Wage rises and AI to force youth jobless higher – Daily Business

Young people face a jobs shortage

Unemployment among the young will rise again next year as a result of minimum wage increases and the erosion of entry level jobs by artificial intelligence, according to a new survey.

The British Chambers of Commerce says the uplift in youth unemployment to17.8% from 16.9% this year risks weakening the skills pipeline the economy needs.

Growth in average earnings is forecast to ease from 3.7% by Q4 2026 to 3.3% by the end of 2027.  

Overall unemployment is forecast to rise to 5.2% in 2026 and then reach 5.5% in 2027. BCC surveys continue to show labour costs as the main cost pressure for businesses.  

While the BCC forecasts a slowing across a number of metrics, it say the UK is avoiding recession and GDP is expected to grow by 0.9% in 2026, which is marginally slower than its previous forecast. This is despite the ongoing geopolitical uncertainty.

The economy is expected to remain at a similar level in 2027, with GDP growth of 1%. It is forecast to pick up to 1.3% in 2028, though this depends on the ongoing unrest.

The forecast for youth unemployment will add to concerns raised last week by Alan Milburn, a former Labour cabinet minister, who warned of a “lost generation”, with as many as 1.25 million young people not in work or education by the early 2030s. 

David Bharier, deputy director of economics and insights at the BCC, said: “The UK is not in recession but the economy remains trapped in a cycle where each recovery is interrupted before gaining traction, and firms go back on the defensive.

“With youth unemployment approaching 18% by mid-2027, the UK risks weakening the skills pipeline it needs.”

The report coincides with publication of a key consultation by the UK government on the guaranteed hours proposal which would ban zero hours contracts.

Neil Carberry, chief executive of the Recruitment and Employment Confederation (REC), said: “Getting these proposals wrong would be a disaster for workers, with unemployment rising and youth unemployment a particularly worrying challenge.

“It is disappointing that the government has drifted so far from the original proposals agreed by businesses and unions in the Low Pay Commission, towards something that pleases the unions but will damage work opportunities for vulnerable workers, especially those who need flexible work.

“The open questions in this consultation must signal a change of approach towards working in partnership with employers as well as unions.

“Despite commitments given last autumn, there has been little evidence of government taking business concerns on the cost of employment seriously enough, with predictable results starting to emerge in monthly labour market figures.”

Helen Dickinson, chief executive of the British Retail Consortium, said: “With over a million young people out of work or education, government cannot afford to get this wrong.

“Crack down on bad employers by all means, but not by adding costs and rules that deter good employers from hiring in the first place.

“Retail is a lifeline into work for hundreds of thousands of young people each year. But if government piles on cost and risk, many of those entry-level jobs won’t be there in future.” 

#Wage #rises #force #youth #jobless #higher #Daily #Business