U.K. unemployment rate among those aged 16-24 hit record-high 21% in 2011, far higher than the 7.7% rate for the general population

Cindy Allen

LONDON , December 27, 2011 (Euromonitor) – In common with many other Western European countries, unemployment among those aged 16-24 is rising dramatically in the UK. Whilst this is primarily a result of mass job cuts due to the economic downturn in the UK, poor literacy and mathematical skills among school leavers are also to blame. The high unemployment rate among the under 25s is considerably weakening the spending power of this key consumer group, though the government is taking decisive action to tackle the issue.

The UK unemployment rate for those aged 16-24 has clearly been affected by the lingering impact of the UK recession of late 2008 and 2009. It rose from 15.0% in 2008 to an estimated 21.0% in 2011. This is far higher than the rate for the total population, which crept up to an estimated 7.7% in 2011 from 5.6% in 2008;

Crucially, the under 25s unemployment rate was on the rise even during the boom years in the UK- it grew from 12.8% in 2005 to its 2008 level. This indicates that other factors are at play besides recession-induced job cuts;

Lack of literacy and mathematics skills are frequently cited by employers as a reason for an unwillingness to hire school leavers. The admission of new accession states into the EU such as Poland has played a role in contributing to youth unemployment as many UK employers opted for more educated graduates from these countries as opposed to hiring UK school leavers.

Implications

The eurozone crisis has weakened the euro against the pound, making UK exports to the eurozone more expensive. This in turn is reducing demand for UK goods and threatening existing employment in manufacturing, which has already declined from employing 13.3% of the UK population in 2005 to 9.9% by 2010. This has meant a reduction in work opportunities for lesser-skilled young people in the UK;

According to data released by the Ministry of Justice, those convicted of offences during the UK-wide riots of August 2011 were overwhelmingly aged under 25 and unemployed. While their motives remain disputed, the willingness of so many to risk incurring a criminal record indicates that some may have felt they had no future job prospects that would be blighted by participating in the riots;

The under 25s are typically prime consumers of the retailing industry. The very high unemployment rate among the under 16-24 year old age group is contributing to low consumer confidence in the UK, and a weakened retailing industry. Many retailers are going into administration or closed underperforming branches: for example Topshop, the fashion retailer popular with this age group, announced in late November 2011 that it would close around 260 stores;

The rise in youth unemployment is putting a strain on UK government finances: government expenditure on welfare and social security benefits rose from £197.7 billion in 2007 to £224.2 billion by 2010. This is making it more difficult for the government to tackle its soaring government budget deficit of 10.2% of total GDP in 2010, up from 2.7% in 2007.

UK Government Expenditure on Welfare and Social Security/ Budget Deficit as % of Total GDP: 2005-2011

Gov

Source: Euromonitor International from IMF/ Government Finance Statistics/ national statistics

Note: 2011 data are forecasts

Prospects

In November 2011, the UK government announced the launch of a £1 billion scheme which may help to reduce unemployment rates among those aged 16-24. Set to come into force in April 2012, proposed measures under the scheme include subsidies to companies in the private sector in return for offering work experience placements to this age group, and a £50 million programme to get the most disadvantaged 16-17 year olds into work;
Higher tuition fees for UK universities will come into force in 2012, allowing universities to charge up to £9,000 per year. This may well see a reduction in the number of university students, as school leavers opt to work instead. If work is still in short supply, this could well contribute to a further increase in the under 25s unemployment rate despite the government's scheme;
In the wider context of high youth unemployment in Western Europe, persistently high joblessness among the 16-24s in the UK could pose long term social problems such as higher crime rates, a widening in the poverty gap and long term issues with skills shortages. ILO research has found that it takes, on average over 11 years for youth unemployment to return to pre-recession levels. Youth unemployment can do lasting damage. Risks include long-term difficulty finding employment and persistent pay differentials with continuously employed peers.

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