Written by the Prince’s Trust
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 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.