Summary
The Youth Employment Index, produced in collaboration with the Youth Futures Foundation, provides an important tool to measure, benchmark and monitor progress across the OECD in employing and training young people. This is key to identifying challenges and opportunities in specific economies.
The report adopts a forward-looking approach, beyond the short-term disruptions of COVID-19, to anticipate how labour markets may evolve over the next decade in response to global megatrends. This helps inform effective action to enable our young people to realise their potential - through productive careers that will also benefit our future economy and society.
Youth Employment Index UK performance
The UK ranks 18th out of 38 countries in the OECD, and has continued to improve its Youth Employment Index score gradually. Its score of 51 is just above the OECD average and is mainly driven by a high relative youth employment rate. However, the UK could improve its index score through policies that lower its long-term youth unemployment rate (ranked 22nd) and increase the enrolment rate in education for 15 to 19 year olds (ranked 26th).
Economic opportunity
Tackling youth unemployment presents a major opportunity for countries to boost their GDP in the long-term. The UK’s NEET rate for 20 to 24 year olds is currently 14%, over 5 percentage points higher than Germany, which - as the best performing large country - is our benchmark country. We estimate that closing this gap would increase UK GDP by 1.8% in the long-term, or £38bn.
Results from our cross-country econometric analysis show that youth unemployment is highly persistent and countercyclical across the OECD. Lowering youth unemployment is associated with higher GDP growth, lower previous levels of youth unemployment, and higher employment of workers aged 55 to 64.
Tackling inequalities
We also find that existing trends in the UK labour market were exacerbated by the pandemic, widening existing inequalities affecting young people, especially from minority groups:
- The youth NEET rate varies widely across regions in the UK with the North East region seeing the highest NEET rate of 13.7%, and Scotland experiencing the lowest NEET rate of 5.7% in the same period.
- Over the pandemic, white people aged 18-25 saw the highest employment rate out of all ethnic groups at 68.5%. Young people of Chinese ethnicity have the highest full-time education participation rates.
- The pandemic has reduced the gap in NEET rates between young men and women. However, young women who are NEET in the UK are more likely to be economically inactive compared to young men (63% vs 51%).
% of 15-24 year olds unemployed, Q1 2000 - Q3 2021
"Even if readers of this report are not moved by the plight and injustice of young people being locked out of opportunities in the jobs market, then the waste of potential and impact on national wealth should be ample reason enough to get behind the solutions that we have set out."
UK outlook
Over the last decade, the UK labour market has undergone profound changes, with technological innovation and the pandemic greatly impacting young workers. At the start of the pandemic, youth unemployment increased by over four percentage points more than older worker unemployment. This can have a scarring impact on vulnerable young people as it affects lifetime earnings, well-being and career prospects.
In order to support young people through the future changes expected in the next decade, businesses and governments need to be forward thinking and anticipate the trends that will shape the economy.
In this report we discuss four megatrends and how they will impact the UK:
1. Shift in global economic power
2. Climate change & resource scarcity
3. Technological breakthroughs
4. Demographics & social change
In order to understand the challenges faced by young people and policymakers based on these disruptions, we have constructed three scenarios based on labour market and policy response:
- Flexible transformation: The skills-centric vision of the UK economy has been achieved through the delivery of flexible policy that prioritises resilience over interventions that are seen as being ‘optimal’.
- Constrained green growth: Megatrends such as technological breakthroughs and climate change cause disruption but this is moderated by a combination of technological adoption lag and active, albeit disjointed, skills cultivation and redeployment.
- Decline: Disruption to young people is high. The pursuit of optimal labour market policies has resulted in short-sighted policies that prioritise the working age population at the expense of the future workforce.
"While the UK is performing close to the OECD average, there are clear economic and social benefits that could be achieved through providing an integrated approach to youth employment, and avoiding the long-term impacts we saw for young workers following the 2008 financial crisis."
Developing policy responses
Our research shows current policy is already leaving behind a subsection of young people who are unable to overcome barriers to education and employment and who are disengaged from the current system. A coherent and effective youth employment policy requires a coordinated long-term strategy across government departments.
Policies also need to be comprehensive, inclusive and adaptable. As society and technology evolves, so will the needs and aspirations of our youth and policy must support this. The young people we fail to reach today could feel the negative impacts for the rest of their lives, with the reverberations reaching every aspect of the UK economy.
Our recommendations for policymakers first focus on institutional change to deliver youth employment policy more effectively. This leads to four policy areas to achieve an integrated approach to holistic policies.
- Institutional change
- Holistic policy
Institutional change
In this report we identify five key principles to improve the overall design and delivery of youth employment policy:
- Promote better interdepartmental and regional cooperation;
- Build a resilient policy-making approach;
- Make policy-making more participatory;
- Use an integrated approach to develop holistic policies;
- Utilise emerging technology and big data for policy making.
Holistic policy
We also recommend a wide range of policy areas to support the development of adaptable, resilient skills, empower young people to find high-productivity, rewarding work and promote their well-being through times of significant change. Our report has developed thirteen separate policy proposals - including development of existing policy and novel policy suggestions. We categorised policy under four key areas to build a comprehensive youth policy strategy:
- Developing skills through investing in better vocational training, improving skills matching, encouraging a more flexible education system and increasing emphasis on place-based policies;
- Supporting people by providing proper career guidance and mentorship, promoting well-being in young people, and addressing inequality;
- Supporting incomes through improving social safety nets for young people, using targeted fiscal policy during economic downturns and supporting those negatively impacted by technological innovation;
- Shaping labour demand by investing in high productivity sectors, improving legal and regulatory protections for all workers and developing appropriate measures of job quality.
"At PwC, we’ve seen first hand the benefits of apprenticeships and targeted skills programmes, but there’s a long way to go yet. We are dedicated to playing our part in these efforts and ensuring that no matter where you are based or born in the UK, you and future generations stand a chance to benefit."
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