1. Cardiff Metropolitan University, Cardiff
Prifysgol Fetropolitan Caerdydd
BA. (Hons) Business Economics
Final Year Dissertation
Youth Unemployment; How well is the UK government addressing the issue?
Tim Mogford
2014
Dissertation submitted in partial fulfilment of the requirements of Cardiff
Metropolitan University for the degree of Bachelor of Arts.
2. 1
DECLARATION
I declare that this dissertation has not already been accepted in substance for any
degree and is not concurrently submitted in candidature for any degree. It is the result
of my own independent research except where otherwise stated.
....................................................................Tim Mogford, Candidate.
3. 2
Acknowledgements
I would like to begin by thanking my supervisor Stephen Bibby for his support and
guidance throughout this investigation. His knowledge and expertise in my chosen
research field has been invaluable.
A massive thanks to my housemates and friends who have supported me through the
stressful times over the last few months, without their support I would never have
been able to complete this project.
Lastly, huge thanks to my parents Robert and Heather who have been there for me and
supported me through all walks of my education. Without them, I would not be where
I am today.
4. 3
Abstract
The aim of this investigation was to test whether the UK government is
currently doing enough to target the problem of youth unemployment.
Through the use primary data in the form questionnaire’s, participants
between the age of 18-24 were randomly selected to give information on
their current position within the labour market and to discuss any issues
they have had in finding employment.
Secondly, an interview with an experienced manager in a local Jobcentre
was carried out to gain a further understanding of the current mis-match
between employers and young people to further determine the causes of
youth unemployment in the UK.
Once the causes were fully determined and researched, an investigation
into the current policies being implemented by the UK government was
undertaken where the policies were critically evaluated to determine if
they were sufficiently targeting the problem and to see how effective they
had been.
The overall findings of this investigation were that although youth
unemployment has been steadily decreasing since the policies were
initiated, they are not sufficiently targeting the main causes of youth
unemployment found through the research. The problem is far more
structural that first assumed and extreme reform of both labour market
policy and the education system is required if the current youth
population in the UK are not to become a ‘lost generation.’
5. 4
Contents
Acknowledgements……………………………………………………………..Page 2
Abstract…………………………………………………………………………Page 3
Contents Page………………………………………………………..............Page 4/5/6
List of Abbreviations……………………………………………………………Page 7
1 – Introduction………………………………………………………………..Page 8
1.1 Research Question..........................................................................................Page 8
1.2 Background Information................................................................................Page 8
1.3 Aims and Objectives………………………………………………………..Page 11
2 – Literature Review…………………………………………………………Page 12
2.1 What is Youth and Unemployed....................................................................Page 12
2.1.1 Who are the Youth......................................................................................Page 12
2.1.2 What is Unemployment..............................................................................Page 13
2.2 Youth Unemployment in the UK……...........................................................Page 14
2.3 Why young people more susceptible to being unemployed than adults........Page 15
2.4 Causes of Youth Unemployment in the UK………………………………..Page 16
2.4.1 Cyclical Unemployment………………………………………………….Page 16
2.4.2 Minimum Wage…………………………………………………………..Page 18
2.4.3 Immigration………………………………………………………………Page 19
2.4.4 Frictional Unemployment………………………………………………...Page 19
2.5 Costs of Youth Unemployment……………………………………………..Page 20
2.5.1 Cost to the Individual Employment………………………………………Page 21
2.5.2 Cost to Individual Wage………………………………………………….Page 21
2.5.3 Cost to Individual Health………………………………………………....Page 22
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2.5.4 Cost to Society……………………………………………………………Page 22
2.6 Youth Unemployment Policies in the UK………………………………….Page 22
2.6.1 Wage Incentives…………………………………………………………..Page 23
2.6.2 Apprenticeship Grant for Employers……………………………………..Page 24
2.6.3 Work Experience Placements…………………………………………….Page 24
3 – Methodology………………………………………………………………Page 26
3.1 Introduction………………………………………………………………...Page 26
3.2 Definitions………………………………………………………………….Page 26
3.2.1 Types of Research Methods………………………………………………Page 26
3.2.2 Philosophical Approaches to Research Methodology……………………Page 26
3.2.3 Reasoning Involved with Research Methodology………………………..Page 27
3.3 Research Methodology……………………………………………………..Page 27
3.4 Data Collection……………………………………………………………..Page 29
3.4.1 Primary Data……………………………………………………………...Page 29
3.4.2 Secondary Data…………………………………………………………...Page 31
4 – Results,Analysis and Discussion…………………………………………Page 32
4.1 Introduction………………………………………………………………...Page 32
4.2 Results of Primary Data – Questionnaire………………………………….Page 32
4.2.1 Prepared for Work after Education…………………………………….....Page 33
4.2.2 Demand for Particular Set of Skills………………………………………Page 34
4.2.3 Wage Expectations………………………………………………………..Page 35
4.2.4 Under-Employment………………………………………………………Page 36
4.2.5 Reason for Unemployment……………………………………………….Page 36
4.3 Results of Primary Data – Interview………………………………………Page 37
4.4 Analysis and Discussion of Data…………………………………………...Page 38
8. 7
Abbreviations
AGE Apprenticeship Grant for Employers
DWP Department for Work and Pensions
FTE Full-Time Education
ILO International Labour Organisation
JSA Job Seekers Allowance
NEET Not in Education, Employment or Training
NMW National Minimum Wage
ONS Office for National Statistics
TUC Trades Union Congress
9. 8
Chapter 1 – Introduction
1.1 Research Question
Youth Unemployment; How well is the UK government addressing this issue?
