A Bank of England official says minimum wage increases are pricing young workers out of jobs in the UK
Sharp rises in the UK’s minimum wage over recent years are directly contributing to higher unemployment among young people, a senior Bank of England policymaker has warned.
Speaking to the Telegraph, Catherine Mann, a member of the Bank’s Monetary Policy Committee, said that substantial increases, introduced under the previous Conservative government and continued under Labour, have manifested in unemployment for younger workers.
“The accumulation over three years of the rise in the national living wage for that group has been manifested in unemployment for that category of workers,” Mann said. “Very unfortunate, but it is true. It is a fact,” she said.
The comments come amid growing concerns over youth joblessness, which has climbed notably faster than the overall rate. Unemployment among 18- to 24-year-olds reached 13.7% in the three months to November 2025, up from 10.2% three years earlier – its highest level since late 2020. Meanwhile, the broader workforce unemployment rate has risen more modestly, from 3.9% to 5.1% over the same period.
Mann argued that the surge in youth unemployment is not necessarily a harbinger of wider labour market weakness, but rather a consequence of disproportionately large minimum wage hikes for younger age groups.
Over the past three years, the minimum wage for 21- and 22-year-olds has increased by 33% to align with the National Living Wage (currently £12.21 for those 21 and over, set to rise to £12.71 from April 2026).
For 18- to 20-year-olds, the rate has jumped even more sharply – by 46% to £10 per hour currently, with a further 8.5% increase to £10.85 planned for April 2026.
An economic headache
The British Retail Consortium (BRC) warned this week that high employment costs and increasing regulations were causing an economic headache for the UK.
BRC Chief Executive Helen Dickinson cautioned that upcoming government policies risk prolonging this.
The Employment Rights Act 2025 (which received Royal Assent in late 2025) introduces phased changes, with consultations and implementations rolling out in 2026.
Key concerns for retail include proposals on guaranteed hours, shift changes, and handling seasonal work, which could impose substantial administrative and cost burdens while reducing job flexibility.”
Several proposals within the new Act, such as on guaranteed hours, could create a substantial cost and administrative burden for retailers, while limiting job flexibility and employment opportunities,” she warned.
Industry voices, including the BRC, have highlighted risks: over half of retail HR directors surveyed in earlier analysis expected reduced hiring and flexibility, with potential negative business impacts. Sectors reliant on part-time and variable hours, like retail, face the brunt, potentially leading to higher staffing costs that feed back into prices.
While the Bank signals scope for future rate reductions if disinflation continues, Dickinson urged collaboration: “By working with retailers to design policies which work in the real world, Government can get the implementation right and raise standards without harming entry-level and flexible jobs, or pushing inflation back up.”
