Young people in the labour market : Key issues for the 2015 Parliament
The unemployment rate among young people is almost three times that of the rest of the population; youth employment rates are well below levels seen before the financial crisis; and under- 30s experienced the weakest wage growth of any group since 2008.
At the same time, participation in education and training among young people is up, record numbers of young people are doing apprenticeships, and they are increasingly well-qualified from an academic perspective.
Why is there such a mismatch between the skills and qualifications of the younger workforce and their employment prospects?
Fewer young people are in employment or looking for employment
Although youth unemployment fell rapidly in the last years of the previous Parliament, from a peak of over 20% in late 2011, employment rates have recovered more slowly. The discrepancy is the result of increased economic inactivity among young people.
This can be explained in part by new requirements for all those under 18 to stay in education or training. However, inactivity has also risen amongst the over-18s, a possible indicator of young people choosing to “sit out” of the labour market during turbulent times by undertaking additional education.
Chart 1: Educational status of 16-24 year-olds
Since 2008, more young people have stayed in full-time education, and correspondingly fewer have started employment.
Educational status of 16-24 year-olds, 2002-14
Youth unemployment remains a problem
Attempts to tackle unemployment among young people generally involve a combination of improving their skills, increasing their work experience and in some cases offering them job guarantees.
Apprenticeships are often seen as a way of combining skills training with work experience, and there was a large increase in apprenticeships in the last Parliament, albeit driven by apprenticeships for those aged 25 and over.
Although the UK government did not sign up to the EU's Youth Guarantee, to offer a place in training or employment to all people aged under 25, the Scottish Government introduced a similar guarantee for 16 to 19-year-olds.
Cities have been given more powers to tackle youth unemployment, with Government funded Youth Contract programmes in the Leeds City Region, Liverpool and Newcastle, which could be extended to other cities.
Apprenticeships reached record numbers in the last Parliament, but what next?
In this Parliament, it is likely that a balance will need to be struck between raising apprenticeship quality and increasing participation. More rigorous apprenticeships may increase quality but reduce the number able to take part.
Conversely, further growth in lower-level apprenticeships may weaken the “brand”: there has been some debate as to whether such apprenticeships should retain the name.
To make apprenticeships more responsive to employer needs there has been a push to increase employer input and investment in the programme in recent years.
However, there is a risk that small employers in particular could be put off by the greater administrative burden associated with such involvement. It is also possible that requiring to employers to make a direct contribution towards training costs may stop apprenticeships being offered altogether.
Increasing apprenticeships funding and boosting participation could threaten other vocational qualifications, including traditional college courses and other forms of in-work training, particularly if resources are diverted away from them.
Do skills make a difference?
Individuals with higher qualifications tend to have better employment prospects.
For example, the employment rate of people with a degree is above that of people whose highest qualifications are A-Levels, who in turn have a higher employment rate than people with GCSEs only.
However, it is less clear what happens to employment when all young people become more qualified together. Over the last decade the qualification levels of 16-24 year olds have increased across the board, but employment rates have fallen (though this is in part due to increased participation in education).
Moreover, not all the jobs young people are taking on actually require these higher qualifications. There has been an upward trend in the proportion of graduates working in non-graduate roles, with a pronounced jump following the 2008/09 recession.
There is a risk that this trend will become self-perpetuating, as university leavers increasingly have to compete for “graduate level” jobs with the rising numbers of gradates with experience in non-graduate roles.
Finally, despite the general rise in qualifications, there are indications that part-time work and more precarious forms of employment, always more common among young people, are becoming increasingly prevalent.
Chart 2: Percentage of employees in part-time work
During the 2008-09 recession, the rate of part-time employment among young people increased. It has remained at around 30% ever since.
Percentage of employees in part-time work, 2004-14
Perhaps reflecting this, and the rise in graduates doing non-graduate jobs, young people have also seen weaker wage growth since the 2008 crisis than the rest of the population.
Can young people be protected from recessions?
In employment terms, young people were disproportionately affected by the last economic downturn. Can they be better protected from the next one?
There may be limits to what can be done. Inevitably, the regular flow of young people into the workforce will at times be inconsistent with firms' desire to employ them, which fluctuates with the state of the economy.
In uncertain economic times, businesses may also be less willing to invest in training younger employees when experienced workers have become available from other firms making redundancies.
However, spells of unemployment at a young age can have long-term damaging effects on individuals and the wider economy and society. Pressure on the Government to ensure young people have stable work opportunities and are better insulated from the ill-effects of economic downturns will continue.
- Conservatives: create 3 million new apprenticeships and roll out more Degree Apprenticeships
- Greens: (…) provide an apprenticeship to all qualified young people aged 16–25
- Labour: guarantee an apprenticeship for every school leaver who attains the grades and require any firm that gets a large government contract to offer apprenticeships and introduce a Compulsory Jobs Guarantee
- Liberal Democrats: increase the number of apprenticeships, extend the Apprenticeship Grant for Employers