The research question will be assessed through investigating the causes of youth
unemployment through previous literature along with the analysis of both primary and
secondary data to gain an understanding of the mismatch in the youth labour market.
Government policies such as the Youth Contract will then be critiqued to determine
whether they are sufficiently targeting the causes of the problem.
1.2 Background Information
The UK faces a crisis of youth unemployment. Although the topic is not a new
phenomenon in the UK as in the past 30 years the amount of unemployed youths has
not fallen below 500,000 and at least 1 in 7 has been out of either work or education at
every point in that period.
Firstly, what constitutes “youth” and “unemployed” must be distinguished to avoid
any confusion and both these terms are defined and covered in chapter 2 of the
literature review.
As of February 2014, there was officially 917 000 young people between the age of
16-24 unemployed in the UK labour market. Although this is down 48 000 from the
last quarter and 58 000 down from the previous year it still presents itself as a huge
issue in the UK due to its constant rise over the last 10 years, the current youth
unemployment rate is calculated at 19.9%. The issue with the youth unemployment
rate is that it’s undisputedly higher than the unemployment rate across the whole
population. (ONS, 2014)
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This high rate of unemployment is due to factors such as young people tend to move
between jobs more frequently as they try to establish their careers and find themselves
in a transitional period of unemployment once left school as the labour market may
not require the skills they have acquired in education, also known as frictional
unemployment.
Furthermore, there are business cycle fluctuations that influence the level of youth
unemployment. This is because when aggregate demand is low in the economy,
youths with little job experience and have been most recently hired are the first to lose
their jobs under the ‘last in, first out’ policy many employers operate.
More recently, youth unemployment in the UK has been adversely and unequally
affected by the economic downturn suffered since 2008 onwards. In order to make a
substantial recovery not only is an increase in economic growth required but suitable,
effective youth unemployment policies, such as The Youth Contract, targeting the
causes is essential.
The debated effect of the National Minimum Wage introduced in 1998 on the youth
unemployment rate must also be taken into account as many disbelievers in it such as
(Worstall, 2011) have made a considerable case for the correlation between the
increasing minimum wage and increased youth unemployment.
Additionally, it is those who suffer youth unemployment have the most severe
consequences. The long-term effects of unemployment ‘scarring’ on wages,
employment and health of those who undergo it are also be considered in this
investigation which is why addressing the problems for this age group pose such a
serious challenge for policymakers.
11. 10
One of the aims of this investigation is to establish the causes of youth unemployment
in the UK through the analysis of primary and secondary data to decide whether
current government policies are sufficient in reducing the rate.
The Youth Contract is a much needed set of measures implemented by the UK
government in April 2012 which is aimed at easing the labour market disadvantage
experienced by youths. It consists of 4 main elements; wage incentive payments,
additional work experience placements, additional apprenticeship grants, and
payment-by-results initiative for 16-17 year olds. However, due to the ethical
restrictions of the investigation it is not possible to investigate unemployment
experienced by those under the age of 18, so only the first 4 policies will be looked at.
The wage incentive is a key component in the package of measures. It is designed as
payments to employers from the government to incentivise the recruitment of young
unemployed people. It is a demand side policy that needs to be reviewed for its
practicality, value for money but most importantly its effectiveness.
Additional work experience payments is a supply side policy which has the potential
to help many young people through targeting one of the main perceived causes of
youth unemployment; lack of relevant work experience in the labour market. The
quality of placements needs to be emphasised just as much as the quantity because as
(Semboja, 2007) states that policies must target supply & demand conditions in the
current labour market, meaning that any placements undertaken must be beneficial in
the search for future employment.
The Apprenticeship Grant for Employers was introduced in February 2012 for
employers to take on up to three young apprentices aged 16-24. The arrangement was
12. 11
intended to assist employers with the early costs of the Apprenticeship and to
encourage retention of apprentices.
This investigation takes into account qualitative primary data from a group of
randomly selected 18-24 year olds to determine their position in the labour market and
potential reasoning behind any unemployment they may be currently facing and can
then be tested against the literature based causes in the UK.
Data from a semi-structured interview with an employee from the Jobcentre will also
be analysed to further establish the reasoning behind youth unemployment in the UK;
explanations ranging from job expectations being too high to readiness for
employment will be examined to gain a further understanding of the topic.
Secondary data from the Office for National Statistics will be systematically used
from previous research due to the scale of this investigation being too small to obtain
a full picture of the situation.
1.3 Aims and Objectives
To identify what constitutes ‘Youth’ and ‘Unemployed’ and to gather an
understanding of the current youth unemployment situation in the UK.
To examine the causes of youth unemployment in the UK using previous
literature along with both primary and secondary data.
Critically evaluate the effectiveness of youth unemployment policies in the
UK to determine whether they correspond to information found in the study.
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Chapter 2 – Literature Review
Introduction
This chapter aims to discuss previous literatures concerning definitions, causes, costs
and policies regarding youth unemployment in the UK, accompanied with
background information on the current youth unemployment situation.
2.1 Defining Youth and Unemployed
2.1.1 Who are the youth?
Firstly, in order to gain a full understanding of the topic, a review of what
constitutes youth and unemployed must be decided because one of the purposes of
this dissertation is to analyse a segment of the UK population so it is worthwhile to
define the two terms separately.
