Youth unemployment

As with adult unemployment, the level of unemployment of 16 – 24 year olds peaked in the UK during 2011, when it reached over 1m (a rate of 22%) and continued to fall as the economy started to grow. By the end of 2014 youth unemployment had fallen to around 840,000 - at a rate of 18%.  However, 16-24 year olds remain the highest group at risk of unemployment, with 50-64 year olds being the least at risk, with a rate of just 3.8% in the year to October 2014.

(Source: ONS).

Despite the downward trend, observers in the UK and around the world – from the UK’s National Institute of Economic and Social Research to the World Economic Forum - agree that youth unemployment represents one of the most serious economic and social problems facing developed and developing economies alike.

According to the ILO, in 2013, as least 73 million 16 to 24 year olds were unemployed, representing 12.6% of all active 16-24 year olds. In terms of world regions, North African youth unemployment is the highest, at 27.9%, with the Middle East at 26.5%. In some countries in the Arab world, up to 90% of 16-24 year olds are unemployed. Youth unemployment in the EU as a whole stands at 21.4%, but there is considerable variation. Greece now tops the pile, with a youth unemployment rate of over 59% - nearly three times the EU average, while in Germany the rate is 7.5% - just one third of the EU average. In fact, in Germany there were 30,000 unfilled vacancies in training programs for young workers. 

In the UK there are around 7.3 million young people aged between 16 and 24 – roughly two thirds (4.8 million) are  ‘economically active’ and one third are ‘economically inactive’  The economically active are either working or available for and seeking work i.e. employed or unemployed, and the economically inactive are not available or not seeking work.  Most of these (1.8 million) are students.

So what lies behind embedded youth unemployment? According to the World Economic Forum, the main causes of youth unemployment include:

  1.  A lack of quality of education and relevance  to the needs of the labour market.
  2.  Economic downturns - which historically increase youth unemployment –  and where young workers are often seen as the most dispensable; population growth, especially in North Africa and the Middle East.
  3.  ‘Discouraged youth’ where many young workers have given up hope of ever acquiring a meaningful job which provides a ‘living wage’. As the OECD also puts it, the 16-24 year olds also face very specific barriers into the labour market, and where there is weak integration of young workers, given the mismatch that exists between the current demand for labour, and the effective supply of young workers – in short, many young workers are neither willing nor able to accept the kind of jobs that are available.

Youth unemployment in the UK has risen consistently during the last three recessions – in 1993 it was 15%, and by 2008 it has risen to 19%, peaking at 22% in 2011.

According to the Commission on Youth Unemployment, unemployed young people represents a financial time-bomb, with an estimated direct cost  to the exchequer (in 2012) of  £4.8 billion (more than the budget for further education for 16-to-19-year-olds in England) and indirect cost to the economy £10.7 billion in lost output.

Of special concern is the number of long-term unemployed young people – defined as looking for work for 12 months or more - and NEETS.  NEETS include those 16-24 year olds who are unemployed or economically inactive and not in any form of education, employment or training.

As in the 1980s and 90’s, recent government policy has focussed on supply-side incentives, including the introduction of a Youth Contract, which is includes an injection of £1bn to get young unemployed people working or studying – the ‘earning or learning’ initiative. It includes wage incentives worth more than £2,275 for each 18-24 year old an employer recruits or provides with work experience placements. There are also incentive payments to support employers to create apprenticeships and £126m to help teenagers into education, employment or training. Doubts clearly remain regarding the extent to which such modest government initiatives can really ‘change the game’. It is clearly time to put vocational education back on the front-burner while taking a closer look at Germany, Austria and Finland – where youth unemployment is simply not an issue.