Almost one million 16 to 24-year-olds – around 12.8 per cent of the age group – are Neets: not in education, employment or training. Yet the government spends roughly 25 times more on welfare for young people – with Universal Credit and PIP claims among under-24s at record highs – than it does helping them into work.
Alan Milburn, the former Labour health secretary leading a review into the issue, has called this “shameful”. He is right.
Milburn argues that part of the problem lies with an “anxious generation” rewired by smartphones. I could imagine as much. But Britain is hardly unique in facing the rise of social media and smartphone dependency – and yet youth unemployment here now sits above the EU average. This is also about policy: welfare, education and the steadily more hostile climate for business. Only half of under-25s are in paid employment, while wider unemployment has climbed to five per cent.
A report by the accountants PwC found that Britain has suffered the sharpest decline in youth employment prospects anywhere in the G7. The UK is sliding down the league table.
Labour’s actions are making matters worse. Rising taxes, higher employers’ National Insurance contributions, the “jobs-killing” Employment Rights Act and plans to raise the minimum wage for younger workers all increase the cost of taking on inexperienced staff. It is becoming harder, not easier, for businesses to employ young people.
Look at where the damage is already concentrated: retail and hospitality. These sectors account for almost half of all jobs held by the under-25s and around a third of minimum-wage roles. They have also seen some of the sharpest falls in vacancies and payroll numbers. The government’s direction of travel could scarcely be less helpful.
Other countries have taken a different approach. In the Netherlands, companies are actively incentivised to hire younger, less experienced workers through a staggered minimum wage system. Workers aged between 15 and 21 are paid a proportion of the full adult minimum wage; for an 18-year-old it is around €7.36 an hour, roughly half the rate for those over 21. The Dutch Neet rate stands at 4.9 per cent. Britain’s is 12.8.
But the crisis is also being worsened by what Labour has not done. Failing to reform the welfare system allows too many young people to still drift onto incapacity benefit, without the requirement to look for a job, at a higher level of support to unemployment benefit. The figures are bleak. In 2015, around 24 per cent of Neets reported a work-limiting health condition. A decade later, the figure had risen to 44 per cent. For those genuinely unable to work, that support is essential. But too many are being written off early in life instead of helped onto a path towards independence. Analysis from the Centre for Social Justice found that a young male Neet is ten times more likely still to be economically inactive twenty years later.
One in ten Neets have a university degree and more than a third have A-levels or above. Sending more and more people down that path is not a solution as employers look for skills – vocational and technical. The cap on the number of vocational training places should be removed and young people encouraged to learn trades that get them employed, but also some insulation from the AI disruption threatening many traditional graduate roles
Conservative governments failed on this too, something Rishi Sunak has now admitted himself. For years, too many young people have effectively been abandoned to economic inactivity. Commissioning Alan Milburn’s review was one sensible move by Labour. The question is whether the government is willing to confront the extent to which its own policies are making the problem worse.