According to the (UN, 2014) the definition of youth is the “age-group 15-24
inclusive” however in practice, it varies greatly according to the country in question
due to cultural and political factors. For example, (O’Higgins, 1997) states how that in
Britain “Youth Employment Policy” generally targets the age group of 16-18 whereas
in Southern Italy the policies can be targeted for people aged 14-32. The lower age
limit doesn’t tend to vary in the industrialised countries and is generally the age at
which compulsory education ends, which is 16 in the UK by law (Gov.UK, 2014),
whereas the upper limit varies from country to country.
I have chosen to use the definition of 15-24 because it incorporates two types of youth
groups which will be used in this study. That is teenagers and young adults, both of
which face different problems in the labour market.
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2.1.2 What is Unemployment?
When applying the definition of unemployment, the most widely used is
“those who have not worked more than 1 hour in the past week but are actively
seeking work and are currently available to do so.” (ILO, 2014)
This is generally the most widespread accepted definition however a critical point of
this would be as (Jones and Riddell, 1999) argue that students and discouraged
workers are not included in the definition, therefore there can never be a fully accurate
statistic of the actual youth unemployment rate due to these ‘hidden unemployed’ in
the UK. This contrasts with statistics in other countries in Europe, such as Norway,
where (Djernaes, 2014) points out how students seeking work are included in the
labour force therefore having an effect on the unemployment rate.
Furthermore, it is also argued that under-employment isn’t taken into account when
defining unemployed which is also a critical part of this investigation. Under-
employment is best described as highly skilled workers in low paid jobs or those in
part-time work seeking full time employment. (Glyde, 1997)
An example can help be illustrated by (Mosca and Wright, 2011) which illustrates
how currently 47% of all UK graduates are employed in non-graduate roles (see
Graph 1). So although I will be using the ILO definition for the purpose of this
project, it must be accepted that there are certain limitations when deciding who is to
be defined as unemployed so that may have an effect on analysis later on.
15. 14
2.2 Youth Unemployment in the UK
As of February 2014, there was officially 917 000 young people between the
age of 16-24 unemployed in the UK labour market. Although this is down 48 000
from the last quarter and 58 000 down from the previous year it still presents itself as
a huge issue in the UK due to its constant rise over the last 10 years (see Graph 2) and
using data from (ONS, 2014) the unemployment rate for 16-24 in the UK is calculated
at 19.9%.
However, the UK’s rate is significantly higher than some its European counterparts
such as Germany which has experienced a continual fall in youth unemployment
throughout the same period as the UK; it was at its highest in 2005 at 17% but has
constantly decreased and now stands at 8% due to its far better structured policies
than the UK on youth unemployment. (Evans, 2014)
The case of youth unemployment in the UK can be seen in a cyclical fashion,
previous data shows how the UK last experienced such a high youth unemployment
rate in 1993 where it was around 18% but then decreased steadily by around 1% a
year until 2004, where it was at its lowest point of 10% but then began to spike again
in 2005, although three years short of when the recent recession actually occurred.
This can partly be explained by the change in policy enforcement in late 2004, the
employment services in the UK were given less incentive to concentrate on young
people on JSA but more to focus on other groups of unemployed such as those on
incapacity benefits and single parents (Van Reenen, 2014) so the timing of this change
explains the rise in youth unemployment prior to the financial crisis.
16. 15
Yet as stated by (Van Reenen, 2014) there does not appear to be a special
problem of youth unemployment in this case compared with past experience in the
UK because young people suffering more during a downturn occurs during most
recessions. Nevertheless an important aspect to take into account is that the current
youth unemployment rate of 19.9% is still the highest recorded in UK since spring
1985. A contributing factor to this high rate is that the definition of the youth
unemployment rate is;
Youth Unemployment Rate = number of unemployed young persons in UK
Youth Labour Force
So with fewer people between the age of 16-24 being employed, the decision to stay
on for further education becomes far more rational because improving your stock of
knowledge increases your employability as well as your value to the economy, in
terms of potential output (Groot and De Brink, 2000.) However (Crawford and
Duckworth et al, 2011) argue that with a higher fraction of youth’s being inactive due
to FTE then it reduces the size of the Youth Labour Force which subsequently leads to
a higher youth unemployment rate.
2.3 Why are young people more susceptible to being unemployed than
adults?
There are many contributing reasons as to why the youth segment of the labour force
are particularly more vulnerable to unemployment than their elder counterparts,
especially during times of recession such as the UK faced from 2008 onwards.
17. 16
One of the key reasons for higher youth unemployment rates is the existence of “job
queues” in the labour market as stated by (Makeham, 2001.) Young people tend to
find themselves at the back of the line for jobs and generally only hired when
aggregate demand is high in the economy because employers prefer workers with
experience, this is an example of the barriers to entry in the labour market that young
person’s face.
Furthermore, during recessions and in general when redundancies must be made,
firms in the UK have been known to operate the “last-in, first-out” principle, meaning
that employees who have worked there for the least amount of time will be made
redundant first. As pointed out by (Roberts, 1984) these fresh employees statistically
tend to be young persons from the age of 16-24 so their age and inexperience
contributes to why they lose their jobs, consequently answering why the youth are
more susceptible to unemployment.
2.4 Causes ofYouth Unemployment in the UK
2.4.1 Cyclical Unemployment
One of the key causes of recent and previous spikes of youth unemployment in the
UK has been attributed to cyclical unemployment. According to (Luke, 2010) this
type of unemployment can be defined as “workers losing their jobs due to business
cycle fluctuations in output.” Aggregate demand plays a large part determining youth
unemployment levels; when the economy is thriving and unemployment is low, there
are no real effects. However, it is indicated by (O’Higgins, 1997) that a fall in
aggregate demand, such as in the 2008 recession, consequently leads to fall in demand
for labour and in particular youth labour.
