The UK is facing a strange problem in the labor market: individuals who have been working for decades are increasingly not retiring from their jobs, while young people trying to start their careers are increasingly unable to enter the job market.
Youth Unemployment Rate and Increasing Number of Older Workers
More than 1.7 million people over 65 in the UK are employed, the highest recorded level. In contrast, the youth unemployment rate is approaching its highest level in over a decade, with nearly one million individuals aged 16 to 24 neither working nor in school. These demographic changes are quite significant; about two decades ago, there were nearly 10 young workers for every person employed over 65, while today this ratio has decreased to about two young people for each older individual.
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Reasons for Older Workers Staying in the Labor Market
Some of these changes are due to improved health and increased longevity, allowing them to work in more flexible job conditions. However, the cost of living is also a significant factor in this equation. Rising living costs have brought some retirees back into the labor market and encouraged others to delay retirement.
This situation becomes more important when companies are not looking to create new job opportunities. The Bank of England has described the state of the UK labor market as "low hiring, low firing." Companies generally do not resort to widespread layoffs nor do they have a strong inclination to expand their hiring. When older employees stay in their jobs longer, naturally fewer opportunities are created for younger workers.
Additionally, artificial intelligence technologies may exacerbate this problem. Reports indicate that the ratio of job positions for graduates to total available jobs has halved since 2022. Instead of creating large teams of young employees, companies are more inclined to give experienced employees AI tools and ask them to produce more.
Finally, working from home may have also contributed to this situation. Young employees require more training and supervision, which becomes significantly more difficult when employees and managers are not regularly together. The end result is almost the opposite of the traditional labor market cycle: the UK currently has the highest number of individuals of retirement age still receiving salaries, while simultaneously facing an unusually high number of young people unable to find their first job.
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