The chief executive of Next, Lord Simon Wolfson, has issued a stark warning about the UK labour market: entry-level jobs are vanishing at a 'dramatic' rate. For those of us who have watched the retail sector cannibalise itself over the past decade, this is less a surprise and more a confirmation of a long-brewing crisis. Wolfson’s comments, delivered alongside the fashion retailer’s half-year results, point to a structural shift that goes beyond the usual cyclical wobbles.
The numbers are sobering. Next reported a 3.6% rise in pre-tax profit to £452 million for the six months to July, but the headline figure masks a deeper malaise. The company noted a 20% reduction in entry-level roles across its stores compared to pre-pandemic levels. This is not a temporary blip. Wolfson attributes the decline to a combination of automation, changing consumer habits, and a tax regime that punishes employment. He is, of course, correct.
Consider the economics. The minimum wage has risen sharply, up 9.8% in April to £11.44 per hour for over-21s. A laudable goal for social justice, but basic supply-and-demand tells you what happens when you price labour above its marginal product: employers substitute capital for labour. Self-checkout tills, automated warehousing, and AI-driven inventory management are not futuristic fantasies. They are here, and they are eating entry-level jobs.
Meanwhile, the government’s fiscal stance offers little relief. Employer National Insurance contributions remain a drag on hiring. Add in the apprenticeship levy, which is less a training fund and more a payroll tax for many firms, and you have a recipe for labour market sclerosis. Wolfson is right to point out that the cost of employing a junior worker has become prohibitive for many small and medium enterprises. The result? A shrinking pipeline for young talent.
But this is not just about retail. The Office for National Statistics data show that the number of 16-24 year olds not in education, employment or training (NEET) has crept up to 11.6%, a worrying tick higher from pre-pandemic lows. The service sector, which traditionally absorbed school-leavers, is also automating. The hospitality industry, for example, has embraced QR code ordering and robotic kitchen assistants. The door-to-door salesperson, the filing clerk, the junior cashier: these roles are becoming extinct.
Critics will argue that Wolfson is crying wolf (pun intended). They will say that technology creates new jobs even as it destroys old ones. But that argument assumes a frictionless transition, which is not how labour markets work. A 17-year-old who might have started on the shop floor now needs coding skills to land a job in a warehouse. That is a leap the education system is failing to bridge.
The broader macroeconomic implications are worrying. A decline in entry-level jobs reduces social mobility and dampens aggregate demand. Young people without work experience struggle to build CVs, trapping them in a low-skill, low-income cycle. The Bank of England should take note: if the youth unemployment rate rises, the structural slack in the economy increases, potentially capping wage growth over the medium term. But don’t expect Threadneedle Street to panic. They are too busy fighting the last war on inflation.
What is the solution? Wolfson suggests tax reforms to make hiring more attractive. He has a point. Cutting employer NICs for under-25s would be a start. But that would require the Treasury to forgo revenue, which seems unlikely given the current fiscal environment. Alternatively, we could embrace the destruction and invest heavily in retraining. But let’s be realistic: the government’s record on skills training is abysmal.
In the end, the market will have its way. Automation will continue its relentless march. Retailers like Next will adapt, shedding labour and investing capital. The losers will be the young, the unskilled, and the unlucky. Wolfson’s warning should be a wake-up call for policymakers. But in a world where fiscal prudence is sacrificed for political expediency, don’t hold your breath. The bottom line is this: the UK labour market is undergoing a structural transformation, and the entry-level job is the first casualty. The question is whether we have the nerve to address it before the rot sets in for good.