18. 17
When there is demand-deficient or cyclical unemployment in the UK economy,
aggregate demand shifts left which can be illustrated in (Graph 4) and when this
happens economic growth begins to decline which is what the UK experienced in
2007 when the % change in real GDP plummeted from +2% to -5% in a two year
period (Graph 5). It is argued by (Ryan, 2001) that youth unemployment fluctuates
much more than adult unemployment due to its super-cyclical nature and the
reasoning for this is that young workers generally have less job protection, gained less
work specific experience and the companies have invested less in training for them
which makes them easier to lay off, however (Pagés and Montenegro, 2007) argue
that redundancy packages cost more for a more experienced worker so it becomes
cheaper to fire a young worker and how that’s the main reason behind cyclical youth
unemployment.
Yet counter to both the previous two arguments is the belief that firms do not
necessarily sack workers but instead they cease to take on new employees in times of
an economic downturn. For example, evidence from (Pissarides, 1986) showed that
the youth unemployment increase that Britain experienced in the 1980’s was due to a
reduction in the outflow of unemployment rather than the inflow. To support this
further, (O’Higgins, 1997) has illustrated that variations in unemployment were due to
increased unemployment duration, meaning that youths were unable to find another
job once unemployed because employers were retaining existing staff without taking
more on. This can be further typified by more recent data showing the ‘unemployed
for longer than a year’ rate stood at 15.3% in 1999 but in 2012 stood at 28.2% further
supporting the difficulty youth’s face from getting out of unemployment once in.
19. 18
2.4.2 The Minimum Wage
There has been much discussion as to the effect of the NMW on youth unemployment
levels in the UK. Opponents of the NMW believe that set too high and it will increase
youth unemployment through impacting on increasing the cost of hiring young
workers with respect to adults, who generally have more experience (Dickens and
Machin et al, 1999). They believe how increasing the minimum wage makes the
relative cost of hiring older, skilled workers more appealing.
Theoretically speaking, (Gorman, 2008) states if skilled workers making £15 per hour
and young, unskilled workers earn the NMW of £3 per hour then increasing the
minimum wage to £5 makes older workers three times more expensive to hire rather
than five times. Employers hire the older worker as it becomes relatively cheaper and
youth unemployment is increased further. Evidence in (Graph 6) shows how the
NMW has increased faster than average weekly earnings in the UK from the period
between 2011 and 2013, further supporting the increased cost of hiring youth labour
when general earnings are unchanged.
However, there have been many studies disagreeing with the effect of the NMW on
youth unemployment such as that undertaken by (Bryan and Salvatori et al, 2012)
which specifically looked at the UK. They found empirical evidence that during the
2008 recession, the NMW increase’s only reduced basic weekly working hours by
around 3-5 hours for the youth segment of the population rather than increasing the
unemployment rate.
Furthermore, studies by (Card and Krueger, 1995) found that a study based in the
USA showed no statistical impact of minimum wage on employment. Closer to the
20. 19
home, (Dolado, 1996) also provided a study on the effect of changes in the minimum
wage on youth unemployment in the UK to which there was also no correlation found
between the two.
2.4.3 Immigration in UK
The level of immigration has recently soared in the UK; back in the early 1990’s the
proportion of foreign born workers was just under 6% but now stands at 10%. Low
skilled immigrants are a closer substitute for inexperienced youth labour and are more
likely to take jobs that would generally be taken by youngsters rather than adults.
This can be backed up empirically by (Van Reenen, 2014) whose study found that in
the UK regions, for every one percentage point increase in the proportion of foreign-
born inside the working age population is correlated with youth unemployment
increase of 0.46 percentage points, so it could be decided that foreign migration does
harm the job prospects of young persons, however this conclusion is massively
influenced by the foreign-born population rate increase in London which shown by
(Gregg and Wadsworth, 2011) went from 28% to 40%. If London were excluded from
the sample selection, then the real effect would be minimal, meaning that there isn’t
enough compelling evidence to confirm increased immigration has caused youth
unemployment in the UK.
2.4.4 Frictional Unemployment
The transition from education to employment can be classified under frictional
unemployment where school/university leavers are searching for the right job which
might take time, this is not economically inefficient because over-qualified staff
taking lower paid jobs would contribute to under-employment, and therefore every
21. 20
economy has to accept some form of frictional unemployment. Those who are more
likely to be unemployed once out of education do not receive sufficient support and
guidance, and it is argued that those pupils who are ‘hard to teach’ are often neglected
hence contributing to their frictional unemployment once they’ve left school. (Econ
Help, 2012)
A key issue that the UK faces is that although school standards have been consistently
rising, the success of schools is determined by those pupils who achieve five or more
GCSE’s at A*-C but not much representation is given for the lower achieving pupils.
This can be empirically backed up by (Van Reenen, 2014) whose evaluation of the
Excellence in Cities programme found that in disadvantaged areas, the programme
had a high success rate on high ability students but did not seem to assist the lower
ability pupils with academic achievement, therefore skewing the results of how well
the education system is progressing.
This is further backed up by (Wilson, 2013) who stated that since 2008, young people
with qualifications below level 2 account for 39% of those unemployed. This leads to
what can be considered excess frictional unemployment because those who leave with
few qualifications will inevitably require a longer transitional period between
education and work, therefore UK policies focusing on careers guidance for school
leavers is now essential to improve the position of young people.
