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The Impact of Minimum Wage Increases on Youth Employment in the UK
Introduction and Purpose of the Paper
Public policy research aims to understand whether government interventions achieve their intended outcomes without causing disproportionate harm. One of the most debated policies in labour economics is the minimum wage. Supporters argue that it protects vulnerable workers and reduces in-work poverty, while critics claim it can reduce employment opportunities, particularly for young people.
The purpose of this paper is to investigate the following research question:
Do increases in the UK National Minimum Wage negatively affect employment levels among young workers aged 16–24?
This question is deliberately framed to be falsifiable. Rather than attempting to prove that minimum wage increases are beneficial or harmful, the research examines whether there is sufficient evidence to reject the claim that higher minimum wages reduce youth employment.
Relevant Economic and Public Policy Theories
Understanding the minimum wage debate requires engagement with several key economic theories.
Classical labour market theory suggests that wages are determined by supply and demand. In this model, a minimum wage set above the equilibrium level creates excess labour supply, leading to unemployment. Young workers are considered particularly vulnerable because they are more likely to be low-skilled and new to the labour market. From this perspective, minimum wage increases should reduce youth employment.
In contrast, monopsony labour market theory challenges the assumption of perfect competition. Where employers have wage-setting power, paying wages below the marginal productivity of labour, a minimum wage can actually increase employment by encouraging more individuals to enter the workforce and reducing labour turnover.
Institutionalist and behavioural approaches add further nuance by emphasising real-world frictions such as job search costs, training investments, and productivity gains from higher wages. These perspectives suggest that moderate minimum wage increases may have limited or no negative employment effects.
Public policy theory also highlights the importance of distributional outcomes. From a social justice perspective, minimum wages are justified as a tool to reduce inequality and protect young workers from exploitation, even if minor employment effects exist.
Review of Existing Research
Empirical research on minimum wages has produced mixed results. Early US studies often supported the classical view, finding negative employment effects among young workers. However, more recent research using improved methodologies has challenged these conclusions.
Notably, Card and Krueger’s work found little evidence that minimum wage increases reduced employment in fast-food industries. UK-based studies, particularly those conducted after the introduction of the National Minimum Wage in 1999, generally suggest minimal negative effects on employment, including among young workers.
The Low Pay Commission has repeatedly reported that gradual increases in the minimum wage have not led to significant job losses. However, some studies indicate that very young workers, especially those aged 16–17, may experience reduced hours rather than outright job losses.
This body of literature suggests that the relationship between minimum wages and youth employment is complex and context-dependent rather than universally negative.
Research Methodology
This study adopts a narrative research approach combined with secondary data analysis. Rather than collecting primary data, it synthesises findings from existing academic journals, government reports, and labour market statistics.
The methodology involves:
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Reviewing peer-reviewed economic studies on minimum wages and youth employment
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Analysing Office for National Statistics labour force data before and after key minimum wage increases
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Comparing employment trends among young workers with those of older age groups
This approach allows for critical evaluation of existing evidence while recognising the limitations of observational data, such as confounding variables and external economic shocks.
Analysis and Findings
Analysis of UK labour market data shows that youth employment has fluctuated over time, but these changes often coincide with broader economic conditions such as recessions, education participation rates, and sectoral shifts.
Periods following minimum wage increases do not consistently align with sharp declines in youth employment. In many cases, employment levels remained stable or even increased, particularly during periods of economic growth.
Where negative effects are observed, they tend to manifest as reduced working hours or slower job growth rather than mass unemployment. This suggests that employers may adjust through non-wage mechanisms such as scheduling or productivity improvements.
Overall, the evidence does not strongly support the claim that moderate minimum wage increases cause significant reductions in youth employment in the UK.
