Youth Unemployment in the UK

The FT today has an article about how long-term youth unemployment is now back at 1998 levels despite a 5 billion pound benefits-to-jobs programme . Now if you go to this url, and have a look at the population pyramids for the UK you might begin to see part of the explanation for why this is happening. The cohorts now entering the UK labour market are slightly thicker than the previous ones. Coincidentally I have just put up a post on Afoe which mentions Richard Easterlin’s disadvantaged cohort theory. What is happening in the UK at the present time would, IMHO, be a good example of the Easterlin effect at work.

Long-term youth unemployment has returned to about the level it was when the government’s flagship New Deal was introduced in 1998, casting doubt over the value of the £5bn benefits-to-jobs programme.

The sharp rise in long-term youth unemployment, which has increased by 60 per cent since its low point two and a half years ago, was revealed by figures from the Office for National Statistics yesterday.

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About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

2 thoughts on “Youth Unemployment in the UK

  1. With all the due respect, Edward, I don’t think that the explanation with age cohorts is proper. Look at Switzerland, which has very low unemployment level, including youth and immigrants. Yet Switzerland has a demographic pyramid that is no better than that of the UK.

    The difference is in labour market flexibility. A properly functioning labour market is able to withstand demographic or immigration shocks of much major magnitude than a slight increase in the number of fresh graduates.

    Most European countries suffer from high unemployment and some people think it’s an unescapable destiny. No it is not. It’s wrong policy.

    Another low-unemployment country in Europe is Iceland. Pity this great little country is not populous enough to be taken as a serious role model.

  2. Pavel,

    I’m not sure what point you are trying to make here. I think we agree flexible labour markets are important. In Germany and France, were labour markets are not so flexible, there is a circa 10% unemployment rate.

    In the US and the UK where labour markets are much more flexible, unemployment normally runs at the circa 5% level. Yet in recent years both the UK and the US have experienced some ‘softness’ in their labour markets, despite reasonably good growth. (This is different to the chronic difficulties in the 10% unemployment rate countries).

    It is here I am mentioning demographics and the comparatively large young cohorts entering the market. In principal this is a good thing, but it is harder to create in the short term the quantity of new jobs you need. In the longer term there is more in-built capacity for growth, if your labour market is efficient.

    Switzerland, I’m afraid, is a red herring here. It’s on my hit-list of countries which are getting old too fast. It could easily join the Germany, Japan, Italy group (I think this is the kind of exclusive club one doesn’t want to belong to). All the symptoms are there: interest rates close to zero more or less indefinitely, low growth, weak internal demand etc. Definitely one to watch.

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