Alan Milburn, speaking from the Netherlands this week as his review into youth employment nears completion, has said what a lot of employers have been warning for some time: making it more expensive to hire young people is never going to help them get hired. His review may now recommend pausing or reversing the plan to equalise the minimum wage across age groups, and he deserves credit for following the evidence rather than the politics.
The sentiment behind equal pay for young workers is sound. Try bluntly telling a young person that you’re going to pay them less to do exactly the same job as someone ten years older, and the initial reaction of many will be one of opposition. The Labour Party, aware of this, campaigned on this issue at the last General Election, and it probably helped win the votes of many young people going to the polling station for the first time.
But the reality is, and as businesses have long warned, the main outcome of this policy is to put young people out of work. Nearly a million 16 to 24-year-olds in this country are not in education, employment or training. Unsurprisingly this number has risen through precisely the period in which ministers have raised the cost of employing someone. Businesses have been barraged by wage equalisation, by the rise in employer National Insurance, and through an Employment Rights Bill that piles further obligation onto the businesses being asked to take the risk on an 18-year-old in the first place.
An 18-year-old with no track record already costs more to bring on than their wage suggests, once you factor in the supervision and the learning curve. Close the gap with what you'd pay a fully trained adult, and the sums that used to tip in a young person's favour stop working. The Jobs Foundation's own Jobs and Education report found the cost of employing an 18 to 20-year-old has risen by over £4,000 between 2024 and 2026. For a small or medium-sized firm, that's not a figure that’s easily absorbed, and for businesses who are operating in an increasingly challenging economic environment, it’s impossible. They’ll choose the older, more experienced employee that comes at a similar cost to the young inexperienced employee every single time.
Inevitably, all government policy comes with trade-offs. The trade-off for minimum wage equalisation is younger, less experienced people, are going to find it harder to access employment opportunities, as there will be fewer available to them. Instead of getting that first job, instead of earning their own money and contributing to the coffers of the Treasury, they’ll join the ever-increasing dole queue.
Wage equalisation is a policy failure. I have no doubt that some Labour MPs will feel that to U-turn on the policy would be a betrayal of the young people who voted for them. But I say the bigger betrayal of young people would be to sit back and do nothing, and continue to watch our youth unemployment rate rise above the European Union average, and to continue depriving an increasing number of young people the opportunity to get their first job and start making a living.
Millburn’s final report is due this Autumn. Ministers will have a choice to make. They can hold the line on a manifesto pledge that is hurting young people and business alike or be brave and abandon it. The latter is the right thing to do.
