The Recession, Youth Unemployment, and Hope for a New Generation

Conventional wisdom holds that the rate of youth unemployment will lie at just over twice the rate of total unemployment. However, across Europe, startling rises in youth unemployment suggest we have reached an alarming conjuncture. In the UK alone, youth unemployment stands at 20.5%;more than double the rate of total unemployment. This constitutes a fatal breach in not only the prospects we can offer young citizens, but the ideas we have previously used to conceptualise their role in the economy. We must seek to further analyse recent economic changes in order to solve this disturbing problem.

This augmented ratio is partially due to the unusual pattern of the last recession; namely, the lower than expected rise in unemployment. Expectations at the onset of the so-called ‘Great Recession’ in the UK were that unemployment would rise above 3 million. However, this did not occur, despite the severity of the contraction in GDP being much greater than in the recessions of the recent past. In light of this, youth unemployment has actually risen at a rate concurrent with previous recessions.

The aforementioned predictions proved incorrect firstly as a result of political contingency. The government intervened heavily into the economy in an attempt to save the banking system and boost growth. Furthermore, public sector cuts were delayed until after the 2010 election. These politicised decisions delayed the growth in unemployment. Even now, the rises in the public sector unemployment are being offset by the private sector (though whether this will continue remains to be seen).

Another unexpected element was the willingness of firms to hold on to labour, even in a part time capacity. This highlighted the fact that the economy has fundamentally changed since the last recession. In a highly complexified economy regulated by tightly controlled workforce legislations, firms spend more on recruiting, training, and retaining labour. They thus wanted to safeguard their investments, and retain workers. As a consequence, we have witnessed ‘price adjustment’ of labour, rather than quantity adjustment, keeping unemployment lower than initially envisaged.

The evolution of the labour market has thus over-emphasised the rise in youth unemployment in comparison to previous recessions. In fact, youth unemployment appears to have behaved largely similarly to previous experiences; it is simply unemployment as a whole which can be perceived differently, amidst the changed structures of the 21st century economy.

However, there must be a reason as to why the change in the economy has not been carried through to lower youth unemployment; one that has largely been overlooked amidst sensationalism and generalisation. Indeed, few analysts point out that unemployment rates for 18-24 year olds have been rising since 2004. If this shift has not been caused by the recession, then how should we conceive of it?

One way in which solutions for this seemingly unexplainable trend have been articulated is that immigration from the accession countries has squeezed out opportunities for young jobseekers. Migrationwatch has suggested there is a direct link between these two trends. Many groups on the political far-right echo these views, positing economic arguments for tighter immigration. These warnings can seem attractive to voters. But are they justifiable economically?

In theory, many immigrants tend to have fewer skills and therefore will be closer substitutes for less experienced young people; specifically pushing up youth unemployment whist leaving the rest of the workforce unscathed. However, this does not explain the squeezing of seemingly skilled graduates who also find themselves unemployed; a fact pointed out by the National Institute of Economic and Social Research. Indeed, apart from a very slight correlation between immigration and youth unemployment in London, this theory does not hold much water.

More compelling, however, is the argument that our education system is neglecting the needs of young people, especially those with technical skills. Whilst the tertiary education sector was massively expanded throughout the 1990s to fill politically expedient quotas, many of the courses on offer are simply not valuable in the skills they provide. Similarly, the focus on easing exam results to satisfy market-led school league tables neglected the need for vocational education. New Labour’s early youth education policies, such the potentially successful New Deal for Young People (NDYP), were just as rapidly scaled back from 1999, in order to focus on more politically volatile areas such as single parents and those on incapacity benefits, and to help fund massive private sector growth initiatives, and the Iraq War.

In their 2011 paper on youth unemployment, Barbara Petrongolo and John van Reesen suggested that the Excellence in Cities Programme (set up in an attempt to improve educational standards in inner-city areas) managed to give quality support to the high ability pupils, but failed to help the low ability ones. This is a problem exacerbated by the declining demand for low skilled workers. Misguided educational policy has created a neglected underclass of young people, who have never been encouraged to pursue their potential and gain employable vocational skills..

As I have shown, the changed nature of the UK economy means that the problems we face today cannot be explained away in terms of previous recessions. We must find a new way of engaging our young people, particularly those who would benefit from vocational skills, and seek to create the educational and training schemes needed to leverage them back into employability, and long-term employment. Otherwise, we will be guilty of creating a generation whose future gives way to wasted potential.