Empowering a new generation of young workers: the $1 trillion prize
October 26, 2016
We are now eight years on from the start of the global financial crisis, yet for many OECD countries youth unemployment rates have not fallen back down to pre-crisis levels. In the UK, one in four unemployed young people were out of a job for over a year – and this was also the case for almost half of all OECD countries. In light of high unemployment rates and rising tuition fees, youth employment has been rising up the UK policy agenda.
To explore how well the UK is doing compared to other countries, we have updated our Young Workers Index. This year’s report places a greater focus on how governments and businesses can enhance youth employment and empowerment, potentially boosting their economies by over $1 trillion in the long run (or around £45 billion in the UK).
Here are the 5 key things you need to know:
1) The UK continues to sit below the OECD average. This year, the UK recovered in the rankings to its 2006 position of 21st out of 35 OECD countries, having fallen to 23rd place in 2011 (see chart below). The proportion of young people not in education and training (the ‘NEET’ rate) is now lower than it was in 2008, but youth unemployment rates have yet to fall back to pre-crisis levels.
2) Switzerland, Germany and Austria continue to lead the pack. With low unemployment and NEET rates, these core European countries again occupy the top 3 places in our rankings for 2015, followed closely by Nordic countries (Iceland, Norway and Denmark). Italy, Greece and Spain continue to perform the least well on our index, as they struggle to recover from the Eurozone crisis. In these countries, youth unemployment rates remain above 40%, compared to the OECD average of 14%.
3) Matching Germany NEET rates could boost total OECD GDP by around $1.1 trillion in the long run and UK GDP by around £45 billion. Germany has the lowest NEET rate of the EU countries at around 10%, as compared to 17% in the UK. By lowering NEET rates to German levels, the OECD as a whole could experience a long-term gain to GDP of up to $1.1 trillion, with the largest potential gains of over 8% of GDP for low performers such as Turkey, Italy and Greece. For the UK, the potential long term gain could be around 2.3% of GDP, equivalent to around £45 billion at today’s GDP values.
4) Promoting vocational training and engaging employers with schools are key features of our top performers. Switzerland, Germany and Austria all operate dual education systems in which young people have the opportunity to undertake vocational training alongside formal education. Young people are encouraged to engage with employers from a young age, boosting their confidence and employability while also allowing employers to address skills mismatch by proactively training young people to their business needs. In light of a growing skills mismatch, with 59% of UK graduates currently working in non-graduate jobs, and rising tuition fees, the UK government has recognised the need to provide young people with attractive alternatives to university. A number of initiatives are being implemented, aimed at shifting cultural perceptions of apprenticeships and boosting social mobility. But it will be critical to provide high quality training and on-the-job experience, not just increase the number of apprenticeships.
5) Businesses have a key role to play in the UK government’s apprenticeship initiatives. For UK policy to successfully boost both the perception of and the number of vocational opportunities, the government needs to work closely with businesses. Collaboration has already begun to design a new set of sector-relevant “apprenticeship standards”, helping companies reap the benefits of apprenticeships, ensuring they better meet business needs, as well as the needs of young people. In addition to vocational training, businesses can support social mobility and transitions to work by engaging with young people early though placements and mentoring schemes, specifically targeted at vulnerable youth.
Our analysis complements our other labour market and public policy insights, including our Golden Age Index on older workers and our Women in Work Index. All of these highlight the UK’s middling performance relative to other high income economies and the great potential for future improvement if it can match best practice around the world. By learning form others, the UK can unlock the full potential of its youth, empowering young people to take ownership of their futures.