Britain’s youth unemployment crisis ‘is self-inflicted’

Tim Wallace

Fri, February 20, 2026 at 12:13 AM GMT+9 3 min read

Labour has been narrowing the gap between the National Living Wage bands - Temilade Adelaja/Reuters

Britain’s youth unemployment crisis is “self-inflicted”, a former executive at the Office for Budget Responsibility (OBR) has said.

Andy King said higher taxes and sharp rises in the minimum wage under Labour had sent employment costs spiralling, undermining young people’s job prospects.

“The employer National Insurance (NI) contributions rise was structured in such a way that it was particularly proportionately large for those on lower incomes or part-time jobs,” Mr King told a Resolution Foundation event.

“The minimum wage was raised significantly, but the youth minimum wage was raised by close to 20pc.

“It hit sectors where you have relatively lower-paid people or more part-time work – retail, hospitality – and those are the sectors where young people get their first job, and so, relative to two years ago, employment costs that you would expect to drive youth unemployment are significantly higher.”

He added: “This self-inflicted youth unemployment problem, how do you get out of that without pretty large U-turns or pretty large spending to overcome the increase in employment costs?”

The comments from Mr King, who served on the OBR’s governing Budget Responsibility Committee until 2023, come as ministers face pressure to change course on youth minimum wage.

Labour has been narrowing the gap between the National Living Wage, paid to workers aged 21 or over, and the rate for 18 to 20-year-olds since coming to power.

The party pledged to scrap the youth rate altogether in its 2024 manifesto, calling the age bands “discriminatory”.

However, business groups and economists have urged the Government to rethink the policy, warning that young people are being priced out of work. Ministers are said to be considering slowing the equalisation of the two rates.

James Smith, the chief economist at the Resolution Foundation, a think tank with considerable influence in Labour circles, said holding off fulfilling the pledge to harmonise pay rates would help to ease youth unemployment.

“That would be a policy you could bring in relatively quickly, it is not a fiscal cost, it would help in this situation,” he said.

Unemployment among 16 to 24-year-olds has surged to 16.1pc, a level not seen in more than a decade.

It means Britain now has a higher youth unemployment rate than the EU for the first time. The UK’s rate has even surpassed that of Greece, where more than 60pc of young people were out of work in the wake of the eurozone’s sovereign debt crisis.

Sir Keir Starmer insisted on Wednesday that the Government will not renege on its promise to abolish the youth minimum wage, vowing: “We will keep to those commitments.”

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However, Rachel Reeves dodged a similar question, instead saying the Government was “determined to do everything we can to support them”.

Mr King said there was a danger that higher employment costs could leave the jobless rate permanently higher.

“Maybe it is just that unemployment is going to stay higher because we have changed the structure of the labour market,” he said.

“I find it quite surprising that the OBR and the Treasury are sticking to their guns that the combined impact of raising employer NI and the minimum wage has not been more damaging to employment than they originally thought. It looks kind of clear.”

Catherine Mann, a member of the Bank of England’s interest rate-setting Monetary Policy Committee, previously told The Telegraph that steep rises in the minimum wage during several years had fuelled youth unemployment.

She said: “The accumulation over three years of the rise in the national living wage for that group has been manifested in unemployment for that category of workers.”

From April, the National Living Wage rises by 4.1pc to £12.71 per hour. The youth rate will go up by 8.5pc to £10.85 per hour, narrowing the gap.

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