OECD warns of bleak job prospects for the young

Britain faces a jobless recovery in which young people's already bleak prospects will be exacerbated by cuts to employment schemes, the Organisation for Economic Co-Operation and Development (OECD) warns.

In its latest Employment Outlook, the international body says that the UK's "economic recovery will be too muted to result in strong job creation and that unemployment is likely to recede only slowly".

Young people, it adds, have been "particularly affected" by recession in the UK. Employment fell by 8 per cent for 15 to 24-year-olds during 2009, compared with a drop of less than 1 per cent for workers aged 25 and over, the organisation points out. One in five of those aged 16 to 24 are officially out of work in Britain.

But the Government's decision to abolish a large number of job-creation programmes will not help matters, says the OECD. It offers some support for the Government's proposed reforms to the welfare system, but cautions about planned cuts.

"While the large fiscal deficit makes it essential to focus on cost-effective programmes and target the most disadvantaged groups, labour market programmes should remain adequately funded," the OECD report says.

"In this context, it may also be of concern that the new Budget ends funding for two crisis measures – the Future Jobs Fund and the Six Month Offer."

The OECD added that the Job Centre-Plus programme was "under severe strain". The Future Jobs Fund subsidises job placements for 18 to 24-year-olds, while the Six Month Offer makes training available for those who have been unemployed for more than six months. As part of a £6bn programme of immediate spending cuts announced last month by the Chief Secretary to the Treasury, Danny Alexander, both will now cease, along with the two-year Jobseeker's Guarantee and the Young Person's Guarantee.

The OECD predicts that UK unemployment will remain at 8 per cent for the next 18 months, broadly in line with official forecasts.

Angel Gurria, the secretary-general of the OECD, said "job creation must be a top priority in months ahead" for all governments in the advanced world.

Embarrassingly for the Prime Minister, David Cameron, and his coalition, the OECD praised the previous Labour government for preventing the sharpest downturn in three-quarters of a century from producing a much larger rise in unemployment.

"Effective re-employment assistance has prevented an even sharper increase in UK joblessness and should be reinforced even in the current context of fiscal consolidation," the OECD said.

"One of the reasons the labour market has weathered the recession relatively well is that unemployed job-seekers have been better able than their counterparts in past recessions to find new jobs."

Mr Gurria highlighted the scale of the employment challenge facing the West. Across the OECD's 34 member states, 47 million people are unemployed and some 17 million jobs will be need to be created to return unemployment to pre-recession levels.

"Despite signs of recovery in most countries, the risk remains that millions of people may lose touch with the labour market. High joblessness as the new norm cannot be accepted and has to be tackled by a comprehensive policy strategy," Mr Gurria added.

Job creation has lagged behind the recovery in output in the US and elsewhere, compared with previous recoveries. Economists have suggested several explanations, including "labour hoarding" during the downturn and companies using temporary staff to cover extra demand.