A constrained labour market strengthens the case for structured pathways for NEETs

The government has long stated its intention to reduce the number of young people who are not currently in education, employment or training (NEET). But the latest labour market data suggests that the current economic climate makes this a real challenge.

A surprise drop in unemployment to 4.9% papers over the cracks

A surprise drop in unemployment to 4.9% papers over the cracks. Beneath that, vacancies have fallen to their lowest level since February to April 2021, payrolled employee numbers continue to edge down, and real wage growth has slowed sharply.

For young people trying to enter the workforce, this only makes their route in tougher. When vacancies fall, the first rungs of the ladder become much harder to reach. For those already at risk of becoming NEET, fewer entry points can quickly mean fewer chances to build skills, confidence and vital work experience.

For employers, the challenge is different, but connected

For employers, the challenge is different, but connected. The need for skilled talent hasn’t gone away, particularly across digital, data and technology-focused roles. But amid a more cautious hiring environment, the focus shifts from short-term recruitment to longer-term capability building.

That is where apprenticeships matter. They’re a structured way to attract, train and retain talent, addressing business needs in the process.

Fewer vacancies, cautious hiring

The continued drop in vacancies is one of the clearest signs that the pace of recruitment has slowed. Many employers are still hiring, but they are doing so more selectively and with greater scrutiny on long-term value. Headline vacancies are down by 29,000 quarterly, and lower growth forecasts suggest that this trend might continue.

This changes the challenge for all parties. Businesses still need to invest in building internal capabilities – particularly when there are industry skills gaps. But in a more constrained market, they need reliable routes that provide confidence their investment will deliver long-term value. But if fewer people can access meaningful roles, the future talent pool becomes weaker.

It’s equally tough for younger people trying to get a foothold in the job market. There is a growing gap between the number of people ready to enter work and the number of viable options available to them.

Wage growth and progression pressures

On the surface, pay is still rising, but the picture in real terms is less encouraging. As of April, the inflation rate is sitting well above the Bank of England’s 2% target at 3.3%, and real wage growth has stagnated at 0.2%.

For those already in work, this creates an incentive shortfall. When pay growth is limited and progression opportunities feel harder to access, employees may question their value and what a route forward looks like.

This puts pressure on employers. Retaining talent rests heavily on showing people how they can progress within a business, and salary can reflect this. In a labour market shaped by caution, structured development programmes where employees can build the skills to progress become all the more important.

Pressure at the entry level

The strain is particularly hard on entry-level talent. Quarterly ONS time series data shows that 15.8% of 16–24-year-olds are unemployed, compared with 11.5% for the same period in 2022.

Taking that first step into the workforce is as challenging as it’s ever been – especially against the backdrop of AI integration and disappearing graduate roles. Coupled with fierce competition for every role, it’s an unforgiving market for young people.

Uncertainty over the wider geopolitical picture and economic outlook is understandably rearing its head in the labour market, and low business sentiment hampers job creation. But employers still need ways to build talent pipelines, and young people need structured routes into jobs where they can build skills that the workforce demands.

High-quality apprenticeships can help meet needs on both sides of the coin. Delivered properly, they are a more targeted way for businesses to close skill gaps and a structured route into the workforce by connecting them with candidates that are ready to make a meaningful contribution while developing their own skillset at the same time.

In a more cautious labour market, structure is critical. Apprenticeships are more than a route into employment – they’re an investment that helps employers build capability, support progression and keep future talent pools healthy.

The number of NEETs in the UK is a symptom of the turbulent time we’re navigating. However, that doesn’t mean we can’t champion meaningful routes into the workforce that offer a clear sense of value – for employers and employees alike.

By Harry Hobbs, Head of Business Intelligence at Baltic Apprenticeships