Why Young Workers Are Paying The Price For A Broken Economy

Youth unemployment is rising again in the UK, and it is tempting to blame a single villain. AI is stealing jobs. Covid “broke” a generation. Taxes are too high. Wages are too generous. The problem is that none of those stories works on its own. What is happening to young workers is the result of several forces colliding at once, and all of them have been a long time in the making.

The headline number is stark. Leaving aside the Covid spike in 2020, the jobless rate for 16 to 24 year olds is at its highest level in a decade, sitting in the mid teens. That is not just a blip, it is a signal that something systemic is wrong in how the economy is treating new entrants to the labour market.

A weak economy always hits the youngest first

Start with the obvious. The UK economy is sputtering. Inflation has been stubborn, interest rates are high, consumers are cautious and global trade is being rattled by political shocks. In that environment, employers think twice before hiring. When they do need to cut back, they look for the least costly, least embedded staff to trim.

That is almost always the young. They have the least experience, the shortest CVs and the smallest amount of sunk investment in training. If a firm has to choose between letting go a long standing employee who knows the systems inside out and a new starter still learning the ropes, the calculus is brutal but predictable. Youth unemployment is not just a number, it is a barometer of how nervous employers feel.

When you tax jobs, you get fewer of them

Layered on top of this cyclical weakness is a deliberate policy choice. The big increase in employer national insurance contributions last year did not arrive in a vacuum. It came after years of rising labour costs, especially at the lower end of the pay scale.

The NICs hike did two things at once. It lifted the headline rate and dragged the threshold down, so that contributions applied at much lower earnings. That is exactly where part time roles in retail, hospitality and other youth heavy sectors sit. It is no surprise that employers in those areas say the change has made marginal hiring decisions much harder to justify.

There are exemptions for under 21s and some apprentices, which look helpful on paper. In practice, payroll systems and business models are not as neat as a Treasury factsheet. What matters to a small shop or cafe is the total wage bill and the total tax bill. Both have gone up sharply.

Minimum wages and maximum pressure

On the other side of the ledger, the minimum wage has risen aggressively, and the youth rate has jumped fastest of all as the government moves toward scrapping lower bands for young adults.

There is a real justice to that. It is hard to argue that a 20 year old doing the same work as a 25 year old should earn significantly less purely because of their age. For young people paying high rents and high energy bills, that uplift is not a luxury, it is survival.

But economists have been saying the quiet part out loud for decades. If you raise the price of something, especially in a weak economy, some buyers will walk away. A higher wage floor, on top of higher employer taxes, inevitably makes some bosses think twice about taking a chance on an inexperienced worker. The risk is that we “protect” young people out of the labour market entirely.

AI is not the future, it is the present

Then there is technology. Automation was already nibbling away at entry level roles long before ChatGPT became a household name. Self service tills, online banking, booking apps and chatbots all do the jobs that used to be done by juniors.

Now, AI is moving up the value chain. The classic early career tasks in offices, crunching spreadsheets, drafting routine emails, doing basic research, are exactly the sort of work that modern AI tools handle well enough for many managers. If software can quickly produce a first draft, the temptation is to employ fewer graduates and ask the remaining staff to polish what the machine spits out.

This does not mean “no jobs.” It does mean fewer traditional stepping stone roles where young people learned how work works. If you never get the first rung, it is hard to climb the ladder later, even if the economy recovers.

Covid stole more than classroom time

We are still underestimating the long shadow of the pandemic. For today’s 16 to 24 year olds, Covid did not just mean a few months of online lectures. It disrupted exams, placements, apprenticeships and casual work at precisely the age when people usually pick up their first real experience.

Those lost years show up in confidence as much as in CVs. Employers say they see more anxiety, more uncertainty and more health related interruptions in young applicants. The statistics back that up. The share of young people who are not in education, employment or training because of mental health problems or disability has roughly doubled compared with twenty years ago.

It is hardly surprising. This is a generation that grew up with austerity eroding public services, wages stagnating, housing costs spiralling and then a global pandemic hitting just as they tried to launch their adult lives. We talk about “labour market scarring” as if it were a dry macroeconomic concept. For many young people it feels more like a permanent stain.

Austerity’s long tail

Behind all of this sits a decade of underinvestment in the social fabric that helps young people into work. Careers services hollowed out. Youth clubs and community centres closed. College budgets squeezed. Mental health services overwhelmed.

When you strip away that scaffolding, you make it harder for young people to get advice, training and support. You also signal something more corrosive, that they are not a priority. The combination of high costs, precarious work and thin public services is not just a barrier to getting on, it is a powerful disincentive to even try.

It is no accident that reports of mental health issues among young people have climbed since the mid 2010s. It is hard to feel optimistic when all the structural signals point the other way.

So what now?

The uncomfortable truth is that there is no single lever to pull. Cutting employer NICs without addressing weak demand and AI driven restructuring might simply feed profits. Pushing the minimum wage down again would punish the lucky few young people who do have jobs, without any guarantee of opening the door to those locked out.

Likewise, lecturing a generation scarred by Covid and austerity to “be more resilient” is not a policy.

A serious response would have to recognise all the pressures at once. That means:

• Targeted support for employers who take on and train young workers, not just tax tweaks but real incentives linked to quality jobs.

• Investment in mental health services and youth support so that young people who want to work are actually in a position to do so.

• A realistic industrial strategy for AI and automation that includes pathways into new kinds of work, instead of assuming that “the market” will magically absorb those displaced from old roles.

• A rethink of how we structure tax on labour, especially at the lower end, so that we do not cheer higher wages with one hand and quietly discourage hiring with the other.

Youth unemployment is often treated as a temporary problem that will fix itself when growth returns. The current spike suggests something deeper. If we treat young workers as the economy’s shock absorbers every time there is a crisis, we should not be surprised when they conclude that the system is not built for them at all.

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