Burnham’s team weighs slowing youth wage hikes as joblessness climbs
The government is weighing a slowdown to the fast‑rising minimum wage for 16‑20‑year‑olds as businesses warn higher costs are curbing hiring.
Andy Burnham's administration is consulting Downing Street and the Treasury on whether to temper the steep rise in the youth minimum wage. Ministers plan to publish a review of youth worklessness in the coming weeks, after Bloomberg reported concerns that the rapid increase may be discouraging employers from hiring younger staff.
Government review and possible policy shift
Labour pledged in its 2024 manifesto to scrap the separate age bands for the minimum wage and bring all workers onto the adult rate. This year the adult rate rose 4.1 per cent to £12.71, while the 18‑20 bracket jumped 8.5 per cent to £10.85 and the 16‑17 rate rose six per cent to £8.00. The gap between adult and youth pay has therefore narrowed quickly.
Officials say they are now asking the independent Low Pay Commission to factor employment opportunities into any future recommendations. A government spokesperson said,
We are determined to help young people into work and deliver on our manifesto commitment to make work pay.
Looking abroad for clues
Britain’s review will also consider the Dutch model, where the minimum wage falls sharply with age. In the Netherlands workers aged 21 and over earn €14.99 an hour, compared with €7.50 for an 18‑year‑old and €4.50 for a 15‑year‑old. Around 74 per cent of Dutch 15‑29‑year‑olds combine work with study, the highest rate in the EU, and only 4.8 per cent are neither working nor in training, versus 13.6 per cent in the UK.
Former Labour cabinet minister Alan Milburn, who is leading the review, visited the Netherlands this week. He said any recommendations could include slowing or even reversing planned wage hikes, arguing that the government must "make it as easy as possible" for firms to employ young people.
Implications for employers and politics
Retailers, pubs and restaurants, sectors that employ large numbers of younger workers, have warned that rising labour costs are already squeezing hiring. The move comes just days after Burnham’s government fined hundreds of employers, including Tesco, B&Q and Whitbread, for breaching existing minimum‑wage rules.
If the policy is softened, the Labour Party could face push‑back from MPs and trade unions that have championed equal pay for younger staff. At the same time, a more gradual approach may ease pressure on businesses and could be reflected in upcoming fiscal plans, such as the Burnham’s recent Whitehall reforms that are already reshaping cost‑of‑living debates.
What happens next will hinge on the Low Pay Commission’s advice and the political calculus within Labour. A slower rise could give firms breathing room, but it may also reignite the debate over whether age‑based wage differentials are fair or effective in tackling youth unemployment.