2.5 Costs ofYouth Unemployment
The costs of youth unemployment can be divided into two main categories; the cost to
the individual and the cost to the economy. Individual costs can have long-term
repercussions regarding future income, output and employment prospects whereas
22. 21
costs to society can have spill over effects and stunt economic growth.
2.5.1 Cost to Individual Employment
There are numerous costs associated with the individual with regards to youth
unemployment; these are known as unemployment scarring effects vary greatly.
The first of which is the case of ‘hysteresis’ which is the belief that unemployment at
a young age will increase the likelihood of unemployment at a later age. Studies by
(ACEVO, 2012) at the University of Bristol show how those unemployed at a young
age will spend an additional two months per year out of work between the ages of 25-
29 than they would have had they more work experience. This can be further backed
up by (Gibbons, 1991) who has found that employers take youth unemployment spells
as a signalling device, suggesting that that the worker is less productive making them
less employable.
2.5.2 Cost to Individual Wage
Lower earnings potential is a further scarring effect to the individual, there is a study
by (Gregg and Tominey, 2005) which illustrates how there is a comparable difference
between the wage earned by those who have experienced unemployment in their
youth and those who haven’t. The ‘wage penalty’ was calculated at 13-21% of
earnings by age 42 however could be minimised to 9-11% if repeat spells of
unemployment were avoided; this avoidance is possible with the correct youth
employment policy.
23. 22
2.5.3 Cost to Individual Health
Lastly, the health of the youth in question can also be adversely affected after a period
of youth unemployment. Psychological scarring such as illness, mental stress,
lessening of self-esteem and depression have all been linked with experiences of
worklessness. The (Audit Commission, 2010) found that young persons who are
NEET are three times more likely to succumb to depression. This is further backed up
by (The Prince’s Trust, 2014) whose study revealed that a quarter of young NEETs
unemployment was the source of family arguments in the household.
2.5.4 Cost to Society
The economic cost of youth unemployment can be measured in different ways.
According to (The Prince’s Trust, 2014) the weekly cost of people aged 18-24
claiming JSA is £22 million compared to the cost of lost productivity each week to be
around a further £26 million however the upper bound estimate ranges up to £133
million. Using the data in (Graph 8) the number of youth’s claiming JSA for over 12
months had increased from roughly 10,000 in 2011 to over 50,00 in 2012 showing
that the cost of unemployment benefits is likely to continue to rise unless issue is
addressed.
2.6 Youth Unemployment Policies in the UK
In this section, the different policies regarding youth unemployment in the UK will be
introduced for what they are and what they aim to achieve. As stated by (Hawley and
Nevala et al, 2012) young people are not a homogenous group and require tailored
policies that can address specific needs in a young person’s life.
24. 23
The Youth Contract is the main policy which will be critiqued for its effectiveness as
it consists of all the sub-policies currently implemented in the UK, which when
grouped together are known as the Youth Contract.
It was announced in November 2011, when government decided on the measures it
would take to address the ever increasing youth unemployment problem in the UK.
Up to £1 billion has been allocated for the three year project starting in 2012. These
included;
160,000 wage incentive payments to employers, each worth up £2,275 for
those who employ an 18-24 year old from the Government Work Programme.
Funding for at least 20,000 extra Apprenticeship Grants for Employers.
An additional 250,000 work experience places a year for 16-24 year olds.
More flexible adviser support through the Jobcentre plus for all 18-24 year
olds once registered for JSA. (House of Commons, 2012)
2.6.1 Wage Incentives
The Wage incentive aspect of the Youth Contract is designed as motivation for
employers to take on younger, less experienced customers from the Work Programme
into real, existing job vacancies. This is meant to account for up to 160,000 of the
total 430,000 additional youth employment opportunities and consumes roughly one
third of the total allocated budget. (House of Commons, 2012)
From an economic point of view, the wage incentives are a demand-side approach
which is an attempt to increase the quantity of labour demanded through subsidising
the wage cost to employers. (Bartik, 2010)
25. 24
The design of the wage incentives is to offer employers payments of up £2,275 when
they recruit an 18-24 year old from the Work Programme. The full payment is
available once a full-time job is secured, defined of at least 30 hours a week. The
placements are focused at those claimants on JSA for over nine months in order to
reduce the number of long-term unemployed youths because (Graph 8) showed that
the number of people 18-24 claiming JSA over 12 months had increased 5 fold in the
period 2011-2012. (House of Commons, 2012)
2.6.2 Apprenticeship Grant for Employers
The Apprenticeship Grant for Employers is a government funded subsidiary
programme of the Youth Contract that supports businesses to recruit individuals aged
16-24 into employment, aimed at businesses who would not otherwise be in a position
to do so. The grant consists of up to ten payments of £1,500 annually and has already
helped thousands of employers grow their business whilst having positive spill-over
effects on the economy in terms of increased employment. (AGE, 2014)
This specific type of government policy is aimed at creating jobs in an environment
where additional staff would help the productivity of a business but they are unable to
afford the added wage costs. This coincides with what (Semboja, 2007) stated how
“public policies that create an environment which are able to fit demand & supply
conditions in the labour market are just as essential as skills and training when
seeking employment.” So the AGE meets both requirements by providing an
additional supply of labour for which there is a demand for in the UK economy.
