Ready To Work, Nowhere To Go: The UK’s Growing Youth Jobs Gap

The UK’s labour market currently faces a growing contradiction. 

At the same time as businesses report persistent skills shortages, nearly a million young people aged 16-24 are not in education, employment or training (NEET). According to the Office for National Statistics, around 957,000 young people currently fall into this category, a level that has not been seen in over a decade. This is despite evidence suggesting that a lower proportion of young people are seeking work at 16 and 18, as the share going into higher education has grown. 

The contradiction is striking: a country short of skills, yet struggling to connect a generation of young people with meaningful work. The majority, if not all, of these young people want to work. They want careers with good employers, opportunities to develop skills and a chance to build a stable future for themselves. What they are struggling to find is that crucial first step into the labour market. 

A labour market with a missing entry point 

For decades, the UK labour market offered a variety of career entry routes: school-leaver jobs, vocational pathways, technical training and apprenticeships. Over time, many of those routes have narrowed. 

Amid a tightening labour market, competition for early career roles has intensified as, seemingly, openings have struggled to keep pace with a growing youth population. And while there has been much attention paid to the difficulties facing graduates in finding work, much less focus has paid to the challenges getting young people into work at an earlier age. 

Since 1992, ONS calculates that the proportion of UK 18-24s who are economically active (ie. in work or actively seeking work) has fallen from 78 percent to 69 percent. While no comparable data is available for young people aged 18, it is notable that according to DfE data, even in the past decade the proportion of 16-18 education leavers going into work or an apprenticeship has dropped from around 24 percent to 16 percent, as the share going to university has risen. 

There are a myriad of factors at play here. Our work with providers and employers highlights difficulties faced by some employers seeking to recruit young people into high quality technical apprenticeships at 18 with high salaries available upon completion. These  employers report that the available cohort they are recruiting from has narrowed considerably owing to increased university entry. 

On the other hand, we hear from providers about the impact of sharp rises in the apprenticeship minimum wage on employer demand for young apprentices, particularly among SMEs. We also hear from providers of some employers having less ability or desire to ‘parent’ young apprentices in the workplace; increasingly they are expected to be productive and contribute from day one. 

All of this points to an erosion in the ability and, to some extent, the appetite of employers to recruit young people into apprenticeships at 16 and 18 and a system that is less well set-up to address this. Career-entry at 21, rather than 16 or 18 is arguably increasingly becoming the norm. 

On one side is a growing generation of young people keen to step into a career. On the other is a labour market that struggles to provide the first rung on the ladder. In that gap sits the rising NEET figure: a large and largely untapped reservoir of talent. 

Choosing university by default 

This dynamic helps explain why many young people choose higher education even when it may not be the best fit for their ambitions or learning style. Higher education offers structure, progression and a clear narrative about career development. For students uncertain about their next step, it provides a socially accepted pathway forward. But it also invariably results in lasting student debt and while on average graduates earn more over their lifetimes, graduate salaries have declined in real terms and the wage premium enjoyed by graduates over non-graduates has also narrowed. 

Through its package of employer-facing incentives under the Youth Guarantee, the creation of new apprenticeship options for young people (such as the expansion of Foundation Apprenticeships) and moves to prioritise young people within apprenticeship funding more broadly, Government is taking steps to address these issues. The Milburn Review will soon publish its conclusions and recommendations about 18-24 NEETs, which is likely to result in more measures. 

Time-limited employer incentives to recruit and train young people, such as those announced recently by Government, may help. But part of the solution must lie in building employers’ ‘confidence’ to recruit and train young people in the workplace, amid a future where the impact of technology on occupations has brought new levels of uncertainty. Providers have a critical role to play here but in the absence of any financial incentive to focus apprenticeship activity on young people means it will usually remain more cost efficient for providers to deliver apprenticeships as workforce development for existing staff, rather than as a way to recruit and train new employees (usually young people). 

We have a post-16 system that prioritises participation, but that pays scant regard to outcomes such as learner destinations. Closing the youth jobs gap requires concerted effort on the supply side with providers and the demand-side with employers too so that a generation that needs to work is met by a labour market that is ready to let them in.

By James Farr, Think