Reasons for Youth Unemployment

Discuss the economics reasons why there is high unemployment rate in 16-18 year old workers. (10 marks)

In the UK, people aged 16-18 are not eligible for unemployment benefits; instead they either have to be in full time education or on a government training scheme.

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) However, the service sector has increased in importance and this creates unskilled jobs such as bar work, supermarket checkout and waiters.
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.
3. Black 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.
4. Real Wage Unemployment. You could argue unemployment is caused by labour market rigidities and wages being above the equilibrium rate. However, in the UK, there is a special introductory rate for the minimum wage for 16-18 olds. It is significantly lower than the main minimum wage.
5. Frictional unemployment. School leavers may just take time to find the right work.