The chief executive of Next, Lord Wolfson, has sounded the alarm on a looming collapse in entry-level jobs, blaming minimum wage hikes and employer national insurance contributions for pricing young workers out of the market. His warning comes as the UK government announces a fresh push to revive apprenticeships, a move that sceptics dismiss as too little, too late.
Speaking to the BBC, Wolfson argued that the cumulative cost of recent policy changes has made it uneconomical for retailers to hire entry-level staff. 'We are seeing a structural shift where the cost of employing a junior employee now exceeds their marginal product,' he said. 'The result is fewer jobs, less training, and a lost generation of workers who cannot get a foot on the ladder.'
To illustrate the point, Wolfson crunched the numbers. A 21-year-old full-time employee on the national living wage now costs an employer around £25,000 per year once national insurance, pension contributions, and the apprenticeship levy are factored in. For a job that might generate only £20,000 in value, the arithmetic simply does not stack up. 'It is a tax on employment,' he added. 'And the burden falls hardest on the young.'
The government, however, is attempting to change the narrative. Education Secretary Bridget Phillipson has unveiled plans to overhaul the apprenticeship system, including a new 'growth and skills levy' that allows firms to spend levy funds on shorter, more flexible training courses. The aim is to increase apprenticeship starts, which have stagnated at around 300,000 per year since the levy was introduced in 2017.
But the markets are not fooled. Gilt yields edged higher on the news as investors priced in further borrowing to fund the scheme. The yield on the 10-year gilt rose three basis points to 4.12%, reflecting the market's deep cynicism about yet another government intervention. 'This is classic fiscal folly,' said one bond trader. 'They borrow more, print more, and wonder why inflation sticks.'
Indeed, the macro backdrop is grim. UK inflation remains stubbornly above the Bank of England's 2% target, with services inflation running at 5.1%. The Bank's Monetary Policy Committee is expected to hold rates at 5.25% next week, but the prospect of rate cuts has receded sharply. Capital flight is also a concern; foreign investors have been net sellers of UK gilts for three consecutive months, according to the latest ONS data.
From a bottom-line perspective, the apprenticeship revival plan looks like a case of rearranging deckchairs. The levy has been widely criticised as a 'payroll tax' that fails to stimulate genuine training. A 2023 House of Lords report found that only 40% of levy-paying employers had used their funds to take on an apprentice. The rest let the money sit idle or spent it on low-value courses.
The new proposals may address some of these inefficiencies, but they do nothing to tackle the underlying cost problem. 'You cannot subsidise your way out of a broken labour market,' said one City analyst. 'Unless you cut national insurance or lower the minimum wage for young workers, the economic calculus remains unchanged.'
Wolfson's comments have reignited the debate over labour market flexibility. Critics of the minimum wage argue that it destroys entry-level jobs; advocates counter that it prevents exploitation. But in a world of tight margins and rising costs, the old certainties are crumbling. The retail sector has already shed 150,000 jobs since 2019, and the trend is accelerating.
For investors, the message is clear: stay nimble. The UK labour market is becoming a drag on productivity, and the government's fiscal headroom is evaporating. If inflation stays sticky and bond yields rise further, the Treasury may be forced to rethink its spending plans. Until then, the young jobseekers will continue to bear the cost of well-intentioned but ill-designed policies.
