Yi Zhang (Low Pay Commission) - The changing UK labour market for young people: Trends since 1992
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Yi Zhang (Low Pay Commission) - The changing UK labour market for young people: Trends since 1992

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Yi Zhang (Low Pay Commission) - The changing UK labour market for young people: Trends since 1992 Yi Zhang (Low Pay Commission) - The changing UK labour market for young people: Trends since 1992 Presentation Transcript

  • The Changing UK Labour Market for Young People: Trends Since 1992 Yi Zhang Low Pay Commission
  • Outline • Introduction to the LPC and why we are interested in the youth labour market • Trends in the labour market position and economic activity of young people aged between 16-24 • Labour market trends of age groups affected by the National Minimum Wage (NMW) youth rates – 16-17 year olds – 18-20 year olds • Conclusions 2
  • Introduction • LPC makes recommendations to the Government on the National Minimum Wage (NMW). Government then accepts or rejects • The NMW is a wage floor below which wage cannot fall • Young people are treated differently as international evidence suggested they are more vulnerable to adverse impacts of minimum wages. Thus there are age-related NMW rates to reflect the inexperience and cost of required training needed for them to compete in the labour market 3
  • The NMW has age related rates and the 1617 Year Old Rate was introduced in 2004 Adult rate Youth Development Rate(18-20 year olds) 16-17 Year Old Rate Apprentice Rate Oct 2013- 6.31 5.03 3.72 2.68 Oct 2012-Sept 2013 6.19 4.98 3.68 2.65 Oct 2011-Sept 2012 6.08 4.98 3.68 2.60 Oct 2010-Sept 2011 5.93 4.92 3.64 2.50 Oct 2009-Sept 2010 5.80 4.83 3.57 Oct 2008-Sept 2009 5.73 4.77 3.53 Oct 2007-Sept 2008 5.52 4.60 3.40 Oct 2006-Sept 2007 5.35 4.45 3.30 Oct 2005-Sept 2006 5.05 4.25 3.00 Oct 2004-Sept 2005 4.85 4.10 3.00 Oct 2003-Sept 2004 4.50 3.80 Oct 2002-Sept 2003 4.20 3.60 Oct 2001-Sept 2002 4.10 3.50 Oct 2000-Sept 2001 3.70 3.20 June 2000-Sept 2000 3.60 3.20 April 1999-May 2000 3.60 3.00 Pounds 4
  • Proportion of workers paid at the applicable NMW (per cent, 5p band) The number of workers paid at their age-related NMW rate has risen since 2004 with a sharp increase in the use of youth rates since the onset of the recession 16 16 14 14 12 12 10 10 8 8 6 6 4 4 2 2 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 April of each year Source: LPC estimates based on ASHE, 2007–2012. Note: Estimates are based on a 5 pence band. 16-17 18-20 22+ All 5 2010 2011 0 2012
  • Trends in the labour market position and economic activity of young people aged between 16-24
  • The proportion of 16-24 year olds has been falling since 2008, and is predicted to do so until 2024, as the population of those aged 25 and over grows faster than that for under 25s 2030 2028 2026 2024 2022 10 2020 11 2018 11 2016 12 2014 12 2012 13 2010 13 2008 14 2006 14 2004 15 2002 15 2000 16 1998 16 1996 17 1994 17 1992 18 10 The number of 16-24 year olds as share of the population aged 16+ (per cent) 18 Year Source: LPC estimates based ONS data: labour market statistics, UK, 1992-2012, and 2010 7 population projections, UK, 2013-2030.
  • Youth employment declined from 1992, but picked up between 2001 and 2008, before falling sharply with the onset of the recession with few signs of recovery since Source: LPC estimates based ONS data: labour market statistics, UK, 1992-2012, and 2010 8 population projections, UK, 2013-2030.
