Recent graduates across the United Kingdom are facing an increasingly challenging employment landscape, with youth unemployment reaching its highest level in a decade. The jobless rate for 16 to 24-year-olds has climbed to 15.3%, marking the most severe situation since the pandemic lockdown period of autumn 2020.
Economic Pressures and Tax Changes
The UK economy continues to underperform, creating a difficult environment for young job seekers. Multiple factors are contributing to this economic weakness, including persistent inflation, high borrowing costs, and reduced consumer spending. International trade uncertainties have further complicated the situation.
According to Sanjay Raja, Chief UK Economist at Deutsche Bank, young workers typically bear the brunt during economic downturns. "The higher up you go, the bigger the opportunity cost to replace workers who firms have put more investment and training into, and who are more difficult to replace," he explained.
The situation has been exacerbated by Chancellor Rachel Reeves's £25 billion increase in employer National Insurance Contributions (NICs) implemented in last year's autumn budget. The changes included raising the headline rate from 13.8% to 15% and reducing the earnings threshold from £9,100 to £5,000 annually. This has particularly affected part-time positions in retail and hospitality - sectors that traditionally employ large numbers of young people.
Wage Policies and Technological Disruption
The government's decision to increase the national living wage to £12.21 per hour and raise the rate for 18 to 21-year-olds by 16.3% to £10 has drawn mixed reactions. While intended to address wage discrimination, employers have warned that higher wage floors could price young people out of the job market.
Meanwhile, artificial intelligence and automation are transforming entry-level roles. Businesses are increasingly investing in technology to handle routine tasks that were traditionally performed by junior staff. Raja noted that "you're in the perfect space where doing menial tasks - spreadsheets, etc - is being disrupted."
The retail, hospitality, and health sectors have been at the forefront of this automation drive, implementing self-service checkouts and digital ordering systems that reduce the need for human staff.
Long-term Challenges and Mental Health Impacts
The COVID-19 pandemic continues to cast a long shadow over young people's employment prospects. Lockdowns disrupted critical educational periods for millions of students, making their transition into the workforce more challenging than for previous generations.
Mental health issues among young people have also seen a significant increase. More than a quarter of 16 to 24-year-olds not in education, employment or training now report mental health conditions or disabilities - double the figure recorded in 2005.
Ben Harrison, Director of the Work Foundation thinktank, highlighted the cumulative impact of these challenges: "All of those factors taken together, it's not necessarily too surprising you've seen this rise in mental health issues since the mid 2010s."
Young people have grown up during an era of strained public services, rising living costs, and stagnant wage growth, creating additional barriers to employment and career progression.
