May 22, 2020

As someone who left university in 2010, I remember only too well the sheer exhaustion of starting a career in the aftermath of an economic shock. I approached exams with a sense of trepidation not for the academic gauntlet but for the abyss beyond. The jobs market brimmed with competition and employers were still holding in their belts after a dreadful year in which many went under.

Over and over, I felt the slow-motion gutpunch of realisation that an employer was never going to respond. Like many, I worked for free, drawing on savings from summer and university jobs from the previous year, to get my foot on a career ladder that wasn’t my first choice.

It hadn’t been until September 2009, 12 long months after Lehman Brothers’ collapse, that Gordon Brown announced his plan for youth unemployment. By that point, the damage had already been done. In the intervening year, youth unemployment rose at four times the average rate, putting an extra 157,000 18-24 year olds out of a job and leaving more than a quarter of a million unemployed for six months or more.

I was lucky, as it turned out. I caught a break, never suffered long-term unemployment and eventually found a career path that has been good to me. But for many of my contemporaries that career start took a toll that endured for many years. According to work by the Resolution Foundation, the generation that entered the labour market alongside me between 2008-11 took six years to make up their lost wages and graduates were 30% more likely to work in low wage jobs than students who left university before or after them.

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Even worse effects were experienced after previous downturns. The cohort that entered the labour market during the mass unemployment of the early 1980s were earning between 13 and 21% less, on average, two decades later. A study of school leavers in the Netherlands in the 1990s found that delaying their entry into the job market by a year reduced their likelihood of finding a job in the following two years from 60% to 16% for men, and from 47% to 13% for women.

We cannot afford to be as lethargic about youth unemployment this time. As the latest ONS figures show, coronavirus may kill fewer young people than previous pandemics (peak mortality during the Spanish Flu was among 28-year-olds) but it has greater potential to sentence them to a life of lower earnings, worse jobs and weaker productivity. The downturn we are entering will be deeper than any other in living memory, and it may also be longer lasting. We must avoid long-term unemployment becoming a rite of passage for a generation.

This will be harder than it sounds. Young people are typically the most vulnerable in recessions because they are most expendable. As existing jobs are lost and new openings become scarce, newly minted youngsters are usually first to be fired and last to be hired. The thinning of the labour market means young people are forced to compete with people with years of experience. Their ambitions and dreams can disintegrate and the skills they built up can fade as time goes on. These effects will already be being felt by the many young people on furlough.

The priority for the Government should be to keep as many young people in work as possible, and to bounce them back into work as quickly as possible when they fall out. The extension of the furlough scheme will help to achieve the first of these objectives, at least for now. But very soon ministers will have to consider options that were previously unthinkable to salvage a generation — and protect the future economy.

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Put bluntly, we will need to start paying employers and institutions to keep young people in work and study. That is a sentence to make fiscal conservatives and economic liberals baulk. But in case you have not noticed we are not in normal times and the normal rules do not apply.

Evidence from other countries provides some evidence of the effectiveness of limited, targeted wage subsidies. A recent evaluation of France’s policy of small business hiring credits for low-wage workers, introduced just three months after the fall of Lehman Brothers in December 2008, found that it had strong and immediate employment effects. Another study of Sweden’s Anställningsstöd employment subsidy programme, which supports up to 85% of wages for underemployed workers, found that firms that hired through the scheme grew quicker than counterparts that did not.

A less expensive option would be for the Treasury to waive employers’ National Insurance contributions for younger workers. Saving these frictional costs will not generate thousands of new jobs but it might shift the balance in favour of younger workers for existing posts. In the current environment, when youth unemployment is surging ever higher, the usual protests about the deadweight costs are less salient. Whatever its form, some kind of Coronavirus Youth Job Retention Scheme will be needed to keep young people in work long after the furlough scheme is over.

But in a severely dampened economy, jobs and wages are always going to have limited reach; there will simply be fewer jobs around. So ministers should consider keeping some young people in education for an extra year. It is little unremarked upon, but it costs the taxpayer marginally less — around £4,000 a year — to support an 18-year-old in college than it does to support them on the basic Universal Credit allowance for a year. These costs fall even more if the effects of lower long-term unemployment on productivity and earnings are taken into account.

Some young people may not want to — in which case we should not force them — but many might want to learn. Given the hammer blow dealt to university finances by plummeting international student numbers, there is a strong case for asking the best institutions to develop cheap one-year courses to upskill the coronavirus generation. It would be an elegant way for the Government, which has rightly resisted a sector-wide bailout, to support the best institutions through the next few years.

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For those of less academic persuasion, this is the moment that apprenticeships should come into their own. One of the virtues of the Conservatives’ apprenticeship reforms is that every firm in the country now has access to a pot of money they can draw upon to fund apprentices, funded from a levy on the biggest employers. These pots could be topped up, co-payments by small businesses could be suspended, or golden handshakes introduced to encourage more firms to hire school leavers as apprentices and put them on a technical path to skilled employment.

Even before this crisis, younger generations had a bad lot. Unlike previous generations, today’s graduates leave university saddled with debt and with marginal tax rates of up to 51%. The pension they receive will be smaller, but they will have to work for longer and contribute more to receive it. The things that previous generations took for granted — a home, a secure job, the ability to settle down and start a family — are harder won and later found, if at all.

As the country begins to emerge from lockdown, where the focus has inevitably and rightly been on the mortality rates of older generations, the focus must swing quickly to the effect on young people. Leaving school or graduating from university is meant to be a wonderful time of adventure and exploration. The unlucky Class of 2020 face heartbreak and listlessness. The scars they will bear from this disease may not generally be visible or medical, but they will last a lifetime unless something is done right now.

Comment


  • May 30, 2020
    Admirable sentiments. Johnson’s form doesn’t look good, however don’t despair. This Chinese Death Flu (CDF) catastrophe should prove to be the catalyst for a massive change in direction. Mr Cummings is the man to make it. He has precisely the maverick character, unapologetic and unorthodox... Read more

  • May 26, 2020
    Poor choice of adjectives, but a revealing rant. Thank you. Perhaps ‘Free’ flights to Zurich might be offered in an attempt to alleviate distress in the Airline Industry. One way or the other population control will have to be addressed, whether you like or not. Surely you have read your... Read more

  • May 26, 2020
    On the face of it, that is one of the most filthy and abhorrent views I have ever heard since I first learned of H*t***'s death camps. But why have the cost of giving families a state bribe to 'off'' their elderly 'loved ones'? Why not just round up everyone of pensionable age and transfer them in... Read more

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