New report finds prolonged youth jobs crisis is set to cost UK economy almost £7 billion next year
- Youth unemployment will remain high, even once the economy recovers, warns a new report from Learning and Work Institute and The Prince’s Trust, supported by HSBC UK
- The economic cost of youth unemployment, in terms of lost national output, is forecast to rise to £6.9 billion in 2022
- The fiscal cost of youth unemployment, in the form of lower tax revenue and higher benefit spending, is forecast to be £2.9 billion in 2022
- The long-running scarring cost to young people entering the labour market in 2021, in terms of lost earnings and damage to employment prospects, is forecast to be £14.4 billion over the next seven years
A new report released today from The Prince’s Trust and the Learning and Work Institute warns that young people will increasingly bear the brunt of the unemployment crisis, at a growing cost to the UK economy.
The major study, supported by HSBC UK, shows how, while some areas of the economy might begin on the road to recovery, young workers are under-represented in these sectors, and the industries that typically employ young people will be hardest hit in the long term.
The report, based on new labour market analysis and surveys with employers and young people, also warns that the pandemic will continue to exacerbate pre-existing inequalities.
Long-lasting damage from youth unemployment:
New economic forecasting reveals that, while young people’s employment has been worst affected by the pandemic with under 25s accounting for three in five jobs lost, youth unemployment is due to climb further still, even as the economy recovers.
The outlook for young people’s employment is worse compared to the outlook for older workers. In addition to being over-represented in the sectors hit hardest by the pandemic to date, young people tend to be over-represented in the sectors that are forecast to see lower employment in the long term and under-represented in occupations which are likely to see the strongest job growth.
This suggests that, in addition to the greater risk of unemployment for young people during the pandemic, the longer-term structural changes in the labour market are likely to reduce future employment opportunities for young people without support to improve skills for the jobs available.
For the first time, the report cautions of the financial hit to the economy of higher youth unemployment due to the pandemic:
- The economic cost of higher youth unemployment in terms of lost national output is forecast to be £5.9 billion in 2021, rising to £6.9 billion in 2022
- The fiscal cost of higher youth unemployment, in the form of lower tax revenue and higher benefit spending, is forecast to be £2.5 billion in 2021, rising to £2.9 billion in 2022
- The long-running scarring cost for young people entering the labour market in 2021 alone is forecast to be £14.4bn over the next seven years. This relates to the impact on employment and earnings they are likely to suffer for at least seven years, due to entering the labour market at a time of higher unemployment.
Pandemic exacerbating pre-existing inequalities:
The report finds disparities in the impact of the crisis on different groups of young people, raising concerns that the pandemic has, and will continue to, exacerbate pre-existing inequalities.
Analysis shows that the decline in working hours for young people with no qualifications (34%) has been five times higher than the decline for those with a degree level qualification (7%). Demand for employees with lower-level qualifications is projected to fall in the short, medium and long-term, raising concerns that the employment prospects of young people who lack higher level qualifications will be further negatively affected.
The report also finds the decline in hours worked for Black young people (49%) has been three times higher than for white young people (16%).
New data surveying UK employers finds two in five (41%) feel the pandemic will have a negative impact on young people’s prospects in their sector in five years’ time. A survey of young people finds one in four (26%) expect their employment prospects will still be impacted in five years’ time.
Stephen Evans, Chief Executive of Learning and Work Institute, said:
"Young people have been at forefront of the coronavirus jobs crisis. While we are hopefully slowly emerging from the worst of the pandemic, the legacy will be with us for years to come in the form of higher youth unemployment.
"If we are to tackle the looming youth jobs crisis, the Learning and Work Institute believes the Government must work with partners to urgently roll-out a ‘Youth Guarantee’ to support young people to access a job, an apprenticeship, education, or a high quality training opportunity."
Jonathan Townsend, UK Chief Executive of The Prince’s Trust, said:
"We also know from 45 years’ experience of working with young people that youth joblessness can impact self-esteem and mental health for years to come, if we fail to act.
