Jonathan Portes on youth unemployment

Jonathan Portes, National Institute of Social and Economic Research


BBBC News Channel

Wednesday, 16 February 2011


Speakers         Simon McCoy

Jonathan Portes


SMc: You were in fact the former chief economist with Liam Byrne when he was in government. In terms of the youth unemployment which I wanted to look at particularly, why is that this recession seems to be hitting young people much harder than previous ones?


JP: Well in general young people do worse in recessions because employers are reluctant to recruit so it’s difficult for them to get their first step on the jobs ladder. What we’ve seen in this recession though is that you know, in the last two years the number of people in work, 25 or over, has actually gone up while the number of young people in work has fallen by 400,000. So that’s pretty shocking at a time when overall employment rates for people who are a bit older are holding up, that young people have done so badly. I think that‘s partly because employers have been hanging on to workers, they don’t want to lose skilled workers and that’s understandable, and it’s also because there are more older workers in the workforce, people who are.. employers are choosing to keep, or people who are staying on because they feel that they want to carry on working longer or perhaps because they have a strong financial reason for doing so.

SMc: Politically the pressure according to the government, is to reduce the deficit, to deal with that before they can deal with anything else. is that right in your view?

JP: I don’t think that is… that any serious economist would say that the pressure to reduce the deficit should override the drive to do sensible things now which will not only help young people now but actually improve their labour market prospects for the future. All the evidence we have shows that young people who suffer prolonged periods of unemployment early in their careers suffer from that not just at the time through lack of a job but in terms of reduced earnings and employment prospects for the future. So it really is a very poor long-term investment to cut programmes that might help young unemployed people into jobs now.

SMc: I mean these figures for youth unemployment are the worst since 1992. For those of us that remember the levels of the 1980s, I mean are we looking at repeating that sort of period?

JP: I don’t think it’s anything like that bad yet. I think what the experience of the 1980s, I hope, has taught us though is that we should never, our society should never allow either from a social or economic point of view, those levels of persistent high long-term youth unemployment to become entrenched. I didn’t think we’re anything like that now but that.. the lesson of that terrible experience is precisely why I think the government should be taking stronger action now to ensure we don’t head in that direction.

SMc: Yeah I mean the difficulty for the government, we all know what the problems are but what is the solution. I mean, that’s too simple a question obviously but is there something they should be doing now?

JP: Well I think there are two things they could do, one is that they could reverse their mistaken decision to cancel the Educational Maintenance Allowance. Rigorous independent evaluation showed that the Educational Maintenance Allowance improved staying-on rates for sixteen to seventeen year olds quite significantly and also, crucially from the point of view of the deficit, that over the medium to the long-term it was likely to be cost-effective for the government. So they should seriously consider restoring, as far as they can, the EMA. That’s the first thing they should do. The second thing they should do is they have cancelled the Future Jobs Fund which was designed to provide help for young unemployed people. Now the Future Jobs Fund was not perfect by any means, some parts of it worked well some parts of it worked badly, and I think the government was correct to say that it didn’t have as much of a private sector employer orientation as it should. I think they should consider building on the best bits of the Future Jobs Fund by looking at how they could involve private sector employers in getting young people back to work, possibly through the use of subsidies to employers who are willing to take on the unemployed people.