Youth Unemployment Lizzie Crowley

Improving national picture but long-term trend in youth disengagement… Whilst we have seen falls in youth unemployment over the last year these figures mask an underlying problem with the youth labour market in the UK. Evidence points to a growing structural youth unemployment problem. Long term youth unemployment in the UK has been on a long term upward trend since the early 2000’s – so even while the economy was growing and employment was rising. This is shown in this chart were you can see the proportion of young unemployed people who remained out of work for a year or more has increase since the early 2000s. The reasons behind the long term rise in youth unemployment are not entirely well understood. However, one of the most likely explanations is that long running changes in the economy have disadvantaged new entrants to labour market – particularly young people who leave school with few formal qualifications. So what type of employment opportunities do young people typically access? Source: ONS Unemployment by age and duration (not seasonally adjusted). Data is for 16-24 12 months plus

Changing structure of the labour market The types of jobs that young people generally work in are concentrated at the lower end of the labour market – in elementary or unskilled occupations, many of which are in the hospitality sector, or in sales and customer services roles. Together these provide around half of all job opportunities for young workers in the UK labour market, as shown by the blue bars at the bottom of this chart. Source: Labour Force Survey

Growing labour market polarisation However these occupations have been in long term decline a trend which has accelerated during the recession and recovery. Growth has been concentrated at the top end of the labour market in highly skilled professional and managerial roles whilst mid skilled occupations and low skilled occupations have continued to contract. As highlighted in this chart. The opportunities that do exist are increasingly being taken up by older more experienced workers, themselves displaced by declining mid-skilled jobs. Source: ONS

Projected to intensify… and in the future this trend looks set to continue – over the next decade growth will be concentrated in higher skilled occupations while there will be continued hollowing out of mid and low skilled work. Source: UKCES Working Futures

Impact of change in the labour market on the education to work transition Less demand for physical skills and more demand for soft skills Customer facing skills increasingly in demand Difficult to obtain/demonstrate soft skills without experience Qualifications Even more important Significant wage premium for graduates Large employment penalty for those with no qualifications Concerns about limited progression - Lack of effective career ladders So what do these labour market changes mean for young people Young people are increasingly concentrated in service sector jobs – roles which require them to demonstrate soft skills – skills which are very difficult to demonstrate without work experience. Yet fewer young people are combining work and study and many leave education without ever having had a paid job. This seriously disadvantages when they face competition for entry level roles from older more experienced workers. It also means that qualifications more important than ever – there is a significant wage premium for graduates who have very low unemployment rates whilst those who leave education with few formal qualifications suffer a large employment penalty The polarisation of the labour market has also led to concerns about concerns about limited progression and lack of effective career ladders in low wage service sector employment.

Youth unemployment is highly spatially concentrated Youth unemployment is not evenly spread High proportion in some inner city London Boroughs and some northern towns and cities which have suffered from deindustrialisation And access to opportunities is also shaped by where you live – youth unemployment shows considerable variation across the UK This map shows the concentration of youth unemployment in Britain's largest cities in 2012/13 This is a familiar pattern of labour market of disadvantage – rates are higher in many northern and coastal cities places – places such as Middlesbrough, Hull and Grimsby Source: APS combined waves 20012/13 Work Foundation calculations

Drivers of local disparities Reflect the changing geography of the UK’s economy and limited adjustment of low skilled labour market Low skilled young people particularly disadvantaged in weak labour markets But cities will also experience other distinctive local challenges which may make YU levels higher or lower, including: Weak public transport infrastructure Poor provision of services to support youth employment Intense competition for vocational training options In general this pattern reflects the changing geography of the UK’s economy and limited adjustment of low skilled labour market - for instance low skilled people are much less likely to move to access work compared to those with better skills. This places low skilled young people particularly disadvantage in weak labour markets as they in competition with older more experienced workers. But cities will also experience other distinctive local challenges which may make youth unemployment higher or lower, including: Weak public transport infrastructure, poor provision of services to support youth employment or intense competition for vocational training options

Significant international variation… Yet we know it doesn’t have to be this way. The polarisation of the labour market has also happened in many other European countries albeit to a lesser extent. Yet countries such as Germany, the Netherlands and Denmark have managed to maintain consistently low levels of youth disengagement despite the global recession and changes in the nature of work. Source: Eurostat

Lack of strong vocational pathway for young people In the case of these countries youth labour market has been sheltered from these changes by a strong vocational education and training system and supportive youth policy. However in the UK, whilst vocational education has been at the forefront of government reforms and growth in apprenticeships has been heralded as an out and out success story, they are still a very weak route into the labour market for young people. As shown by this chart the vast majority of the increase has been in provision for the over-25s And we also know that most apprenticeships have gone to existing employees rather than new entrants to the labour market. There are also major issues not just with quantity and access but with the quality of the apprenticeships on offer. Source: National Apprenticeship Services

Collapse of earning and learning amongst young people in education We also know that other countries with low levels of youth unemployment have a strong youth jobs market with lots of opportunities for young people to combine work and learning - as shown by this chart – ensuring that they developed valuable experience to help them build skills and access work whilst completing education. The UK on the other hand is experienced a collapse in the number of young people combining work and study. Source: Eurostat

Smoothing the school to work transition, policy priorities should include: Clarifying non-academic pathways Strengthening further education and apprenticeship provision Greater emphasis in schools on destinations Improving the careers guidance offer Simplifying support and funding Greater local co-ordination of youth services Access to work experience opportunities Increase employer engagement across the school to work transitions Looking forward, key risks on the transition of young people from school to work include: Ensuring recovery broadens and is sustainable – limited impact of youth labour market so far – risks leaving young people behind Clarifying non-academic pathways – Raising of the participation age will be very challenging insuring that the 16-19 vocational offer is XXXXXX Very complex local pathways for ’the other 50 per cent’ with limited advice and no equivalent of UCAS available to guide people through getting to college or applying for an apprenticeship.. Strengthening further education provision - Weaknesses in further education provision which leaves 1.5 million learners in the post-16 learning and skills sector in provision rated less than good. Further education is less generously funded than higher education and has been subject to large cuts. There are concerns that the sector has historically had weak incentives to ensure that students find work. Incentives for schools to identify and re-engage young people still remain weak, though accountability changes and the introduction of destinations data may help Improving the careers guidance offer - Ofsted reports that three-quarters of schools failing in duty to secure appropriate careers advice and guidance Simplifying support and funding - One study has found that at least eight national organisations, funding 33 different funds and schemes, spanning 13 different age groups to aid transition to different destinations Greater local co-ordination of youth services - Local authorities have formal responsibility for NEETs, but the activity of more than 10 per cent of 16–18-year-olds in local authority data on NEETs is ‘unknown’ Increased employer engagement

Lizzie Crowley – Head of Youth Employment lcrowley@theworkfoundation.com