The UK government is considering removing taxes that employers pay when they hire people under 25. A major think tank says this policy would cost £5.1 billion but create only 38,000 jobs — meaning the government would spend around £134,000 per job created. That is bad value, according to analysis from the Resolution Foundation. More targeted financial incentives would likely create more jobs for the same money.

Young people in the UK are struggling to find work. The NEET rate — the share of people aged 16 to 24 not in school, work, or training — has risen since 2019 and is higher than in most other developed countries. By October 2025, an extra 195,000 young people had slipped into NEET status over just two years, according to the Foundation's 'False starts' report. The problem has been building for years, but it is getting worse.

When the economy slows and companies stop hiring, young people get hit hardest. Adults already in jobs usually keep them. But young people looking for their first job have nowhere to turn when no new positions open. That is why NEET numbers have climbed.

Why a Broad Tax Cut Wastes Money

Removing employer taxes for under-25s sounds simple. Employers would see it, it costs nothing to administer, and politicians can advertise it easily. But the numbers do not work. At £5.1 billion a year, the scheme would cost roughly £134,000 per job created. That is far more expensive than other options.

Here is why. If you remove taxes for all young workers, employers get the benefit even when they would have hired young people anyway. The government is paying employers who did not need a reason to hire. By contrast, if the government said "we will pay you only if you hire someone who has been out of work for more than a year" or "only if you hire in sectors where young people usually struggle," the money could target where it matters most. That is more efficient but harder to manage.

Young People's Barriers Go Beyond Wages

The 195,000 extra NEETs are not a single group. Some left school and cannot find work. Others have health problems or care for a family member. Some have simply given up. A tax cut appeals to employers thinking about cost, but it does nothing for the young people who cannot work because of illness, lack of skills, or other personal barriers.

Other countries do better. They have kept young people's employment rates higher by offering more vocational training, active support from government, and closer ties between employers and schools. A tax cut for employers does not touch any of these areas.

Why this matters: the government is planning major spending and welfare changes. Youth unemployment affects benefits budgets, health, and earnings for decades. How the government designs a policy — not just how much it spends — decides whether money actually works.