UNEMPLOYMENT AMONG YOUNG PEOPLE
How does it happen:
Inadequate education and lack of productivity is costing jobs. Unemployment increases progressively with decreased educational levels; and the education system is not producing the skills for the labour market. Labour supply is affected by the increase in the number of job seekers over the years.
Who can be a victim:
Young people between the ages of 16-24 are the victims of unemployment among young people
What is youth unemployment?
The term “youth unemployment” is exactly what its name implies: it results when young people – defined by the United Nations as 15–24-year-olds – are looking for jobs but can’t find them. While unemployment itself is a problem – especially in the wake of COVID‑19 – youth unemployment is quickly becoming a global crisis.
Youth is a concept that’s been widely debated, some people contending youth is merely a transition from childhood to adulthood, while others consider it a life stage that should be recognised for having its own set of complex issues and experiences, not the least of which is rapid socioeconomic change. No matter one’s views on the concept of youth, the situation known as youth unemployment is one that should concern us all.
Why is youth unemployment a problem in the long term?
Having a significant amount of young people out of work can negatively impact a community’s economic growth and development. If left unchecked, youth unemployment can have serious social repercussions because unemployed youth tend to feel left out, leading to social exclusion, anxiety and a lack of hope for the future. Given that almost 90% of all young people live in low-income nations, not feeling that a better life is possible can result in millions of young people floundering in poverty and frustration – bringing fragile nations down with them.
Reasons for Youth Unemployment
In the UK, youth unemployment has averaged higher than the main unemployment rate. This is a similar situation to the US and European economies.
The reasons for youth unemployment include:
- Lack of qualifications. Young people without any skills are much more likely to be unemployed (structural unemployment) A report by Centre for Cities suggests there is a correlation between youth unemployment and poor GCSE results in Maths and English. To some extent, the service sector has offered more unskilled jobs such as bar work, supermarket checkout and waiters. However, the nature of the labour market is that many young people lack the necessary skills and training to impress employers.
- Geographical Unemployment. Youth unemployment is often focused in certain areas – often inner cities where there is a cycle of low achievement and low expectations. For example, the employment rate for 16–24-year-olds is only 64% in the North East compared to a national average of 70%
- Real Wage Unemployment. You could argue unemployment is caused by labour market rigidities and wages being above the equilibrium rate. Traditionally young workers have been paid lower ‘apprentice wages.’ In the UK, there is a minimum wage of £5.60 – for those aged 18-20 (2017). For those aged 21-24, the minimum wage is £7.05 – Age 21-24. (2017) – just below the full minimum wage of £7.50. However, nominal wage growth has been muted leading to falls in real wages. This has increased potential for real wage unemployment, especially amongst younger workers.
- Lack of graduate jobs. Many young people leave college with a degree but then find graduate jobs are in short supply. Some find they can be over-qualified for the job market they enter
- Cyclical Unemployment. The biggest cause of unemployment in the UK is often cyclical/demand-deficient unemployment. This is unemployment caused by the falling output which occurs during the recession. During the 2008 recession, youth unemployment increased at a faster rate than the actual unemployment rate. It is often young workers who are more likely to experience unemployment; this is because with the least experience they are the easiest to remove from the labour market. Also, firms often don’t sack workers, but they do stop taking on new (young) workers.
- Frictional unemployment. School leavers may just take time to find the right work.
- Cultural/social factors. Youth unemployment is often highest amongst deprived areas where there is pessimism over job prospects. Youth unemployment is often higher among people who have a history of broken families, drug use or criminal record. Youth unemployment is also higher amongst ethnic minority groups. In 2016, the unemployment rate for young Bangladeshi and Pakistani people aged 16-24 was 28%. This compared to youth unemployment rates of 12% for the White ethnic group (the lowest) and 25% for people from a black ethnic background. (ONS)
1.Underground economy. Official unemployment may occur in areas where there is a thriving underground economy. i.e., there are unofficial jobs for people to take. These jobs may be illegal such as dealing in soft drugs. However, it is hard to ascertain the extent of these unofficial jobs and it is easy to make sweeping generalisations about deprived areas.
2.Hysteresis. Hysteresis is the idea that past unemployment trends are likely to cause future unemployment. If young people have been unemployed in the past, it becomes increasingly difficult to get a job. This is because
- Lack of jobs may cause young workers to become demotivated
- A lack of past employment may cause firms to be unwilling to hire in the first place.
