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The Progressive Policy Think Tank

Youth unemployment and what to do about it

In recent months, the labour market has performed well above expectations and youth unemployment has been falling. This has led some commentators to argue that the market is fixing the problem, and needs to be left alone to get on with it. But we need to put the recent movement in the jobs market in perspective.

First, the youth unemployment rate remains dizzyingly high at 18.5 per cent, with young people over three-and-a-half times more likely to be unemployed than adults. In the first quarter of 2014 almost 868,000 young people could not find work, and almost 1 million were NEET (not in employment, education or training).

More worryingly, however, high youth unemployment looks to be a structural feature of the labour market. Even before the recession, the youth unemployment rate had been rising relative to the adult rate for many years. In 1993, young people were twice as likely to be unemployed as adults, a differential which rose to over four times by 2005. Long-term youth unemployment also remains high: almost a third of unemployed 18–24-year-olds have been out of work for more than a year. And young people are much less likely to have had a job by the time they enter the labour market: in 2013 over 700,000 workless young people had never been in employment.

Ratio of youth to adult unemployment rate

The critical factors determining whether young people are able to succeed in world of work are good qualifications and proper work experience. The current benefits system ensures neither. Jobseeker's allowance (JSA) is work-first, and young people cannot improve their skills while claiming it if they want to train or study for more than 16 hours a week. A young person entering higher education has access to means-tested grants and loans; no such support exists for those wanting to study a 'further education' course.

Those European countries with low rates of youth unemployment tend either to have strong apprenticeship systems for young people, which give clear structure to the school-to-work transition, or a distinct support system for young people that keeps them out of the adult benefit system (Denmark has both).

IPPR's proposals for a youth allowance and youth guarantee are aimed at overcoming these problems through a distinct benefits, training and work track for young people – one which recognises that they are at the start of their careers and learns from those countries with low NEET rates. Our youth allowance – for young people aged 18–21 – would not mean young people had to take up training. If they wanted to enter work, as now, they could. We simply propose to end the crazy barrier on continued FE learning in the JSA system.

Given the need to pay for new spending on young people in training, we suggest focusing financial support on young people who cannot be supported by their parents (while ensuring help is there were it is really needed, alongside access to other benefits). Just because a young person does not succeed at school first time around, it doesn't mean we should give up on their education. If we do that, we increase their chances of ending up long-term unemployed or cycling in and out of low-paid work.

In addition to getting the system of financial support sorted, it is vital to improve the education/employment provision for young people. That means driving up the quality of vocational training, focusing decent apprenticeships on young people and providing paid work to any young person unemployed for six months. Employers need to play their part too: engaging more in the content of training, coordinating apprenticeship places, and utilising the skills of their employees to pursue higher-value-added business strategies. Left to its own devices, the market will not fix these problems.