“Government, employers and charities must work together to ensure that the young people who need the most support are not forgotten. They need the opportunities to upskill, retrain and access job opportunities, or we risk harming not only our young people’s futures but the recovery of our economy."
The Prince’s Trust helps young people to build confidence and skills for work, education and training. The employability courses offered by The Trust are run both in person and online and give young people the practical and financial support needed to stabilise their lives. The youth charity is working with employers to deliver the Government’s Kickstart scheme by providing quality employability support to young people on placements.
Ian Stuart, Chief Executive, HSBC UK said:
“This vital report is already informing and enabling HSBC UK’s Future Skills partnership with The Prince’s Trust, ensuring young people in the UK have access to the necessary training, skills and employment opportunities for future economies, with a focus on digital and technology sectors.
“It is critical that young people are provided with the skills they need for a thriving career, and as the labour market changes, we must increase our commitment to young people to guarantee the stability of their future employment."
The Prince’s Trust has helped one million young people across the UK since 1976 and focuses on supporting disadvantaged young people into jobs, education and training.
For further information or media enquiries, please contact Roisin Sheehy at firstname.lastname@example.org
Notes to Editors
Building on the government’s ‘plan for jobs’, Learning and Work Institute recommends further action to limit the rise in youth unemployment, and the damage this will do to young people and the economy:
- Introduce a ‘youth guarantee’, which ensures all young people can access a job, an apprenticeship, or a training opportunity;
- Introduce a ‘job guarantee’ to create paid employment opportunities for young people at risk of long-term unemployment, at a cost of £0.65bn;
- Expand and extend the Kickstart scheme until the end of 2022 at a cost of £1.3bn;
- Increase the apprenticeship hiring incentive to £5,000 and extend it to September 2022 at a cost of £0.4bn.
- The Prince’s Trust will endeavour to work in partnership with government and employers in response to these findings and recommendations.
- The economic cost of higher youth unemployment is the immediate impact on economic output due to more young people being unemployed rather than in work.
- The fiscal cost of higher youth unemployment is the impact on public finances due to lower tax receipts and additional social security benefits that are paid as a consequence of more young people being unemployed.
- The long-running scarring costs is the total negative impact on earnings over a seven year period due to young people entering the labour market at a time of higher unemployment. This cost is based on analysis by IFS of the long-running impact on employment rates and incomes of young people who enter the labour market when unemployment is high, as well as OBR’s March forecasts for future unemployment rates.
- The report is based on an online survey of 1,280 employers undertaken in January 2021, an online survey of 2,092 young people aged 16-24 undertaken in Jan-Feb 2021, two focus groups with young people, and analysis of ONS labour market statistics.
About Learning and Work Institute
Learning and Work Institute is an independent policy, research and development organisation dedicated to lifelong learning, full employment and inclusion. We research what works, influence policy, develop new ways of thinking, and help implement new approaches.
About The Prince’s Trust
The Prince’s Trust helps young people all over the UK to build their confidence and skills and supports them into jobs, education and training. Founded by The Prince of Wales in 1976, the charity supports 11 to 30 year-olds who are unemployed, struggling at school and at risk of exclusion. Many of the young people helped by The Trust’s youth support workers and mentors are in or leaving care, facing issues such as homelessness, mental health problems, or have been in trouble with the law. The courses offered by The Trust give young people the practical and financial support needed to stabilise their lives, helping develop self-esteem and skills for work.
Three in four young people supported by The Prince’s Trust move into work, education or training. The Trust has helped over a million young people to date.
About HSBC UK
HSBC UK serves around 14.5 million customers in the UK and employs approximately 32,000 people. HSBC UK offers a complete range of personal, premier and private banking services including bank accounts and mortgages. It also provides commercial banking for small to medium businesses and large corporates. HSBC UK is a wholly owned subsidiary of HSBC Holdings plc.
HSBC Holdings plc, the parent company of HSBC, is headquartered in London. HSBC serves customers worldwide from offices in 64 countries and territories in its geographical regions: Europe, Asia, North America, Latin America, and Middle East and North Africa. With assets of US$2,984bn at 31 December 2020, HSBC is one of the world’s largest banking and financial services organisations.