  • Compared with other age groups, young people have been most affected by the recession with the largest fall in their employment Source: LPC estimates based on ONS data: employment rates for the age groups of 16-17 year 9 olds (YBTO), 18-24 year olds (YBTR), 25-34 year olds (YBTU), 35-49 year olds (YBTX), 50-64 year olds (LF26) and 64+ year olds (LFK4), seasonally adjusted, UK, 2008-2013.
  • 1992 June 1992 November 1993 April 1993 September 1994 February 1994 July 1994 December 1995 May 1995 October 1996 March 1996 August 1997 January 1997 June 1997 November 1998 April 1998 September 1999 February 1999 July 1999 December 2000 May 2000 October 2001 March 2001 August 2002 January 2002 June 2002 November 2003 April 2003 September 2004 February 2004 July 2004 December 2005 May 2005 October 2006 March 2006 August 2007 January 2007 June 2007 November 2008 April 2008 September 2009 February 2009 July 2009 December 2010 May 2010 October 2011 March 2011 August 2012 January 2012 June 2012 November 2013 April 2013 September ILO Unemployment (thousands) Youth unemployment has increased since 2003 with further deterioration during the recession and remained well above its pre-recession levels 1,200 Introduction of the NMW April 1999 Start of the 2008-09 1,200 1,000 1,000 800 800 600 600 400 400 200 200 0 0 Month ILO Unemployment level (RHS) Unemployed 16-24 year olds not in FTE Source: LPC estimates based ONS labour market statistics, seasonally adjusted, UK, 1992-2013 10
  • 1996 May Unemployment rate Employment rate Inactivity rate Source: LPC estimates based on ONS data, three-month moving average, seasonally adjusted, UK, 1992-2013 11 2013 September 2013 January 2012 May 2011 September 2011 January 2010 May 2009 September 2009 January 2008 May 2007 September 2007 January 2006 May 2005 September Introduction of the NMW 2005 January 2004 May 2003 September 2003 January 2002 May 2001 September 2001 January 2000 May 1999 September 1999 January 1998 May 1997 September 1997 January 70 1995 September 1995 January 1994 May 1993 September 1993 January 1992 May Employment rate, Unemployment rate, Inactivity rate of 16-24 year olds (per cent) Since 1993 young people’s employment rate has fallen as fewer have found jobs. In contrast, their unemployment ‘rate’ held up until the start of the recession Start of the 200809 recession 70 60 60 50 50 40 40 30 30 20 20 10 10 0 0 Month
  • This move away from employment is into fulltime education 100 100 90 increase in tuition fees 90 Quarter FTE FTE and employment Employment(NFTE) Unemployment(NFTE) 12 Inactivity (NFTE) Source: LPC estimated based on LFS microdata, four-quarter average, UK, Q2 1992- Q2 2013 2013 Q2 2012 Q3 2011 Q4 2011 Q1 2010 Q2 2009 Q3 2008 Q4 2008 Q1 2007 Q2 2006 Q3 0 2005 Q4 0 2005 Q1 10 2004 Q2 10 2003 Q3 20 2002 Q4 20 2002 Q1 30 2001 Q2 30 2000 Q3 40 1999 Q4 40 1999 Q1 50 1998 Q2 50 1997 Q3 60 1996 Q4 60 1996 Q1 70 1995 Q2 70 1994 Q3 80 1993 Q4 80 1993 Q1 Proportion of all those aged 16–24(per cent) Start of the recession Intro NMW
  • Young people not in full-time education are more likely to be employed than those in full-time education, and their employment rate largely increases with age 80 70 70 60 60 50 50 40 40 30 30 20 20 10 Employment rate by education status and age (pere cent) 80 10 0 0 16 17 18 19 20 21 22 Age Not in full time education In full time education 23 13 Source: LPC estimated based on LFS microdata, four-quarter average, UK, Q3 2002-Q2 2013 24
