UK Budget Pauses Minimum Wage Equalisation for Under-21s

The UK government will use the 28 October Budget to raise statutory pay rates but will pause minimum wage equalisation for under-21s, a decision already triggering Labour manifesto breach claims. Business Secretary Jonathan Reynolds did not contest reports that the lower National Minimum Wage for 18- to 20-year-olds will receive only a 3.9% increase to £11.27 an hour, while the National Living Wage for those aged 21 and over rises 3.9% to £13.21. The BBC reported that 18- to 20-year-olds will not get the bigger catch-up increase Labour had previously signalled.

What is minimum wage equalisation for under-21s?

Minimum wage equalisation refers to Labour's manifesto pledge to remove "discriminatory age bands" so that all adults, including 18- to 20-year-olds, receive the same statutory minimum wage as workers aged 21 and over. At present, younger workers are legally entitled to a lower National Minimum Wage, while older workers receive the higher National Living Wage. The policy was designed to tackle age-based pay inequality, but it has collided with concerns about entry-level job availability and rising youth inactivity.

Why is the government pausing equalisation?

The pause reflects a sharp trade-off between fairness and employment. Ministers are worried that faster equalisation could price young people out of first jobs, especially in hospitality, retail and care. According to Resolution Foundation analysis, the number of 16- to 24-year-olds not in education, employment or training (NEET) has risen by 195,000 in two years to 940,000, and is on course to hit one million.

Youth employment concerns and NEET data

The youth unemployment crisis has become a central obstacle to equalisation. More than a quarter of young NEETs are inactive due to sickness, and rapid increases in the 18-20 rate since 2024 have already prompted business warnings that hiring young people is becoming harder. A 3.9% across-the-board uplift is therefore being framed as a cautious, jobs-first approach rather than a retreat.

Labour manifesto breach claims

Opposition parties say the decision breaks Labour's 2024 manifesto commitment to give "all adults" the same minimum wage. Green co-deputy leader Mothin Ali accused Labour of showing no respect for young people and called for a £15 minimum wage for all ages. Reynolds insisted the Labour manifesto 2024 pledge "still applies" but would be phased "over time", pointing to labour-market pressures. The Greens and other critics argue that delaying equalisation leaves younger workers facing the same cost of living pressures on lower pay.

What the Budget changes: old and new rates

The 28 October Budget will deliver the following rates from April 2027:

The age pay gap therefore remains wide: an 18-year-old on the new rate would earn £1.94 an hour less than a 21-year-old, or about £77 less for a 40-hour week.

Reactions from business, unions and opposition

Business groups have largely welcomed the pause, arguing that faster equalisation would have hit labour-intensive sectors already coping with higher employer costs. Unions and youth campaigners counter that under-21s face the same rent, food and transport bills as older workers. The row places Chancellor John Healey Budget decisions under intense scrutiny, with the government insisting equalisation remains a question of "when", not "if", and that it will proceed "one step at a time". Reuters reported that Healey confirmed the 3.9% minimum wage rise on 28 October 2026.

FAQ

What is minimum wage equalisation?

It is the policy of aligning the lower National Minimum Wage for 18- to 20-year-olds with the higher National Living Wage paid to workers aged 21 and over, removing age-based pay bands.

Why has Labour paused equalisation for under-21s?

Ministers cite rising youth unemployment and the risk that faster pay increases could price young people out of entry-level jobs. Around 940,000 16- to 24-year-olds are currently NEET.

How much will 18- to 20-year-olds be paid after the Budget?

Their hourly rate will rise 3.9% from £10.85 to £11.27 from April 2027, compared with £13.21 for workers aged 21 and over.

Does this break Labour's manifesto promise?

Critics say yes, because the manifesto pledged "all adults" would receive the same minimum wage. The government says the commitment still applies but will be phased over time.

Conclusion and future outlook

The pause is a pragmatic retreat with political cost. It protects youth employment in the short term but leaves Labour open to accusations that younger workers are being asked to accept lower pay indefinitely. With the Budget due on 28 October, the Chancellor's framing of "trade-offs between jobs and wages" will determine whether this becomes a temporary pause or a permanent policy reversal.