2.6.3 Work Experience Placements
Part of the youth contract is to emphasise the current Jobcentre’s work experience
26. 25
scheme, with a further 250,000 places being announced for the scheme and work
academies alike. Its aim is to help young unemployed people obtain the experience
needed through various paid and unpaid placements with businesses lasting from 2-8
weeks at the employers’ diversity. (Jackson and Rowe, 2012)
According to (Snape, 1998) previous work experience is highly valued by employers
and these placements offer the opportunity for youths to gain the adequate skills for
employment through first-hand experience. Furthermore, (Kershaw, 2013) indicates
how in the current youth labour market previous experience is not only useful but
becoming essential as those with prior knowledge of the working environment are
three times more likely to land a job.
27. 26
Chapter 3 – Methodology
3.1 Introduction
The aim of this chapter is now to critically evaluate the different methodological
approaches available in order to decide which best suits my research question. I will
begin by critiquing quantitative and qualitative economic methods then give reasoning
for my choice which will allow me to answer my research question proficiently then a
discussion on the collection of both my primary and secondary data will be
undertaken.
3.2 Definitions
Initially a few key definitions are required to establish the different;
3.2.1 Types of research methods
3.2.2 Philosophical approaches to research methodology
3.2.3 Reasoning involved with research methodology
3.2.1
Quantitative research in economics is defined by (Carus, 2009) as “collecting
numerical data and analysing it using statistical or econometric methods.”
Qualitative research according to (Helper, 2000) is “an empirical investigation where
data is observed in the form of words instead of numbers.”
3.2.2
Positivist philosophical approach is defined by (Robson, 2003) as “the nature of the
world existing regardless of people’s perceptions of it.”
28. 27
Relativism is explained by (Robson, 2003) as “the views that there are not absolute
truths and people have different ways of perceiving the world; complexity and
behaviour must be studied to gain true understanding.”
3.2.3
Deductive reasoning in economic research is put forward by (Saunders and Lewis et
al, 2003) as “when the researcher defines a theoretical position and proceeds to
analyse the assumption with the information obtained.”
Inductive reasoning is defined by (Chand, 2013) as “beginning with an individual
question and proceeding to form a general principle based on the evidence collected
in the real world economy.”
3.3 Research Methodology
The two main methods of research discussed are quantitative and qualitative which
both hold their own significance in different means. It is argued by (Starr, 2012) that
general usage of quantitative methods in economics consists of the collection of a pre-
determined set of information from research subjects such as data-reporting units. The
fundamental flaw with this technique is that research subjects cannot truly answer the
question they were asked or give reasoning behind their response; this ability to
answer unrestricted is critical to the research of this project therefore the use of
quantitative methods is discouraged.
In contrast, (Kanbur, 2003) states how the use of qualitative studies bears a more
flexible approach to gathering information were the research subjects are able to
freely answer questions giving a complete insight into the phenomenon of economic
interest; in this case youth unemployment.
29. 28
With regards to my investigation, the use of qualitative methods allows an open-ended
approach to collecting data which yields far more information regarding the causes of
youth unemployment, which then permits a more detailed examination of the
subsequent government policies. However a limitation to my approach argued by
(Bamberger, 2000) is that due to the unstructured character of the qualitative
methodology; the more thorough information collected requires a more complicated
analysis than its quantitative counterpart.
The two key differing philosophical approaches to research in economics are
positivism and relativism. The former is associated with quantitative research methods
in which (Whitton, 2013) describes as being used to test hypotheses against obtained
facts therefore allowing casual relationships to be linked between events. A fault with
such an approach is that it does not take into account how economics is concerned
with the understanding of human phenomena involved with issues such as youth
unemployment. (Robson, 2003)
In this investigation, the relativist view will be adopted due to its strong links with
qualitative research and belief how theories can be generated from observing collected
information instead of purely testing a hypothesis from numerically obtained data.
Relativism can allow for participants to shed light on their own individual experiences
which provides invaluable insights for analysis unlike positivism which is restricted to
data tested conclusions. (Creswell, 2003)
There are also two methods of reasoning used in theoretical economics which are
deductive and inductive. Both are two forms of logic which help the researcher
30. 29
establish the truth.
Deductive reasoning according to (Saunders and Lewis et al, 2003) is associated with
quantitative research and is a form of inference; in which a theoretical position is
outlined and then a theory is tested against collected facts. As outlined by (Chand,
2013) deductive methods are preferred because they give exactness in economic
analysis, they provide actual figures which determine the validity in any previous
assumptions made. However, for the purpose of this investigation deductive reasoning
is discouraged, this is because (Chand, 2013) further illustrates how those who follow
this method may be absorbed in mathematical toys and the impact of real world
behaviour may be forgotten.
Inductive methods are preferred because they explore a topic through collecting
information and then generate a theory based on results. This method is extremely
dynamic, as stated by (Allan and Skinner, 1991) the changing economic phenomena
can be analysed used the basis of experience so conclusions can be drawn then
appropriate curative measures can be implemented; this applies fully to the youth
unemployment problem where adequate policies are required to tackle the issue.
3.4 Data Collection
During this investigation two primary methods of data collection will be utilised to
gain an understanding of the youth unemployment issue. Both in-depth interviews and
questionnaires will be designed and streamlined to definitive theme seeking to gain
information on the causes/issues of youth unemployment.
3.4.1 Primary Data
Initially a short questionnaire will be prepared with some open/closed questions
31. 30
regarding the individual’s current employment status, job expectations and views on
their position in the labour market. Participants will be selected based on their age
because this investigation is targeted at 18-24 year olds, who constitute the definition
of youth. Furthermore, the sample will be collected from different geographical
locations to obtain a wider range of information allowing for better analysis.
