The plight of the young and unemployed is truly scary – and this government seems to have no answers

A quarter of long-term unemployed young people have self harmed

David Blanchflower
Sunday 12 January 2014 14:50

On 24 February 2010 the then Shadow Chancellor George Osborne gave the Mais lecture at the Cass Business School where he set out his vision of what his economic policy would look like if he won power at the May 2010 election. He outlined what he called a “new model of economic growth that is rooted in more investment, more savings and higher exports”. In the speech he also argued that in order to bring some accountability to economic policy, he was setting out “eight benchmarks for the next Parliament against which you will be able to judge whether a Conservative government is delivering on this new economic model”.

We already know he has failed on his first two, which he said were “maintain Britain’s AAA credit rating” (sadly lost) and “we will increase saving, business investment and exports as a share of GDP” (none of these has happened either). One of the others was that “we will reduce youth unemployment’. Youth unemployment has risen.

The first chart illustrates that youth unemployment among those aged 18-24 has risen sharply since May 2010. It is up from 732,000 in May 2010 to 758,000 in the latest data release, and up by 11,000 on the year. Of particular note is the increase in the numbers who have been unemployed for a year or more or two years or more. Since May 2010 they are up by 53,000 and 32,000 respectively. Among 16 and 17-year-olds the numbers who have been unemployed for at least a year is up from 22,000 to 27,000.

No data are published on the numbers of the youngest group unemployed for more than two years. This is of real concern given that the literature shows, including work that David Bell and I have conducted, that long spells of unemployment when you are young create permanent scars that youngsters never get over. This is a national disaster in the making.

The 18-24 unemployment rate is up over the same period from 17.8 per cent to 18.6 per cent, as is the rate for 16 and 17-year-olds, up from 33.5 per cent to 35.5 per cent since the coalition took office. In the US the latest data released on Friday show a youth unemployment rate for 18-24 year olds of 12.4 per cent. Of concern also is that the proportion of both groups who have been unemployed for at least a year is up.

The second chart shows one of the reasons for this is that the number of young people was especially large when recession hit. The chart reports the number of 18-24 year olds based on data by single year of age. So we know the number of 18-24 year olds today but we can also calculate the number in earlier years, so in 2008 I report the number of 24-30-year-olds today. In 2032 I calculate the number as the sum of all the 0-6 year olds. These numbers are correct assuming no net migration of course. They are not projections but simply counts of the numbers based on the current size of the cohorts. They show that the number of 18-24 year olds in 2008, at the onset of recession, was higher than it had been since 1990 and higher than it will be for at least another 20 years or so, all other things held constant. A big part of the reason that youth unemployment started to rise during the period 2000-2008 was simply that the size of the cohort expanded each year.

We already know from the work of my colleague Lisa Kahn from Yale that the labour market consequences of graduating from college in a bad economy are large, negative and persistent. The effects on college graduates involve lower wages because they end up in lower-level occupations. These effects are likely amplified for the least educated with few skills. As college graduates take lower-level jobs those at the bottom are pushed out into unemployment and that is where they stay. Entry effects on lower-skilled workers seem to operate through employment effects and don’t tend to show up in wages.

Lisa has suggested to me that she thinks this is because they are less at risk for disadvantages in human accumulation. When they spend time unemployed or in lower-level jobs, and aren’t investing in their human capital or in the wrong type of human capital, she believes they are less disadvantaged, relative to college graduates where post-schooling human capital appears to be more important. It’s likely much worse for everyone when there is a historically big cohort. New evidence from the latest Prince’s Trust survey of the young, conducted by YouGov provides scary reading. It suggests the youngsters who are long-term unemployed are in deep trouble. They interviewed 2,161 16-25 year olds and were able to separate out youngsters in education, employment and training (EETs) from the long-term unemployed (LTU), that is kids who had been unemployed for at least a year.

The long-term unemployed report especially poor mental health and the difference with the EETs is stark. Three per cent of those who were in EET said “life wasn’t worth living” compared with 17 per cent for the LTU. 10 per cent of those were EET said they had been prescribed anti-depressants compared with 26 per cent of the LTU.

The proportion of both who said they had self harmed was also unacceptably high – 18 per cent of the EET versus 25 per cent of the LTU. Twenty five per cent of the EETs and 32 per cent of the LTUs had had suicidal thoughts. I told you it was scary.

Not good.

The government cut the Future Jobs Fund and the Education Maintenance Allowance that worked. These are our kids and all the government can do is announce a triple lock on pensions. Thank God the Prince’s Trust is on the case. Iain Duncan Smith is AWOL. Please somebody do something before it’s too late. Cameron, call me.

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