10th May 2026
There is growing evidence that UK employers are becoming more reluctant to hire younger workers, particularly in entry-level sectors such as retail, hospitality and leisure, as employment costs rise sharply. The evidence comes from official data, business surveys, economists, recruitment firms and parliamentary hearings.
The biggest cost pressures cited by employers are:
higher employer National Insurance contributions
large rises in the National Living Wage and youth minimum wage
increased business rates and energy costs
proposed employment law changes affecting flexible work
weaker economic growth and falling consumer spending
The strongest evidence is now appearing in youth unemployment figures and the collapse in low-paid job vacancies.
Official figures show youth unemployment in the UK has risen significantly. Reuters reported that unemployment among 16–24 year olds climbed to 16.1%, the highest for around a decade, with economists linking part of the increase to higher wage and tax costs for employers.
Recruitment data also shows that low-paid vacancies have fallen faster in Britain than in comparable European countries. Economists at Indeed said lower-paid job postings in the UK had weakened much more sharply than in Germany or France, specifically pointing to higher minimum wages and National Insurance increases.
Business groups are increasingly warning publicly about the impact on younger workers. The British Chambers of Commerce told MPs that firms are becoming more cautious about taking on inexperienced staff because rising employment costs mean employers now prefer workers who already have experience and stable work histories.
The Federation of Small Businesses reported that hiring intentions among smaller firms fell to record lows, with many businesses reducing staff or freezing recruitment.
There is also evidence that the cost increases are disproportionately affecting young workers because youth wages have risen faster than adult wages. According to analysis highlighted by the Institute for Fiscal Studies, the cost of employing 18–20 year olds rose by around 12.7%, compared with roughly 7% for adults on the National Living Wage.
That matters because younger workers are often less productive initially and require training. Employers traditionally accepted this partly because youth wage bands were lower. As those wage gaps narrow, businesses increasingly question whether it is economically worthwhile to hire inexperienced staff when older workers cost only slightly more.
This concern is strongest in sectors that historically relied heavily on young employees. Hospitality and retail employ very large numbers of 16–24 year olds. Reuters reported that some of the sharpest job losses since 2025 have occurred in those sectors.
The government’s own Low Pay Commission has acknowledged concerns about youth employment prospects. Its 2026 report states it is “alert to concerns” regarding young people’s job opportunities as youth minimum wage coverage rises sharply. The commission noted that the proportion of 18–20 year olds covered by minimum wage rates has increased substantially.
However, the evidence is not completely one-sided. The Low Pay Commission also said it has not yet found definitive proof that higher youth wage rates alone are causing the deterioration in employment. It argues that weaker economic conditions, changing consumer demand and sector-specific problems are also important factors.
Still, many employers appear to be adapting by:
hiring fewer entry-level staff
demanding more experience even for junior roles
reducing hours
increasing automation and self-service systems
relying more on older or already-trained workers
cutting apprenticeship recruitment
The rise in National Insurance contributions is especially significant for lower-paid sectors because the threshold at which employers start paying NI has fallen, meaning businesses pay tax on a larger share of low wages. This particularly affects industries employing many younger workers.
There are also concerns that tighter employment regulations could reduce flexible starter jobs. Retail and hospitality groups have warned that restrictions on zero-hours contracts and new employment rights may unintentionally reduce casual or seasonal opportunities often used by younger workers entering the labour market.
The government itself appears concerned enough that it has introduced subsidies and incentives for firms to employ younger people, including £3,000 hiring incentives and expanded apprenticeship support.
Overall, the evidence increasingly suggests that rising labour costs are making employers more cautious about hiring younger workers, especially in low-margin sectors. While economists still debate how much of the problem is caused specifically by minimum wage and National Insurance rises, the combination of higher employment costs and weaker economic conditions is clearly reducing the number of entry-level opportunities available to young people in the UK.