Reeves announced that she would accept the recommendations of the Low Pay Commission, the independent body that advises the government on wage policy. The national living wage, which applies to workers over 21, will increase by 4.1 per cent to £12.71 an hour, up from £12.21.
However, economists and employment experts have warned that the sharp rise for younger workers could exacerbate job struggles. The Resolution Foundation described the increase for 18 to 20-year-olds as “unnecessarily big” and cautioned that it could discourage firms from hiring, potentially raising the number of young people not in education, employment, or training (Neet).
Nye Cominetti, principal economist at the Resolution Foundation, welcomed the rise in the national living wage but urged more flexibility in youth wage-setting. He said: “Younger workers are set for even bigger pay rises, but these steep increases risk causing more harm than good if they put firms off hiring and push up Neet rates. The minimum wage has been one of Britain’s most successful policies in a generation, but at higher levels, the government and the Low Pay Commission need to respond to changing labour market conditions.”
Daisy Cooper, deputy leader of the Liberal Democrats, echoed these concerns. She warned that unless businesses can grow, the rise may lead to fewer jobs for young people. She added that the government should help families by cutting energy bills, supporting high streets with VAT reductions for hospitality until 2027, and pursuing growth-friendly deals with Europe.
Reeves defended her decision, saying the increases ensure that those on low incomes are “properly rewarded for their hard work” and benefit young people entering the workforce.
Official figures show that one in eight people aged 16 to 24 is currently classed as Neet. Between July and September this year, an estimated 946,000 young people were not in employment, education, or training, up by 196,000 compared with 2019 levels. Pat McFadden, Work and Pensions Secretary, said the figures had been “far too high for too long,” while employment experts highlighted the risk of more young people slipping into long-term worklessness.
Kate Nicholls, chief executive of UKHospitality, expressed concern that the pay rise could put additional pressure on already fragile youth employment rates. The British Beer and Pub Association added that Reeves’s changes risked “crippling job opportunities for those just getting their first important start on the career ladder.”
