We are facing the worst jobs crisis in a generation – with young people (18–24) set to be hit particularly hard. Covid-19 is first and foremost a health crisis, but it has increasingly morphed into an economic one as well. However, this will be fundamentally different to the 2008–9 crisis. In particular, it will result in a much larger employment effect, with the Office for Budget Responsibility forecasting 3.4 million people out of work this year (up from 1.3 million).

Young people will be particularly affected. We estimate that without further government action there will be an extra 620,000 young people unemployed by the end of the year (with 380,000 new claims to benefit between April and the end of the year expected to last for six months or more).

There is a strong case for bold policy interventions to prevent youth unemployment. Becoming NEET results in a ‘scarring effect’ that lowers long-term employment prospects and earning potential (Gregg and Tominey 2004). Furthermore, those from the poorest backgrounds and with the lowest qualifications are likely to be the worst affected.

This report argues for the government to ‘aim higher’ in its response to the coming unemployment crisis. There are already more than 400,000 young people in this country who are unemployed (and an even larger number not in employment, education or training. This is evidence of a broken school-to-work transition. This is why the measures we have described in this paper are not just responses to current crisis but permanent shifts in our welfare system.

This is the first in a series of papers that will examine pathways for reform to ‘future proof’ our welfare state for the decades ahead.