Plan to increase youth minimum wage could be delayed

Joe Pike,Political correspondentand

Brian Wheeler,Political reporter

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Ministers are considering slowing down plans to pay adults of all ages the same minimum wage.

Labour committed in their election manifesto to remove "discretionary age bands" and increase the wages of 18 to 20-year-olds so they are paid the same as those over 21.

But government sources have confirmed ministers are interested in delaying that rise, though are unlikely to reverse the commitment entirely.

Some business leaders say minimum wage increases are making it too expensive for them to hire young people - but unions say it is unfair that the young can be paid less for doing the same job as older people.

The government has already made a start on ending the gap between minimum pay for younger and older workers.

The hourly for rate for 18 to 20-year-olds will rise by 85p to £10.85 in April, with under-18s and apprentices getting 45p more to £8 an hour.

That comes on top of 16.3% rise for 18 to 20-year-olds in 2024.

The minimum wage for those aged 21 and over has been rising at a slower rate and is due to go up by 50p to £12.71 an hour in April.

That leaves a gap of £1.86 an hour between younger and older workers, which the government has committed to closing before the next election in 2029.

The Times newspaper first reported that ministers were weighing up whether to drop the pledge.

Chancellor Rachel Reeves did not deny that the process could now be delayed when asked about it on a visit to a supermarket in south London.

She said: "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 workers.

"But we do recognise there are challenges and that is why we're extending the number of further education college places, extending the number of apprenticeship places to help young people get the skills and the experience that they need to move into work."

At an event in south Wales, Prime Minister Sir Keir Starmer said: "We've made commitments to young people in our manifesto, and we will keep to those commitments, including the commitment that we would make sure that the living wage would go up this April, which I can absolutely confirm to you will happen."

On Tuesday, it was confirmed unemployment had risen to a near five-year high, with the jobless rate among young people at its worst level for more than a decade.

The Office for National Statistics (ONS) said the rate of unemployment rose to 5.2% in the three months to December, up from 5.1% in the three months to November.

Luke Johnson, the former chairman of Pizza Express and a director of Gail's bakery and Brompton Bicycles, said: "The government is making it more expensive and more risky to employ people and so I think entrepreneurs and managers will not create the jobs."

He told BBC Radio 4's Today programme: "The mood amongst employers and those who invest in this country is the darkest I have ever seen."

He argued that it was fair to pay a lower rate to young workers because "if someone is less experienced and less well trained than someone who has been doing the job for a while they are not necessarily going to be as productive".

Johnson said the timing of the planned increases in the minimum wage was a "tragedy" for young people because there was set to be a "substantial rise in unemployment" in the coming years due to Artificial Intelligence and other factors.

Tina McKenzie, from the Federation of Small Businesses, said: "Sharply rising employment costs, alongside other increasing costs of doing business, are already chilling hiring intentions.

"Even steeper increases after the coming April hike would have priced many more young people out of jobs."

But Unison, which represents NHS and other public service workers, said competitive wages were needed to "keep and attract the staff".

The union's head of policy, Sampson Low, said: "There's no reason for younger workers to be paid less for the same work.

"Young, low-paid workers are likely to spend the extra cash where they live, helping their local economies."

Andy Prendergast, national secretary of the GMB Union, which represents workers across public utilities, said: "Employers tell us that every single improvement in workers' rights is going to cause a problem and time and time again they have been proved wrong."