Why is youth unemployment so high?

British businesses are to be offered a £3,000 state bonus for hiring a young person who has been out of work for six months as the number of economically inactive young people nears one million.

Work and Pensions Secretary Pat McFadden said it was part of the government’s plans to “back Britain’s young people” after youth unemployment hit its highest level in more than a decade.

How bad is it?

According to the Office for National Statistics’ latest labour market overview, 14% of Britons aged 18 to 24 were unemployed in the final quarter of 2025, compared with 12.7% in the same period last year.

This growth has largely been driven by young people who are “economically inactive”, meaning those who are out of work and not seeking it. The most recent data from the ONS says the number young people not in employment, education or training (Neet) between October and December 2025 reached 957,000, up from around 800,000 in 2019.

Why is it so hard to find work?

For many of those not in employment or training, “the challenge is not so much a lack of skills or visibility as the dearth of openings in a stagnating labour market”, said the Financial Times. “Young people say they lack work experience and something to talk about to employers,” said Sareena Bains, chief executive of charity Movement to Work. “Those opportunities are becoming few and far between.”

The tough labour landscape has been made worse by the roll-out of AI, which threatens to erase many entry-level jobs.

Business groups have also criticised the government’s decision to raise employer’s national insurance contributions and the youth minimum wage, as well as changes to workers’ rights, all of which could make companies less inclined to take a risk on a newcomer to the workforce over an experienced worker. In February, Huw Pill, the Bank of England’s chief economist, told the Commons Treasury Committee that changes around tax and the national living wage have had a “particular effect on those aged 16 to 18, and 18 to 21”.

Having analysed the effects of setting minimum wage rates by age, Alan Manning from LSE concluded that the evidence is “too weak” to blame youth unemployment on the minimum wage.

What else is to blame?

The Centre for Social Justice (CSJ) has identified a “toxic cocktail” of “rising employment taxes, perverse incentives to claim benefits and a broken migration system”. The think tank’s Wasted Youth report found that businesses are turning to non-EU migrants while a growing number of young Britons are claiming benefits.

Health is another major factor. The share of Neet young people who report having a health condition that limits their ability to work rose from 26% in 2015 to 44% in 2025 – a 70% increase, according to The Health Foundation. This “mirrors trends among young people generally”, said the think tank. “Regardless of whether they are in work or education, 16–24-year-olds today are much more likely to report having a work-limiting health condition than they were in the past”. This increase is “driven primarily by mental health and neurodevelopmental conditions”.

What is being done?

As well as the £3,000 incentive for firms to hire young people out of work for six months, the government has also announced small and medium-sized businesses will get a £2,000 bonus if they take on a young apprentice, and jobs with training subsidised by the state are to be expanded to 22- to 24-year-olds.

Current policies to help Neet young people and expand apprenticeships were “not stacking up to the scale of the challenge”, Stephen Evans, chief executive of the Learning & Work Institute, told the FT.

A more radical proposal, backed by former home secretary David Blunkett and former chancellor Jeremy Hunt, is a Future Workforce Credit, a £670 million effective tax cut for employers hiring Neets that would cover 30% of their salary. CSJ modelling based on similar interventions suggests the approach would get 120,000 young people into jobs while saving £765 million in tax and welfare spending.