UK Labour Market Challenges 2025: Unemployment, AI, and Wage Pressures Explained!

The UK labour market is facing major challenges in 2025. With rising economic inactivity, skills shortages, youth unemployment, and AI disrupting jobs, how will businesses and workers adapt? In this video, we explore regional unemployment trends, the persistent gender pay gap, the role of trade unions, and whether the minimum wage is perhaps reaching a breaking point for any small businesses. We'll also examine how AI and automationare reshaping job opportunities—and the risks of structural unemployment.

With so many pressing issues, understanding the labour market is crucial for A-Level, IB, and GCSE Economicsstudents. Watch now to get real-world examples of labour market failures, government interventions, and supply-side policies.

Glossary of Key Labour Market Terms

1. Unemployment Rate – The percentage of the labour force that is actively seeking work but unable to find employment.
2. Economic Inactivity – The proportion of the working-age population that is neither employed nor actively seeking employment, often due to illness, education, or caring responsibilities.
3. Skills Shortages – When employers struggle to find workers with the necessary qualifications, training, or experience to fill job vacancies.
4. Labour Market Tightness – A situation where job vacancies are high relative to the number of unemployed workers, leading to hiring challenges for employers.
5. Real Wages – The purchasing power of wages after adjusting for inflation, indicating how much goods and services can be bought with earnings.
6. Youth Unemployment – The number of young people (typically aged 16-24) who are out of work and actively seeking employment.
7. Gender Pay Gap – The difference in average earnings between men and women, often expressed as a percentage of men’s earnings.
8. Trade Union Membership – The proportion of workers who belong to a trade union, which represents their interests in negotiations with employers.
9. Minimum Wage – The lowest legal hourly pay rate that employers must offer workers, set by the government to prevent exploitation.
10. Labour Productivity – The amount of economic output produced per worker or per hour worked, reflecting efficiency in the workforce.
11. AI and Automation in Employment – The impact of artificial intelligence and robotics on job creation and job displacement across different industries.
12. Regional Unemployment Disparities – Differences in unemployment rates between various regions within a country due to economic, demographic, and industrial factors.
13. Job Vacancy Rate – The proportion of available job openings in the labour market, used as an indicator of demand for labour.
14. Work Visas and Migration – Policies governing the entry of foreign workers into the country to fill labour shortages in key industries.
15. Living Wage – A wage level deemed sufficient to meet basic living costs, often higher than the legally mandated minimum wage.