Plans to increase the minimum wage for 18 to 20-year-olds to the same level as for other adults could be delayed, Sky News understands.
In its 2024 election manifesto, Labour committed to “remove the discriminatory age bands, so all adults are entitled to the same minimum wage, delivering a pay rise to hundreds of thousands of workers across the UK”.
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But Sky News understands the government is considering delaying the pledge – although it is committed to doing it eventually.
Reports suggest the potential delay is over fears the higher cost of employing young people could put off firms from hiring them and worsen youth unemployment.
New figures released on Tuesday showed the UK’s unemployment rate rose to 5.2% in October to December last year, the highest it has been in almost five years – while the rate for 16 to 24-year-olds was 16.1%, the highest level since early 2015.
Almost 950,000 people of that age were not in employment, education, or training in July to September last year.
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Speaking in Cardiff, Prime Minister Sir Keir Starmer confirmed the government’s commitment to equalising the youth minimum wage.
But companies say measures taken by the government, such as increasing employer National Insurance contributions, have made it more expensive and riskier to hire new staff in industries which would typically hire young people, such as hospitality.
Chair of the Federation of Small Businesses, Tina McKenzie, told Sky News: “If [the government] think that small employers can handle [increased costs], as well as the increase in the minimum wage, then good luck.
“Take your head out of the sand and realise if you continue to increase costs of employment and you make hiring young people more difficult for small employers, then all that’s going to happen is that they will hire less young people.”
Unions have warned the government against “scaremongering” on a delay in implementing the rise.
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General secretary of the TUC, Paul Nowak, said that youth unemployment “is an urgent issue and one which deserves real solutions like an ambitious jobs guarantee, ending insecure employment and driving up the number of quality apprenticeships – not more scaremongering about the minimum wage”.
“Young workers have bills to pay too – and it’s only right that they get a fair rate for the job. That’s why the government must stick to its target on scrapping pay rates based on age, rather than based on the work people do,” he said.
Chancellor Rachel Reeves dodged questions from reporters in south London earlier on whether she was sticking to the commitment, saying: “We already have incentives to hire young people with the apprenticeship rate of the minimum wage, but also for no National Insurance contributions for the youngest of workers.”
Recognising challenges that young people face, she added: “As a government, we have determined to do everything we can to support them,” naming policies such as increased apprenticeship places.”
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The minimum wage for workers aged between 18 and 20 is £10 an hour, rising to £10.85 in April.
In comparison, the minimum wage for workers aged 21 and over – known as the national living wage – is £12.21 an hour, rising to £12.71.
