Youth Unemployment in the UK

1. Youth Unemployment in the UK David Bell Stirling Management School University of Stirling

2. The International Picture

3. The Picture Through Time Increase in Relative YouthUnemployment Started Before Recession Both supply and demand factors?

4. Economic activity of 16 and 17 year olds 1987 and 2011

5. The Regional Picture – Local Authorities With Highest and Lowest Rates

6. Explanations • Reduced demand for low-skilled workers • Unqualified young lack experience and technical skills, but skill-biased technical change not a good explanation of falling youth unemployment during early part of last decade • Migration • Geography wrong, with the possible exception of London • Minimum wage • extended in October 2004 to cover 16-17 year olds • But to measured effects • School to work transition • Schools have no incentive to devote resources to those below the qualifications threshold • Complexity/poor information inhibit effective matching

7. Consequences • The domino effect – do workers take lower-skilled jobs during recessions? • level IV (corporate managers and professionals), • level III (associative professionals and skilled workers), • level II administrative and service occupations), • level I (elementary trades and service occupations)

8. Consequences • Failure to enter the labour market on a “good” trajectory entry can result in later “scarring” – subsequent adverse events involving individual and societal costs • For the individual these include: • Higher probability of unemployment • Lowerwages • Reduced well-being • Poorer health • For society, • Negative health outcomes, negative behaviours and associated fiscal costs • ACEVO Commission on Youth Unemployment • “The net present value of the cost to the Treasury, even looking only a decade ahead, is approximately £28 billion.” • “In 2012, the total cost to the economy of youth unemployment at its current levels in terms of lost output is likely to be £10.7 billion.” • Not much known about the process of scarring • Behavioural economics perspective - howis scarring linked to psychological state? e.g. optimism/expectations?

9. Youth Expectations - Data – Prince’s Trust 2012

10. Klaus Zimmerman on the German Apprenticeship System “The apprenticeship system is really one gigantic microeconomic management exercise that involves all the relevant stakeholders in society. It spans from young people and their teachers to the local companies and small businesses, chambers of commerce, industry associations, commercial banks, to trade schools, technical universities and multinational companies. Indeed, the core lesson from Germany is that this is not a top-down approach, but really a bottom up one. Every company, every school principal, every mayor, every non-governmental organization, and every church can make a difference. It is the focus to detail and a keen interest in young people’s future path that counts the most—not lofty white papers or grandiose policy announcements issued in the national capital.” Jobs and Development Blog

11. Policy • Lack of demand • Complexity of forms of assistance for young • Improved matching • Managing the school - work transition • Transport subsidies • Employability skills • Early intervention • Behavioural approach • Understanding the mindset of the young – may not respond in as economists might expect to interventions