Older people stay in work as young people struggle to get in

Britain has a missing generation of workers

Britain has a generational jobs problem, but blaming older workers would be far too simple. Having experienced people working longer can be good for businesses and the economy. The real crisis is happening at the other end of the workforce, where 751,000 young people are unemployed and nearly one million are outside employment, education or training. Small businesses traditionally provided the first rung on the employment ladder, but increasingly they are struggling to afford it.

UK’S GENERATIONAL JOBS CRISIS

Older workers are staying longer and young workers are locked out. Is one causing the other and how are the small and micro businesses contributing to the squeeze

In the early 2000s, the UK had 10 young workers for every over‑65 in work. Today it’s just two and the impact on small businesses is drastic.

The number of people aged 65+ in work is more than 1.7 million, according to the latest figures from the Office for National Statistics. This is a record high driven by longer life expectancy, better health, flexible working and cost‑of‑living pressures that keep older people on the payroll.

In theory, this should create a multi‑generational workforce where skills flow freely between older and younger employees. However, in reality we’re stuck in what the Bank of England calls a “low hire, low fire” labour market where young people are being shut out.

Crisis

Youth unemployment is now close to its highest rate in more than a decade, entry‑level jobs have plunged, and almost one million 16–24‑year‑olds are looking for opportunities in work, education or training without success.  

Small and micro businesses, historically the biggest employers of young people, are contributing to the problem and feeling the consequences:

Entry‑level roles have collapsed: Vacancies for junior staff have fallen sharply across retail, hospitality and leisure which are the sectors dominated by small firms and the sectors that traditionally have given young people their start in the workforce.

Hiring inexperienced staff has become too expensive because wages have risen faster for young people than for adults, and employer National Insurance has jumped. The cost of employing 18–20‑year‑olds rose 12.7%, compared with 7% for adults.

For small businesses with tight margins, the maths no longer works.

Older workers staying longer reduces churn: when older employees stay in roles longer, fewer positions open up for young people, especially in small firms with limited headcount. We may not be talking about direct replace of older workers by young ones but there are also fewer opportunities for the ones in between to move up and leave vacancies.

AI is replacing junior roles. Some bosses say they aren’t using AI to fill roles that would previously have been taken by first time workers. Others are planning to get rid of starting level roles and automate to save money. AI is helping older workers extend their careers and replacing tasks traditionally given to junior recruits. Graduate roles as a share of vacancies have halved since 2022.

Remote work makes training harder. Firms are reluctant to hire younger people to work remotely because developing inexperienced staff is harder without in‑person mentoring.

The Fallout

Small and micro businesses face a talent gap and a cost crunch and are caught in a dangerous loop. When older workers stay longer there are fewer openings. With wages for younger people rising faster it is becoming unaffordable to recruit entry‑level people. If AI replaces junior tasks, there are fewer starter roles and weak growth makes employers cautious about taking one anyone, so recruitment freezes spread. This all leaves small businesses struggling with:

Skills shortages because they can’t bring in young talent to train and grow.

Rising labour costs: Hiring anyone, young or old, is more expensive.

Reduced flexibility: older workers staying longer reduces turnover and limits restructuring.

Slower innovation: without junior members of the team, small firms lose fresh ideas and digital skills.

There’s a long‑term risk in this too as a missing generation of workers today becomes a missing generation of managers tomorrow. It also means fewer young people paying into the national insurance pot for the state pensions paid to those who are retiring, and reduced tax take for the treasury.  

Policy

The Prime Minister has made youth unemployment a priority by expanding subsidies for minimum‑wage youth jobs and plans to overhaul vocational routes into work.

Critics say the government has also driven up the cost of hiring young workers, narrowing wage bands too quickly and raising employer NI to levels that stop investment in anything in the business, including recruitment.

Some Labour MPs and advisers want a more radical fix by shifting tax away from young workers and towards pensioners, targeting property and wealth.

The Milburn Review into the jobs crisis for young people warns the problem is structural, not cyclical and the annual cost of youth unemployment is now £125bn.

Challenges

For small firms, this generational shift is an operational problem because they can’t find young people they can afford to take on. Youth labour is now priced closer to experienced labour, so it they do hire they want experienced people to avoid the training costs and so that they will be productive in the business sooner. Training inexperienced staff is expensive, and risky, in a low‑margin environment.

However, business owners can’t rely on older workers forever because while retirement may be delayed, it’s not cancelled and businesses can’t grow without new talent. A business without entry‑level roles becomes a business without a future.

Flipped

Britain’s labour market has flipped. Older workers are staying longer, young workers are locked out and small businesses are stuck in the middle, facing rising costs, shrinking talent pipelines and fewer opportunities to grow.

This is a small business, skills and future growth crisis rolled into one. If the government wants small and micro businesses to thrive, it must reduce the cost of hiring young workers, expand vocational and apprenticeship routes into work, support small firms adopting AI responsibly, create incentives for them to create entry‑level job and rebalance tax and labour policy across generations.

Without young workers, small businesses can’t grow and without small businesses, the UK won’t grow.