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The UK labor market is hitting a wall,
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and could it be minimum wage's fault?
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Between a radical overhaul of workers'
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rights and record-breaking minimum wage
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hikes, British businesses are sounding
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the alarm as the youth unemployment rate
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a top official from the Bank of England
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is pointing the finger at
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disproportionately big increases in the
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minimum wage for that exact age group.
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For 18 to 20-year-olds, wages have
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surged 46% in just 3 years. While that
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might sound like a win for workers,
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according to Catherine Mann, it's more
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like the canary in the coal mine moment,
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where businesses simply cannot afford to
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take the chance on someone without a
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track record. And the pressure is only
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increasing. From April 2026, the
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national living wage for over
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21-year-olds hits £12.71.
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While for those 18 to 20-year-olds, they
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will see another 8.5% jump to £10.85.
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The government's goal is to eventually
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align the 18 to 20 rate with the adult
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rate, but it's a move experts have been
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quick to raise concerns over. For
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removing the experience discount that
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had previously incentivized bosses to
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hire the younger generation. These
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changes also serve as a double whammy
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alongside the national insurance rate,
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which added to employers' tax bill and
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made an even bigger difficulty for
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hiring. But it doesn't stop there. Not
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only is labor getting more expensive,
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but it's also becoming legally riskier.
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This morning, we also have a fresh
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report from the professional body for
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HR, the CIPD, which suggests the
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government's biggest upgrade to workers'
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rights in a generation might actually be
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a handbrake for the economy. The report
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reveals that more than a third of UK
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businesses plan to reduce permanent
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hiring. Why? Well, three-quarters of
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firms are pointing the blame towards the
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Employment Rights Act, anticipating the
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legislation will hike costs for
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employers. While the government backed
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down on day one unfair dismissal rights,
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they've still slashed the qualifying
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period from 2 years to just 6 months.
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For employers, this means the honeymoon
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phase for new hires just got a lot
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shorter and a lot riskier, meaning it is
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not just about hiring, it's about the
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cost of getting it wrong. From next
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January, the measure comes into effect
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along with the removal of the cap on
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compensation for unfair dismissal, which
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is currently the lower of 118,223
2:06
pounds or a year's pay. As businesses
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attempt to manage a rising bill for
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workers and battle against legal
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advances, are the government's so-called
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upgrades worth it or will this
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fast-track the move towards automation?
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Let us know your thoughts in the
