Young people have never been so disadvantaged in the labour market

The government urgently needs to improve its youth welfare and training schemes

Yesterday’s labour market statistics show more good news, particularly around pay.

Regular wages (i.e. excluding bonuses) were up 2.7 per cent. This is the highest growth in over six years and hopefully confirms that workers are getting some much-needed relief after years of wage restraint.

One group that have not been as successful during the recent jobs boom are the young unemployed. After peaking in late 2011 at 22.5 per cent, the youth unemployment rate has fallen to 16.2 per cent in the latest data, but remains well above its pre-recession level.

The truth is that issues around the ‘youth transition’ from education to work have been around for more than a decade. Looking at the ratio of the 16-24 youth unemployment rate (chart below) to that of 25-64 year-olds tells us how young people are doing compared to older adults.

What we see is that from the early 1990s right up until the recent recession, the position of young people in the labour market worsened steadily.

ippr graph

(click to enlarge)

Just as worrying is the fact that young people have not on the whole benefitted from the recent rapid jobs growth.

In fact, today’s data sets a new record; since comparable data began, young people have never performed as poorly relative to older adults, with the youth unemployment rate more than three times as high as the unemployment rate for 25-64 year-olds.

If even an economy adding historically high numbers of jobs can’t make significant in-roads into youth unemployment, what else can be done?

First, we need to understand why young people have been finding it more and more difficult to get a job over the last twenty years.

The reasons are complex, and include poor support from the further education system for those not going to university, and a welfare system that did little to respond to the particular needs of young people, instead treating them largely the same as older adults by following an extreme ‘work-first’ approach to support.

There are two strands to the new government’s response. The first is a plan to introduce a new requirement for young people claiming Jobseeker’s Allowance for over six months to participate in compulsory community service or face losing their benefit.

At IPPR we have significant reservations about whether this approach will work. There is a risk that such harsh treatment of long-term unemployed youth, many of whom live in labour markets with relatively few job opportunities, will cause significant numbers to dis-engage entirely from support.

This relates to a second problem; many young people not in education, training or employment (NEETs) are not claiming unemployment benefit at all.

Real reform of youth welfare would see more of their number brought into a system of support that is less concerned with sanctions and unpaid work, and instead works closely with young people to develop a career and training plan appropriate to each individual, with a backstop of guaranteed work paid at the minimum wage.

The second angle taken by the new government is to pledge the creation of 3m new apprenticeships. But as my colleague Luke Raikes recently showed, two-thirds of recent apprentices were already working for the company where they are training, meaning little is being done to support the young unemployed into a job.

What is more, two-fifths were over the age of 25. While training for older adults is vitally important, it should not come at the expense of school leavers securing much-needed training places.

In addition, it is likely that the wider Further Education (FE) budget is going to face significant cuts in the next spending review, further limiting the options for young people who are not on an education track leading to university. Better targeting of apprenticeships and other training opportunities is needed.

As the chart above shows, young people have never been as disadvantaged in the labour market as they are now. While the government is promising significant reform of the training and youth welfare systems, in both cases it needs to revisit and improve its proposals, or else risk young people continuing to be shut out of jobs.

Spencer Thompson is senior economic analyst at IPPR. Follow him on Twitter

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