  • For those not in full-time education, the employment rate of younger people has fallen more sharply over time 90 90 Start of the recession 16 17 18 19 20 21 22 23 24 14 Source: LPC estimated based on LFS microdata, four-quarter average, UK, Q2 1992-Q2 2013 2013 Q2 2012 Q3 2011 Q4 2011 Q1 2010 Q2 2009 Q3 2008 Q4 2008 Q1 2007 Q2 2006 Q3 2005 Q4 2005 Q1 2004 Q2 2003 Q3 2002 Q4 2002 Q1 2001 Q2 20 2000 Q3 20 1999 Q4 30 1999 Q1 40 1998 Q2 40 1997 Q3 50 1996 Q4 50 1996 Q1 60 1995 Q2 60 1994 Q3 70 1993 Q4 70 1993 Q1 80 30 Employment rate (NFTE, per cent) 80
  • Labour market position of age groups affected by the NMW youth rates
  • Since 2004, 16-17 year olds have become much more likely to stay in full-time education, as fewer have become employed 100 100 Intro NMW Proportion of all those aged 16–17 (per cent) 90 Roll-out of EMA Intro 16–17 Year Old Rate Replacement of EMA with BF Start of the recession 90 Quarter FTE Unemployment (NFTE) FTE and employment Inactivity (NFTE) Employment (NFTE) 16 Source: LPC estimated based on LFS microdata, four-quarter average, UK, Q2 1992- Q2 2013. 2013 Q2 2012 Q3 2011 Q4 2011 Q1 2010 Q2 2009 Q3 2008 Q4 2008 Q1 2007 Q2 2006 Q3 2005 Q4 0 2005 Q1 0 2004 Q2 10 2003 Q3 10 2002 Q4 20 2002 Q1 20 2001 Q2 30 2000 Q3 30 1999 Q4 40 1999 Q1 40 1998 Q2 50 1997 Q3 50 1996 Q4 60 1996 Q1 60 1995 Q2 70 1994 Q3 70 1993 Q4 80 1993 Q1 80
  • The proportion of 18-20 year olds in full-time education has steadily increased over time, and the labour market position of those not in full-time education was more adversely affected by the recession 100 100 Intro NMW Proportion of all those aged 18–20 (per cent) 90 Roll-out of EMA Start of the recession 80 Increase in tuition fees EMA replaced by BF 90 80 Quarter FTE FTE and employment Unemployment(NFTE) Inactivity (NFTE) Employment (NFTE) 17 Source: LPC estimated based on LFS microdata, four-quarter average, UK, Q2 1992- Q2 2013. 2013 Q2 2012 Q3 2011 Q4 2011 Q1 2010 Q2 2009 Q3 2008 Q4 2008 Q1 2007 Q2 2006 Q3 2005 Q4 2005 Q1 2004 Q2 0 2003 Q3 0 2002 Q4 10 2002 Q1 10 2001 Q2 20 2000 Q3 20 1999 Q4 30 1999 Q1 30 1998 Q2 40 1997 Q3 40 1996 Q4 50 1996 Q1 50 1995 Q2 60 1994 Q3 60 1993 Q4 70 1993 Q1 70
  • The gap in employment rates of different age groups has widened, with younger people more adversely affected by the recession than their older counterparts 80 70 Start of the recession Intro 16–17 Year Old Rate Intro NMW 80 70 Quarter 16–17 18–20 21–64 18 Source: LPC estimated based on LFS microdata, four-quarter average, UK, Q2 1992- Q2 2013. 2013 Q2 2012 Q3 2011 Q4 2011 Q1 2010 Q2 2009 Q3 2008 Q4 2008 Q1 2007 Q2 2006 Q3 2005 Q4 2005 Q1 2004 Q2 2003 Q3 2002 Q4 2002 Q1 2001 Q2 0 2000 Q3 0 1999 Q4 10 1999 Q1 10 1998 Q2 20 1997 Q3 30 1996 Q4 30 1996 Q1 40 1995 Q2 40 1994 Q3 50 1993 Q4 50 1993 Q1 60 20 Employment rate (per cent) 60
  • 18-20 year olds saw the largest rise in their unemployment proportion since the start of the recession, but have showed signs of recovery, though still remaining well above its pre-recession rate 19 Source: LPC estimated based on LFS microdata, four-quarter average, UK, Q2 1992- Q2 2013.
