Fair Pay, Fewer Chances: What the Real Living Wage Means for Young Workers

Breaking into the working world has never been harder for young people – and if lower minimum wage rates are scrapped, it could get worse.

It’s no secret that Gen Z have had a rough go of it. Unemployment is rising, competition for jobs is fierce and ambition is waning.

As the Budget approaches, measures designed to tackle this malaise couldn’t be more welcome. Yet the Chancellor’s plan to scrap age bands for the minimum wage, a system critics call “discriminatory”, may end up deepening the very challenges it aims to solve.

When Good Intentions Meet Economic Reality

According to the Resolution Foundation’s new report on young people who aren’t in education, employment or training, removing youth rates would likely worsen their conditions. Alongside urging the government to scrap its plans, it warns that “sharp rises would be ill-advised in the current economic environment and risk making it even harder for young people to get a foot into the labour market” as well as triggering “potential unemployment effects.”

Youth Roles Under Threat

Part of the pressure stems from the April hike in National Insurance Contributions (NICs). Although employers don’t pay NICs on staff aged 16–21, higher costs elsewhere, combined with increases to the 16–17 and 18–20 minimum wage rates, have led to hiring freezes in industries that traditionally employ large numbers of young workers.

Recent figures from Employment Hero show that employment in hospitality – a sector where around half of the workforce is under 25 – rose 4.1 per cent month-on-month in September. But that momentum may be short-lived if more cost-raising measures follow.

The Real Living Wage Effect

For younger workers, the real danger isn’t just stagnating pay – it’s being priced out of the labour market altogether. The Resolution Foundation’s latest analysis of the Living Wage Foundation’s Real Living Wage Rates shows rising living costs are feeding into higher wage benchmarks, with the Real Living Wage now set at £13.45 across the UK and £14.80 in London. Essentials like food, gas and water have climbed far faster than overall inflation – up 5, 13 and 26 per cent respectively – pushing pressure onto employers already stretched by higher operating costs. While these voluntary rates reflect what’s needed for a basic standard of living, sharp increases in wage floors without targeted support could narrow opportunities for those at the start of their careers.

That risk extends beyond pay packets. When entry-level jobs become too expensive to offer, internships and apprenticeships – the very roles that give young people vital first-hand experience – are often the first to go. Youth employment programmes, local training schemes and incentives for firms that hire under-25s could help offset the impact, but only if they’re sustained beyond headline announcements. The labour market may be tightening, yet the longer young people are kept out of work, the harder it becomes for them to get back in – and for employers to fill future skills gaps.

Balancing Pay, Productivity and Opportunity

While higher labour costs make hiring decisions tougher, maintaining clear pathways into work for young people is crucial to a healthy labour market. Employers who keep entry-level roles, apprenticeships and training schemes open are effectively investing in their own future workforce. A balanced approach – one that links pay growth to productivity and supports skill development – can help firms manage costs while still building the talent they need to stay competitive.

As November’s Budget looms, policymakers face a delicate balance: raising pay to meet real living costs without pricing young people out of the jobs market. How the Chancellor squares that circle will determine whether the next generation sees progress – or another step backwards.