Bank of England: Minimum Wage Rise Linked to Youth Unemployment – City A.M.

Bank of England: Minimum Wage Rise Linked to Youth Unemployment – City A.M.

February 15, 2026 discoverhiddenusacom Business

Rising minimum wages in the United Kingdom are coinciding with a concerning trend: increasing unemployment among young people. New data reveals that the jobless rate for 18 to 24-year-olds reached 13.7 percent in the three months to November, a significant increase from 10.2 percent three years prior and the highest level seen since late 2020. This rise has pushed the UK’s youth unemployment rate above the European average for the first time since records began in 2000.

The Link to Minimum Wage Increases

According to Catherine Mann, a policymaker at the Bank of England, the increase in youth unemployment is directly linked to “disproportionately big increases in the minimum wage for that age group.” She cautioned against interpreting this as a sign of broader economic weakness, stating that the wage increases are the primary driver of the shift in employment figures.

Did You Know? The minimum wage for 21 to 22-year-olds has increased by 33 percent over the past three years, aligning it with the national living wage of £12.71 per hour.

The rate for 18 to 20-year-olds has seen an even more substantial increase of 46 percent, reaching £10 an hour, with a further rise to £10.85 planned for April. The government has expressed intentions to eventually align this rate fully with the adult rate.

Impact on Employers

The rising minimum wage is creating challenges for businesses, particularly in sectors like retail and hospitality, which traditionally employ a large number of younger workers. These businesses are also facing increased employer National Insurance contributions. Paul Johnson noted that while higher minimum wages benefit those already employed, they can negatively impact hiring decisions.

Expert Insight: The situation highlights a potential trade-off between increasing the income of low-wage workers and maintaining employment opportunities for those with limited experience. The data suggests employers may be reconsidering hiring younger, less experienced staff when the wage differential narrows.

Johnson explained that employers may question why they would choose a 17-year-old with no experience if they are required to pay the same wage as a 25-year-old. This shift could lead to a restructuring of hiring practices and a decrease in opportunities for young people entering the workforce.

Broader Economic Context

The Bank of England recently maintained interest rates at 3.75 percent, while forecasting that overall unemployment could reach 5.3 percent this year as economic growth slows. GDP is currently projected to expand by 0.9 percent, a downward revision from a previous estimate of 1.2 percent. These broader economic conditions are compounding the challenges faced by young workers.

Frequently Asked Questions

What is the current youth unemployment rate in the UK?

The unemployment rate for 18 to 24-year-olds is currently 13.7 percent (as of the three months to November).

How much have minimum wages increased for younger workers?

Minimum pay for 21 to 22-year-olds has risen by 33 percent over the past three years, and the rate for 18 to 20-year-olds has increased by 46 percent.

What does the Bank of England say about the link between minimum wage and youth unemployment?

Catherine Mann of the Bank of England believes the rise in youth unemployment is linked to the “disproportionately big increases in the minimum wage for that age group.”

As minimum wage policies continue to evolve, will the UK be able to balance the goals of fair wages and accessible employment opportunities for its young people?