Official data shows that unemployment among those aged 16 to 24 rose to 16.1% in the final quarter of last year, up sharply from 13.8% in mid-2025.

The increase places Britain ahead of the euro zone in youth joblessness, signalling growing stress in the labour market, particularly for younger workers entering employment for the first time.

The rise has reignited debate over the government's plan to phase out lower minimum wages for younger workers. Over the past three years, the UK's minimum wage has risen significantly, with the main rate reaching £12.21 per hour.

Wages for 18 to 20-year-olds have risen even faster, increasing by 46% over the same period. While the policy aims to ensure fair pay, economists and business groups argue it may be discouraging employers from hiring inexperienced workers.

Some firms are reportedly opting for semi-skilled employees over untrained younger candidates, given the narrowing wage gap.

Labour market data indicates that vacancies for lower-paid roles have fallen more sharply than higher-paid positions, a trend not seen in countries like Germany or France.

Sectors such as hospitality, retail, and parts of the IT industry have seen notable job losses, disproportionately affecting younger workers. Analysts suggest that rising labour costs, combined with economic uncertainty, are contributing factors, while the role of artificial intelligence remains unclear.

For many young people, securing employment has become increasingly difficult. Students and graduates report submitting dozens of applications with little response, while part-time roles have become less reliable.

The tightening job market has left many either underemployed or discouraged from applying altogether, highlighting a growing disconnect between policy intentions and labour market realities.

The government maintains that higher wages are essential to support low-paid workers, but there are signs it may reconsider aspects of its approach. Reports suggest officials are reviewing plans to eliminate lower pay rates for younger workers.

Economists warn that while the link between wage increases and unemployment is not definitive, current conditions call for caution. With the youth labour market showing signs of strain, policymakers face a delicate balance between fair pay and job creation.

(with inputs from Reuters)