- Unemployment means workers don’t have the opportunity to learn skills and on the job training.
A note on youth unemployment rates
- The official unemployment rate for youths is influenced by the high number in education. When we say the youth unemployment rate is 18% – it doesn’t mean 18% of people 16-25 are unemployed.
- It means 18% of those 16–25-year-olds who are looking for work are unemployed.
- The graph below shows many young people are in education/higher studies.
Inactivity rates amongst the young
Inactivity rates include people who are classed as unemployed, but also includes people who are not economically active, people in education or not actively seeking work. Thus, inactivity includes people in education and training, but also those discouraged to leave the labour market.
Why is youth unemployment rate higher than average?
- Youth unemployment rate statistics skewed by relatively higher numbers in education.
- Young workers least qualified with lowest levels of relevant skills. Therefore, less employable.
- Some young workers leave university with degrees but find graduate jobs are in short supply.
- Young workers may be perceived as less reliable by employers.
- Young people who are unemployed – find it hard to break the cycle of no job – therefore no experience – therefore hard to get a job.
Inequalities exacerbated
The unequal nature of the jobs crisis has exacerbated inequalities amongst young people. As previously in the context of a difficult labour market, young people – especially young women – have taken up further and higher educational opportunities. Ethnic differentials in economic experience have widened, with the reduction in employment rates being four times and three times greater for young Black people and young Asian people, respectively, than for young white people (albeit higher rates of participation in education by the former two groups explains part of this difference). The least well qualified have also fared worse than those with higher qualifications.
Good employment
For young people, a ‘good job’ is usually a full-time job but with flexible hours of work paying above the living wage. They also place an onus on sharing the ethics and values of the company they work for: they want to believe in the content of the job or the purpose of what they are doing. Employers seeking to attract and retain young talent need to pay heed to these desires and values.
Youth unemployment produces multiple scarring effects
It is clear that youth unemployment leads to many negative outcomes in terms of both material and mental wellbeing. Here, Ronald McQuaid summarises the multiple scarring effects of youth unemployment. Current high levels of youth unemployment will therefore be felt by society for decades, making effective policy responses incredibly important.
Being unemployed when young leads to a higher likelihood of long-term ‘scarring’ in later life in terms of subsequent lower pay, higher unemployment and reduced life chances according to much research (see, for example, work by Bell & Blanchflower and Strandh et al). There is also evidence of greater mental health problems in their 40s or 50s. So, the impacts of current high levels of youth unemployment will be felt by society for decades.
There are lots of problems with analysing the causes and effects of such long-term scarring and the reasons for it appear inter-connected. For instance, wellbeing and mental health may affect subsequent income and chances of getting and keeping a job, but are themselves influenced by unemployment. Some broad overlapping reasons for scarring include: (1) employer responses, (2) the person’s human capital, (3) their expectations, (4) job search and (5) the influence of external factors in the economy and society.
First, employers may consider periods of unemployment on someone’s CV to be a negative signal, for example signalling perceived low productivity, hence increasing the likelihood of a person not being hired or being offered only a lower-level job.
Second, unemployment at the start of their career may lead to having lower skills or to a general loss of confidence by the individual. Cognitive skills (for example, learning skills and the ability to process information) are likely to affect the productivity and adaptability of a worker and hence their likely pay or ability to get a suitable job later in life. Indeed, having no or few qualifications is usually a predictor of unemployment. Non-cognitive skills (for example, a person’s dependability, self-discipline, inter-personal skills, communication, adaptability, consistency, persistence and self-confidence) are also important.
There is limited consensus as to the degree that such non-cognitive skills can be altered after adolescence and the effects of youth unemployment on them, although there is evidence that some can be altered throughout working life. There are also strategies that can assist in compensating for low cognitive skills such as planning (e.g., detailing where, how and when to start job search), which can improve the transition from job search intention to actual behaviour. So, there is much that can be done to help those young people who find themselves unemployed, especially developing cognitive and non-cognitive skills.
The three industries with the highest job losses (accommodation and food, wholesale and retail, and arts and entertainment) are also the three industries with the highest percentage of young workers in their workforce.
Where young people tend to work explains why they’re more likely to be furloughed. One-fifth of all young workers are furloughed, higher than any other age group.