  • When looking at the combined picture for young people aged between 16-20, we can see a clear shift towards full-time education, and recent changes in policies don’t appear to have affected this trend 2,500 2,500 Number of 16-20 year olds (thousands) Intro the NMW Roll-out of EMA Intro the 16-17 Year Old Rate Start of the recession 2,000 EMA replaced by BF 2,000 1,500 1,500 1,000 1,000 Increase in tuition fees 500 500 FTE only Unemployment (NFTE) Employment (inc those in FTE) Inactive (NFTE) 20 Source: LPC estimated based on LFS microdata, four-quarter average, UK, Q2 1992- Q2 2013. 2013 Q2 2012 Q3 2011 Q4 2011 Q1 2010 Q2 2009 Q3 2008 Q4 2008 Q1 2007 Q2 2006 Q3 2005 Q4 2005 Q1 2004 Q2 2003 Q3 2002 Q4 2002 Q1 2001 Q2 2000 Q3 1999 Q4 1999 Q1 1998 Q2 1997 Q3 1996 Q4 1996 Q1 1995 Q2 1994 Q3 1993 Q4 0 1993 Q1 0
  • LPC research findings using LFS 1 • The Low Pay Commission has commissioned many research projects since 1997 – many have used the LFS. • The main findings are: – Some evidence of a negative impact of minimum wages on employment for young people (15–24), plus impact was exacerbated in the presence of an economic downturn (Dolton and Rosazza Bondibene, 2010) – Positive and statistically significant increase in probability of employment (up to 4–6 percentage points) on becoming 22 but no effect on becoming 18 or at any other age (Dickens et al 2010) – No negative employment effects from the NMW when workers cross the age threshold and become eligible for the adult rate but did find that the NMW lowered the probability of young males being in employment one year prior to them becoming eligible for the adult rate, at the age of 20 (Fidrmuc and Tena Horillo, 2011 and 2013) – Young NMW workers had a greater probability of job loss than other workers, but also a greater probability of job entry. The effect on job entry exceeded the effect on job loss (Fidrmuc and Tena Horillo, 2013) 21
  • LPC research findings using LFS 2 – Some evidence of a negative effect on hours worked among youths, exacerbated during the recession (Bryan et al 2012) – Updated research found some, albeit weaker, evidence of a reduction in hours. The results implied that the NMW reduced basic hours for young people during the recession relative to the pre-recessionary period. (Bryan et al 2013) – Evidence that young workers (18-21) are close complements to older workers (55+) but some weak evidence that as the NMW has increased, employers in the low-paying sectors have substituted away from 16-17 year olds to older workers. No evidence of employment effects (Lanot and Sousounis, 2013) – The introduction of the 16–17 Year Old Rate had not affected participation in full-time education (De Coulon et al 2009) 22 – No impact on schooling (Lanot and Sousounis 2010)
  • Conclusions • • • • • • • Despite a falling population, young people have fared relatively poorly in the labour market Employment among the youngest people has fallen The labour market positions of different age groups have diverged, with younger people the most adversely affected by the recent recession More young people have been moving into full-time education since 1992, and this was reinforced by the introduction of the Education Maintenance Allowance (EMA). As a result fewer became employed Those young people in full-time education have also become less likely to be employed The introduction of the 16-17 Year Old Rate of the NMW (in October 20014) coincided with the roll -out of EMA (September 2004) Recent changes in policies such as the replacement of EMA with the Bursary Fund and the increase in tuition fees have not yet had an adverse impact on the number of young people remaining in full-time education 23
  • Thank you! Any questions? https://www.gov.uk/government/organisations/low-pay-commission 24