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Professor Geraint Johnes
Professor of Economics at Lancaster University
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Professor Geraint Johnes

Director's February report

Authors: Professor Geraint Johnes

18 February 2015

One of the major research themes at The Work Foundation in recent years has focused on the issue of youth employment. Three years ago, the numbers of young people (aged under 25) who were unemployed exceeded a million. This was profoundly harmful to the young people directly affected, of course, and moreover it represented a huge wasted resource for the country as a whole.

Since then, youth unemployment has fallen along with the overall unemployment rate. The latest data indicate that some 763000 young people are unemployed. This amounts to an unemployment rate of 16.8%, well above the 5.8% rate that attaches to the labour force as a whole.

The latest set of data on underemployment produced by Bell and Blanchflower - and published on The Work Foundation's website earlier this month - further highlight the difficulties faced by young workers. Not only are young workers more prone to unemployment than are their older counterparts, but they are also more prone to underemployment.

Taking the labour market as a whole in the UK, underemployment only became a noticeable feature during the Great Recession. Until 2007, the underemployment rate tracked the unemployment rate quite closely. But then a gap of around 2 percentage points opened up, and this has started to close only in recent months. For young workers, however, underemployment has been a feature for much longer. In 2001, the earliest period for which data are available, the gap between the unemployment rate and the underemployment rate for this group amounted to 4 percentage points. This opened up to more than 9 percentage points in 2013, and even now remains as high as 7.5 percentage points. This means that, the underemployment rate for young people in the UK currently stands at some 24%. This is a huge underutilisation of talent.

The Prime Minister has laudably promised to 'end youth unemployment' in the next parliament. The data suggest that such a promise, welcome as it is, does not go far enough.

The Bell and Blanchflower data throw light also on the incidence of unemployment and underemployment by ethnicity. Taken as a whole, the figures paint an uncomforatble picture for young people. The unemployment and underemployment rates faced by young people from ethnic minorities - and especially by young black people - are huge. The unemployment rate for this group remains above 30%. Once account is taken of workers who wish to work longer hours to calculate an underemployment rate, the figure rises to well over 40%.

Education has long been promoted as a route to a better labour market experience. It certainly helps. But alone it is insufficient to close the gaps noted above. As we argued in our written evidence to the Education Select Committee last year, young people should be protected from adverse labour market conditions, and this requires construction of a new framework for the delivery of employment, skills and welfare to work schemes.

The youth labour market is far from fixed. At The Work Foundation we shall continue to conduct research in this important area, informing advice that can help transform policy to the benefit of (what, given the extent of underemployment, we still consider to be) the missing million.