Youth Unemployment and Covid-19: Avoiding the creation of a pandemic generation

There are nearly seven million 16-24 years olds in the UK; around 1 in 10 of the national population.

The scale of government responses across much of the world to the Covid-19 pandemic have been unprecedented in peacetime. Extensive business and employee support schemes (such as furloughing) have prevented an economic downturn turning into a huge crisis of mass unemployment and rapidly increasing poverty.

Yet, the UK Office for Budget Responsibility’s reference scenario is that the UK economy will suffer a 35 percent loss in output in quarter two (April-June) of 2020. It assumes that the full lock-down restrictions will last for three months followed by a three-month period of partial restrictions. These assumptions reflect responses to previous public health emergencies (Ebola and SARS) and are in line with World Bank estimates that 90 per cent (REF) of any impact will be due to the lock down conditions imposed by many governments. Whilst the OBR forecasts a short-term spike in unemployment rates (up from 4 per cent to 15 per cent) by the middle of 2021 these will have returned to 6 per cent and be trending downwards. Business will have returned to normal albeit government debt levels will have gone up significantly.

If the OBR reference case turns out to be true in practice there are still significant economic consequences of Covid-19, and these will not fall equally on all areas or parts of society. Young people are particularly at risk whenever there is economic turbulence. There are two main reasons for this. Firstly, young people are often over-represented in occupations and sectors most affected by downturns. Research by the Institute for Fiscal Studies shows that for Covid-19 people aged 20-30 are 2.5 times more likely to be working in businesses which have closed as a result of the crisis (in areas such as retail, hospitality and catering). Secondly, many young people will this summer be on a point of transition into the labour market – they will be finishing school, college or university, or they will simply be between jobs. Suddenly, the demand for employment for this group has collapsed. Assuming the OBR case materialises, youth unemployment would follow a similar, but worse, pattern to the great recession of the late 2000s – a recession which in the UK caused youth unemployment to rise to a 1.5 million in 2012, nearly five years after the onset of the global financial crisis.

Worryingly, there are two reasons to believe that the OBR reference case is over optimistic. There are different reasons for this. Firstly, the economic shock of Covid-19 may hasten a ‘shake-out’ of businesses in sectors which were already struggling: such as catering, retail and hospitality. The UK ‘high street’, already in crisis, may never return to even its struggling state. Secondly, whilst the UK has a highly flexible labour market, demand in less affected sectors may only return slowly. And finally, and perhaps most significantly, the path of the Covid-19 pandemic may not permit the end of lock down for workers in the many sectors of the economy. Entry level employment opportunities on the scale provided until recently may simply not return in the short or medium term.

The attention of policy makers, particularly after a period of very low unemployment, is often to protect those in employment. This is reflected in the focus of many of the UK government’s Covid-19 economic responses. These are welcome measures which should promote a faster recovery. However, they do not reach many of the young people most at risk of a prolonged recession – both at risk of losing their employment and those who are already more marginalised. Whilst the consequences of short-term periods of unemployment have limited long term effects; long term unemployment produces life-long scarring effects to career earnings, health and wellbeing. In a realistic, rather than optimistic, scenario we may be seeing a huge rise in long term young unemployment. Planning to stop this happening cannot start soon enough.

A national youth unemployment response plan needs to comprise the following elements:

    • Youth Employment Guarantee Scheme. This was one of the first responses in the UK and elsewhere to the 2008 recession. In the UK it took the form of the Future Jobs Fund. It provided employment for young people and much needed capacity for employers. DWP’s own analysis found that It was also incredibly cost effective when all costs and benefits are considered.
    • Training for Future Jobs: Crises have few silver linings, but one is for governments to be unencumbered by existing structures and policies. Used wisely the government could launch a new UK Skills Programme, investing in both employer and provider capacity for skills in what are likely to be growth sectors of the future. Some of the building blocks are there in the HE and FE sectors but a rethink of the Apprenticeship and Traineeship schemes would allow longer term and higher quality training to be put in place in sectors likely to grow in the sector (for instance low carbon construction and production).
    • Supporting the most vulnerable. Attention is often focused in recession on those already close to the labour market. There is a strong logic to this and as a result relatively small amounts of funding can go a long way. A significant concern in the UK though is the large group of young people who cannot or do not benefit from such schemes. They often have multiple and complex needs, such as experiencing periods of homelessness, long term health conditions, or simply no qualifications and no prior employment experience. Covid-19 has reinforced the precarious position of many young migrants who risk being doubly disadvantaged by the collapse of low skilled/low wage employment and limited or no recourse to benefits. Our research shows that for this group a strong social safety net needs to be put in place involving financial, personal and employment support and that this provides considerable societal benefits which outweigh initial financial costs.
    • Local Youth Employment Partnership. Our research as part of the national evaluation of National Lottery’s Talent Match programme found that partnership between agencies (voluntary and statutory sectors) and with employers is a vital part of any response. No one agency has all the solutions (from outreach, to training to simply coordinating support) to meet the multiple needs young people might have.
    • Youth involvement. Each of the above matters in the design of a response but perhaps what will set this apart is a focus on involving young people in the design and delivery of programmes at a national and local level. Young people know the challenges they face and their involvement improves the quality of the support provided. 

As the pandemic has shown, governments have an incredible capacity to respond to immediate crises; the skill though is ensuring that the crisis does not damage the employment and life prospects for the UK’s near seven million young people.

 

Peter Wells and Ian Wilson

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