A blank version of the questionnaire has been included as appendix A. The
participation information sheet which includes a project summary, why the respondent
has been chosen to participate, project risks and how their privacy will be protected is
included as appendix B. The participation consent form is included as Appendix C
Information collected will then be analysed using the aforementioned inductive
approach using some statistical tests and observer impression which (Ratner, 2002)
describes as observing the data, interpreting it to form an impression and reporting it
in a structured form. This is to test whether current government policies are
sufficiently targeting the problem.
Secondly, an in-depth interview with a manager of a local job centre will be held to
try gain further information regarding the potential mismatch in the labour market.
Due to the scale of the project, the interview will be relatively unstructured to give an
unfiltered representation of the respondents view as I believe that to be most
beneficial to this investigation (Starr, 2012). The interview will be taped and later
transcribed to preserve the full content of information.
The full interview is included as appendix D and the letter to the organisation is
included as appendix E.
The collection of qualitative data tends to be resource-intensive so the purposive
32. 31
sample technique will require a far less sample size than used in quantitative research.
This smaller sample size of around 20 participants for the questionnaire and 1 in-
depth interview is used because the purpose of the investigation to obtain an in-depth
understanding which would be forsaken if a larger, more general sample was used.
There are no significant risks or ethical issues with these methods of data collection as
there is no sensitive data sought after, only employment information. However to
ensure maximum privacy; all information will be held in full confidence and not
linked to personal details given, moreover once the study has been completed all
personal information such as consent signatures will be destroyed accordingly.
3.4.2 Secondary Data
This is data obtained by previous studies but is used for the current investigation.
Sources such as the ONS will be used to obtain large-scale data on the research
question. This method of data collection is designed to gain a fuller picture of the
issue because this high quality database provides data that would be unfeasible for an
individual researcher to collect.
Data and information from the Department for Business Innovation and Skills will
also be used due to their previous studies and expertise on current youth
unemployment policies. The quality of the information is high and has been gathered
on a scale much greater than possible in this investigation so will be crucial to further
the understanding and analysis of the topic.
Furthermore, it is essential to use secondary data when considering socio-economic
changes that have happened previously since no new questionnaire/interview can
accurately describe past events. (Schutt, 2003)
33. 32
Chapter 4 -Actual Results, Analysis and Discussion
4.1 Introduction
This chapter aims to discuss the causes of the UK’s youth unemployment and the
subsequent policies to decide whether they have been effective in addressing the
issue. It will critique the different approaches by the government to decide whether
the causes found in the literature review and in the primary data collection have been
successfully targeted.
Key themes from the primary data i.e. questionnaire and interview will be
documented both graphically and scripted and compared to the aims and objectives.
Causes that have been found in the questionnaires will be contrasted with those found
in the lit review to determine the reasons behind the youth unemployment issue.
It will then lead on to an analysis and discussion of the findings to determine how
accurate both the primary and secondary data has been to the aims and objectives and
its similarity to the literature review along with critiquing subsequent government
policies and their relevance to the information I have found.
4.2 Results of Primary Data – Questionnaire
For the collection of the primary data, a questionnaire was produced which consisted
of 9 questions to 20 participants regarding their current employment position and
potential reasoning behind them being unemployed. The sample questionnaire can be
found as Appendix A.
The questionnaires were distributed randomly to persons in the local area as the
34. 33
How Prepared For Work After
Leaving Education
Very Poorly Prepared
Poorly Prepared
Well Prepared
Very Well Prepared
investigation was geographically limited. The technique was used to avoid any
overly-recurring answers and to obtain the widest range of information available.
4.2.1 Prepared for Work after Education
Initially, when the persons were questioned about how prepared felt they were for
work after leaving education it provided interesting results. Data can be illustrated
below;
Figure 1
The questionnaire contained a scale of 1-4 which asked the participant to rate how
well prepared for work they were once out of education. Figure 1 shows how 75% of
the participants rated they were poorly prepared upon leaving education, 15% thought
they were well prepared and 5% believed they were very well prepared.
35. 34
This will be useful for discussion later on because it is relevant to one of the aims of
the investigation which is to find out the causes of youth unemployment and Figure 1
can help understand that perhaps poor readiness for work is preventing those aged 18-
24 from entering the right line of work and also preventing employers from hiring un-
suitable candidates.
4.2.2 Demand for Particular Set of Skills
Qualitative data was then obtained from the questionnaire regarding whether there
was a current demand by employers for the particular skills set that the person being
interviewed had. This is extremely relevant to the investigation because it gave an
insight into not only the current demand & supply conditions in the labour market but
also provided information as to whether the current education system was teaching the
correct skills which would be beneficial for respondents finding a job once out of
education.
A high percentage of the respondents stated how what they had learnt in university
was quite a specific subject area; meaning that once they had tried to enter the job
market, they found that there was a low demand for their set of skills because “only
the best get employed” and extra training or qualifications were required if they
wanted to find correct employment.
Some of the respondents found that their specific set of skills learnt in both college
and university revolved around the tourism trade. This will be particularly relevant to
this investigation because as mentioned in the literature review, demand deficient
unemployment is perceived to be a key cause of youth unemployment. This data
36. 35
0%
20%
40%
60%
80%
£10 000 - 15 000 £15 000 - 20 000 £20 000 - 25 000 £25 000 - 30 000
First Year Salary Expectation After
Education
would potentially agree with that literature because after the 2008 economic crisis,
demand for tourism may have decreased as holidays are known in economics as a
luxury good; something that demand is reduced for when income is decreased in
times such as a recession.
