Chancellor John Healey is expected to announce an above-inflation increase in the National Living Wage in Wednesday’s Budget, taking it above £13 an hour for the first time.
The increase, expected to be just under 4%, would add to pressure on businesses already struggling with rising employment costs, energy bills and taxes. The Low Pay Commission's central estimate of a 3.7% rise would take the hourly rate to £13.18 from next April.
However, the Chancellor is also expected to slow increases in minimum wage rates for younger workers amid growing concerns about youth unemployment and the impact of rising costs on entry-level recruitment.
Louise Hellem, chief economist at the Confederation of British Industry, told The Telegraph: “The steep rises in employment costs over the last few years have made firms more cautious about hiring and reduced their ability to invest.
“This has had a significant impact on firms’ ability to create entry-level roles, making it increasingly difficult for young people to take that crucial first step on the career ladder.”
The warning comes as new figures from jobs website Adzuna show graduate hiring fell 43% year-on-year in September, while overall vacancies declined by 11.9%.