Priced Out At 18? Are Young People Now Too Expensive to Employ?

Ten years ago, hiring an 18-year-old on the minimum wage cost a business £5.55 an hour. Today, it’s £10.85.

That’s almost double.

At the same time, nearly 1 million young people aged 16 to 24 are not in education, employment or training – they’re known as NEETs. The latest figures show the number has risen by 30,000 in a year, with the increase largely among young men.

So have we priced young people out of jobs? Well, the answer isn’t quite that simple.

The cost of hiring an 18-year-old has soared

The minimum wage for 18 to 20-year-olds is now £10.85 an hour, compared with £5.55 in 2016. Meanwhile, the rate for workers aged 21 and over has risen from £7.20 to £12.71 over the same period.

That means the minimum wage for younger workers has risen by almost 100%, compared with around three-quarters for older workers.

And the gap is set to narrow further.

The Government has committed to eventually extending the National Living Wage to workers from age 18, removing the separate 18-20 rate. The Low Pay Commission has proposed moving 20-year-olds onto the adult rate in 2027, followed by 18 and 19-year-olds in 2028 or 2029, although the timing remains subject to economic conditions and government policy.

For an employer, that makes a significant difference.

At 35 hours a week, an 18-year-old on the minimum wage would have cost around £10,100 a year in basic wages in 2016. Today, the same hours would cost around £19,700.

And that’s before taking other employment costs into account.

Why does this matter for young people looking for their first job?

The concern is that a young person with little or no work experience can become a harder sell when the minimum amount an employer can pay them is rising rapidly.

This matters particularly in sectors such as hospitality and retail, which employ large numbers of young people. The Low Pay Commission has specifically highlighted concerns about young people’s employment prospects and noted that vacancies and employee numbers in these sectors have fallen significantly.

But there is an important detail in the latest NEET figures.

Of the 981,000 young people currently classified as NEET, around 393,000 are unemployed – meaning they are looking for work. That number has risen by 26,000 in a year.

The remaining 588,000 are economically inactive. In other words, they aren’t working or studying and aren’t currently looking or available for work.

So higher wages can’t explain the whole problem.

In fact, the number of young people who are NEET has been on a longer-term upward trend, and the Learning and Work Institute says the latest figures show that trend continuing over the past five years.

The Low Pay Commission has also warned that it is difficult to separate the impact of minimum-wage increases from other pressures facing businesses, including changes to employer National Insurance, monetary policy and consumer spending. Its assessment is that there isn’t currently enough evidence to say that recent increases have affected young people’s employment overall.

The trade-off

That doesn’t mean the cost of hiring young people is irrelevant.

It’s undoubtedly true that if you’re running a café, pub or shop, the cheapest legally available worker has become considerably more expensive. And the higher cost for employers could make some businesses more cautious about taking on inexperienced workers.

There’s also a tax difference worth knowing about. Employers don’t pay the standard rate of employer National Insurance on the earnings of workers under 21. For the standard rate, for 2026/27, that threshold is £50,270.

That means, for a typical minimum-wage 18-year-old, a rise in the minimum wage largely increases the employee’s pay rather than adding employer NI on top.

But the fundamental question remains: what happens when the cost of giving someone their first job keeps rising?

Higher wages can mean a better-paid first job for the young people who get one. But if employers become more cautious about taking on inexperienced workers, it could also make that first door harder to open.

And for the hundreds of thousands of young people who are already looking for work, getting through that door is what matters most.