it as a lengthy union backed overhaul that increases costs and legal risks for employers. He argued that measures such as earlier access to unfair dismissal claims and expanded union powers were prompting firms to think twice before taking on new staff.
Alan Milburn, the former Labour health secretary who now chairs the Government’s review into young people and work, warned that the trend runs deeper than short term economic turbulence. Speaking to the BBC, he said the labour market was undergoing dramatic change.
Mr Milburn said that 45 per cent of 24 year olds who are not in education, employment or training have never had a job, a situation he described as carrying a long term “scarring effect”. Without intervention, he warned, a generation risked being left “on the scrapheap”.
Behind the headline figures, ONS data show that more than 17 per cent of young men are out of work, the highest rate in 12 years. Peter Dixon, of the National Institute of Economic and Social Research, said there were signs that younger workers were being squeezed out by rising wage floors.
He noted that the 33 per cent increase in the minimum wage over two years had coincided with a rise of more than two percentage points in unemployment among 18 to 24 year olds, taking the rate to 14 per cent, the highest in a decade.
Ministers are expected to make a decision in the coming months as they prepare the Government’s annual remit to the Low Pay Commission, which sets recommendations for the national living wage and minimum wage rates. Whether Labour presses on with its manifesto promise or executes yet another U turn could prove a defining moment for its economic strategy.
