Among the many gloomy economic statistics sent to depress us recently the figure for youth unemployment must be one of the gloomiest. This week we learned that it had topped one million. What’s more, everyone agrees that it is going to get worse, perhaps much worse, before it gets better. The effect of sustained unemployment on young people can be devastating, setting back their prospects in ways from which they may never recover.
So why is youth unemployment so bad? And what can be done about it?
Economists call unemployment a 'lagging indicator'. By that they mean that it is one of the last measures of economic wellbeing to go sour. It was therefore to be expected that, as economic growth stuttered to a virtual halt this year, unemployment figures, which had stayed reasonably healthy, would eventually start to get worse too. That’s what we learned this week had happened in the three months to September.
In that period unemployment overall rose by 129,000 to 2.62 million, a rate of 8.3% of the workforce and a 17-year-old high. Youth unemployment, which covers people aged between 16 and 24, went up relatively even faster, by 67,000 to 1.02 million, or 21.9% of young people in that age group. Both in terms of the actual total and the rate of unemployment, these figures are the highest since comparable statistics started to be collated in 1992 (though things were probably even worse in the recession of the 1980s).
The figure of 1.02 million includes 286,000 students looking for work to supplement their student income. Such students are required (for reasons of international comparison) to be included in the figures even though some people, including the government, think they should be excluded on the grounds that their inclusion gives a misleading impression of the real state of youth unemployment. But even if they are excluded, young people in this age group are two and half times as likely to be unemployed as older people.
There are obvious reasons for this. At a time of growing unemployment in general, there are fewer entry-level jobs available for young people . Employers who need to shed labour tend first to sack the inexperienced. Even in ordinary times, the young are twice as likely to be unemployed as the old.
This week’s figures caused a predictable political row as to who was to blame. The government claimed that it was the trouble in the eurozone that was causing unemployment overall to rise and youth unemployment even more so. Labour said that while Europe’s woes might prove to be responsible for things getting even worse in future, it was the government’s own policies that were to blame for where we are now. The very fact that unemployment is a lagging indicator, they said, proved that Europe couldn’t be the culprit, since its problems have mounted only recently. It was the government’s failure to sustain domestic demand in the economy, they argued, that explained the plight now facing the young.
Whatever the rights and wrongs of these arguments, there is a simple fact that suggests that neither provides an adequate explanation of why youth unemployment is so bad. It’s that the trend of rising youth unemployment goes as far back as 2004, a period during which unemployment in general was falling for most of the time. It was with this in mind that the business secretary, Vince Cable, said: 'The problem of youth unemployment is deep-rooted and has been with us for a very long time'. According to John Philpott of the Chartered Institute of Personnel and Development, 'Structural youth unemployment is probably close to the 9-10 per cent rate observed before the recession and is likely to persist even when the demand for labour eventually picks up'.
Why is the underlying rate of youth unemployment so high? There are several explanations put forward. One is that many of the relatively unskilled jobs that young people might once have been prepared to do just in order to get into the world of work are now done by immigrants. Those who argue this say we need only look at any building site or in any hotel and we shall see evidence of it.
Another explanation is that the minimum wage is too high for the young. The Low Pay Commission, which supervises the setting of the minimum wage, recommended this year that the rate for the young should rise less fast than for older workers. Here too, though, there is no convincing statistical evidence linking the level of the minimum wage for the young with rates of youth unemployment.
Some argue, instead, that young people leaving school simply lack the skills and the preparedness to work which would make them attractive to potential employers. And some claim that it is the benefits system that is at fault. John van Reenan, a professor at the LSE, argues that after 2004 job centres concentrated on getting single mothers and those on incapacity benefit into work and took their eye of the ball in trying to get the young a job. Instead they were left to live off benefits.
Whatever the reason for the persistent high rates of youth unemployment, reducing it is a pressing need for the government. Chris Grayling, the employment minister, said this week: 'Our challenge in the autumn statement will be to put in place additional measures to support growth and create employment opportunities, especially for young people'.
What can be done?
When it came into office, the Coalition Government axed Labour’s 'Future Jobs Fund', which included a 'job guaranteej for all under-25s still without work after six months on the dole. In its place it introduced the Work Programme which aims to incentivise the private sector to get the young into jobs. It has also tightened up the benefits system by threatening to withdraw Job Seekers’ Allowance from young people unwilling to go along with work experience programmes. This has proved controversial as some young people claim they are being required to work for nothing, stacking shelves in supermarkets and the like, as supposed work experience.
Some argue that’s what really needed is a revival of the apprenticeship system. 57% of employers don’t run such schemes and 51% of them think they are not cost-effective. This week Vince Cable announced a scheme to pay small businesses up to £1,500 for each apprentice taken on. And the Prime Minister announced a £250m scheme over two years to increase vocational training.
But sceptics say that governments of all stripes have, over the years, tried every conceivable scheme to tackle the problem of inadequate training, skills shortages and the demise of apprenticeships without any appreciable effect. They fear the problem may be much more deep-rooted: that it may have much more to do with the way we bring the young up, the failure of families to inculcate values of aspiration and hard work, of schools to equip them properly for the tough world of work, and of the culture generally to foster the notion that reward requires effort. But is that just a counsel of despair? Does the problem really lie with the young themselves or with the way we are running our economy?
What’s your view? Let us know
If you are yourself an unemployed young person, or have a young person unemployed in your family, what do you think is the problem?
Why do you think youth unemployment has been growing since 2004?
What do you make of the various explanations for it – that immigrant labour is the cause of the problem, that the minimum wage is too high, that schools are not equipping young people adequately for the world of work, or that the benefit system is at fault?
What faith do you have in government schemes to deal with the problem?
And what single thing would you advocate to improve the situation facing the young?