Reasons for Youth Unemployment

A look at the economics reasons for high youth unemployment (16-25) in the UK.

youth unemployment UK

During the recession, youth unemployment rose at a faster rate than the main unemployment rate.  After peaking at 20% (1 million) in early 2012, youth unemployment has recently fallen to 18.5 %

The reasons for youth unemployment are fairly similar to other causes of unemployment. They include:

  1. Lack of Qualifications. Young people without any skills are much more likely to be unemployed (structural unemployment) A report by Centre for Cities suggest there is a correlation between youth unemployment and poor GCSE results in Maths and English. To some extent the service sector has offered more unskilled jobs such as bar work, supermarket checkout and waiters. However, the nature of the labour market is that many young people lack the necessary skills and training to impress employers.
  2. Geographical Unemployment. Youth unemployment is often focused in certain areas – usually inner cities where there is a cycle of low achievement and low expectations. For example, the employment rate for 16-24 year olds is only 64% in the North East compared to a national average of 70%
  3. Real Wage Unemployment. You could argue unemployment is caused by labour market rigidities and wages being above the equilibrium rate. In the UK, there is a special introductory NMW rate of £3.68 for the  for 16-18 olds. It is significantly lower than the main minimum wage of £6.08 for those over 21. (2011/12). However, nominal wage growth has been muted leading to falls in real wages. This has increased potential for real wage unemployment
  4. Cyclical Unemployment. The biggest cause of unemployment in UK is often cyclical or demand-deficient unemployment. This is  unemployment caused by the falling output which occurs during the recession. During the 2008 recession, youth unemployment increased at a faster rate than the actual unemployment rate. It is often young workers who are more likely to experience unemployment because with the least experience they are the easiest to remove. Also, firms often don’t sack workers, but they do stop taking on new (young) workers.
  5. Frictional unemployment. School leavers may just take time to find the right work.
  6. Cultural / Social factors. Youth unemployment is often highest amongst deprived areas where there is pessimism over job prospects. Youth unemployment is often higher among people who have history of broken families, drug use or criminal record.
  7. Underground Economy. Official Unemployment may occur in areas where there is a thriving black economy. i.e. there are unofficial jobs for people to take. These jobs may be illegal such as dealing in soft drugs. However, it is hard to ascertain the extent of these unofficial jobs and it is easy to make sweeping generalisations about deprived areas.
  8. Hysteresis. Hysteresis is the idea that past unemployment trends are likely to cause future unemployment. If young people have been unemployed in the past, it becomes increasingly difficult to get a job. This is because
    • Lack of jobs may cause young workers to become demotivated
    • A lack of past employment may cause firms to be unwilling to hire in the first place.
    • Unemployment means workers don’t have the opportunity to learn skills and on the job training.

Inactivity Rates amongst the Young

youth-unemployment-inactivity

Inactivity rates include people who are classed as unemployed, but also includes people who are not economically active, people in education or not actively seeking work. Thus inactivity includes people in education and training, but also those discouraged to leave the labour market.

Related

19 Responses to Reasons for Youth Unemployment

  1. usman February 17, 2009 at 1:27 pm #

    govt and private sector should work together to tackle this problem

  2. Huma December 4, 2010 at 6:25 pm #

    Government should introduce such tactics which are helpful for youth and give chances for further improvement.

  3. Richard Mwambi April 9, 2011 at 2:11 pm #

    Iam church minister in charge of youth in my diocese. Your notes have helped me a great deal.They are an answer to umemployment challenge among youth in africa.

  4. K. Michael April 12, 2011 at 11:43 am #

    I believe the youth should also develop entrepreneurial skills and start up businesses on our own.If we continue to put pressure on the prevailing jobs, i don;t think we all can be satisfied since the pressure will continue to increase day by day.
    Secondly, we need to also add value to our education by going further in our academic life.

  5. Richard Mwambi May 26, 2011 at 8:14 pm #

    Youth need be helped to identify resources.Most of which have tremendous pontential to help us meet our basic need and improve our standards of living.

  6. Ikenna gabriel November 8, 2011 at 7:33 pm #

    I believe that If the Government does not employ you, then you employ yourself. I am a blogger, but though I have not seen any income from my blog I believe it will be a very good source of work for me in the future even I strive for audience. We the Youths of today need to work things out for ourselves.The trouble with unemployment is that the minute you wake up in the morning you’re on the job. ~Slappy White

  7. muhammad akhtar December 2, 2011 at 10:23 pm #

    tha reason of unemployment in uk moving indistrial structure to other countries if govetment give incentives to busnismens . it would improve

  8. Reg Clodfelter April 23, 2012 at 2:54 am #

    Hi Everyone,

    My name is Reg Clodfelter, and I am a research assistant for journalist Katherine Lewis. I am doing research for a story about national unemployment, and I am looking for a person to interview who has been unemployed for at least a year and is finally starting a full-time job mid-May.

    The interviewee must:
    - be comfortable talking on the record (being quoted by first and last name and geographic location) and discussing financial details of their situation.
    - be available for interviews in the next three weeks.

    If this describes you or someone you know who is interested in being featured in a national magazine, please contact me at your earliest convenience by email at [email protected]. Let me know if you have any questions or concerns.

    Thank you for your time,

    Reg Clodfelter
    [email protected]

    • Joy November 27, 2012 at 6:35 pm #

      i have been looking for work for the past 2years

    • Danielle February 6, 2013 at 12:58 pm #

      Can someone please explain this graph in detail to me?

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