Furthermore, information was also collected which stated how due to the less-specific
nature of the qualifications they had achieved that, although there was a demand for
them in the labour market, it would be beneficial to either move into further education
or seek additional training to present themselves as more employable and to “stand
out from the crowd” to employers. This information is essential in understanding the
problem of youth unemployment because it states how many identical degrees that
respondents had potentially due to the increasing number of university graduates in
the last 10 years, especially post-recession leading to high numbers of youths with
very similar qualifications.
4.2.3 Wage Expectations
Another aspect of the questionnaire was to assess the first year salary expectations if
the respondent had attended University, as the number of unemployed graduates is
continuing to rise. The results can be shown below;
Figure 2
37. 36
These results show a consistent key theme that although obtaining a degree through
higher education is perceived to increase salary once in employment, 70% of
respondents expected to earn between £10 000 – 15 000 once they had left university.
This will provide a valuable insight when relating back to the aims and objectives of
the investigation because one theory was that the high level of youth unemployment
was due to wage expectations being too high therefore not taking jobs at the market
level price.
4.2.4 Under-Employment if Employed
50% of respondents stated how they did not feel that their current role in full-time
employment and some part-time was suited to their particular set of skills. They
believed that the skills they have obtained were suited to more demanding roles. An
example would be how 10% of respondents had business related degrees but worked
in retail as sales assistants.
This is vital information because although under-employment does not contribute to
the unemployment statistics, previous research has shown those who feel they are
overly-qualified are not only less productive but are also more likely not to stay in
that job meaning they will soon be contributing to the youth unemployment statistics.
4.2.5 Reason(s) for Unemployment
The general consensus gained from the information was that those youths who found
themselves currently unemployed were in that position because they were unable to
38. 37
find jobs appropriate to the skills they had acquired in education. This could be partly
blamed on the lack of jobs currently available in the UK economy for school leavers
and graduates alike.
Furthermore, information collected also pointed towards the idea that once out of
education the correct pathways are not very clear for where to move into employment.
This is an important theme because without the correct guidance, school and
university leavers will be left without adequate preparation for work. With no sense of
direction, young persons will become NEET until they pointed in the right direction
whether it is re-entering education, vocational training or full-time employment.
4.3 Results of Primary Data – Interview
For further collection of primary data, a semi-structured interview consisting of 7
questions was arranged with a manager of a local job centre to try and gather a better
understanding of the topic in question. It contained both open and closed questions to
try and obtain a subjective view along with some factual information that could be
used for later analysis.
The full interview can be found at Appendix D.
One aspect of the interview which provided valuable qualitative information was how
the manager of the Jobcentre believed that the mismatch was due to a lack of relative
work experience that young people possessed which left them disadvantaged in the
job market. With employers preferring candidates with previous work experience,
youths are experiencing more and more difficult gaining work experience which
prevents them from gaining future employment.
39. 38
Additionally, it would appear that from the interview, the period of transitional
unemployment is what seems to be troubling many youngsters. It was recorded that
some youths who are in long-term unemployment of over 1 year find it the hardest to
find work as they haven’t done anything to benefit their job prospects during that time
therefore become more difficult to employ than those in short-term unemployment.
The minimum wage argument was dismissed in the interview, it was stated that
although it does increase costs for businesses it was put in place to protect young
people being wage discriminated in the first place.
Generally speaking, the view of the interviewee was that job/wage expectations of
youngsters also isn’t the cause of the unemployment as many jobseekers were
prepared to take any employment possible but the sheer lack of recruitment by
businesses could be to blame.
4.4 Analysis and Discussion of Data
During the analysis of the data I have collected, not all the information obtained in the
questionnaires and interviews will be used. This is due to the high complexity of the
topic of youth unemployment therefore only a few key themes will be used for
thorough analysis and then cross-referenced with the effectiveness of policies that the
UK government has implemented.
4.4.1 Soft Skill Preparation
How well prepared for work after leaving education was illustrated in Figure 1 and
showed how 75% of respondents believed they were poorly prepared for work. This
40. 39
can be interpreted as an important reason into why youths are unable to find
employment because if they do not feel they are adequately prepared for employment
then not only will they find it difficult once they do have a job but also will find it
difficult to find a job they feel confident in.
There is a clear mis-match between employers and employee’s here with regards to
readiness for work because data from the National Employers Skills survey illustrates
how employers feel that 58% of candidates are well prepared for employment once
they have left education. This can be illustrated below;
Figure 3 – Employers’ view on how well prepared young people are for work
The secondary data being analysed here contravenes with that found in the primary
research and the break-down in employment is from the supply side of labour. Un-
prepared for work youths appear to be a contribution to the high unemployment rate
although this particular cause was not found in any previous literature, therefore with
no evidence of a cause there have been little government policies targeting the reason.
41. 40
Many youths have high ambitions for themselves but lack the core skills necessary to
achieve them. These soft skills include dedication, motivation and attitude which are
often just as important as qualifications to employers. (National Careers Service,
2014)
This can be further backed up by the Appendix 4 which stated how “many of the
youths lack soft skills such as commitment and punctuality”
After analysing this data it is clear that there is a clear need for policy intervention by
the UK government regarding the preparation of youths for employment post-
education, however through the use of previous literature it is clear that there has been
no attempt to implement such a policy thus helping to explain the current youth
unemployment problem. This is relevant when referring back to the title of the
investigation in that the UK government is not currently addressing the issue of youth
unemployment
However an evaluative point of this would be that “soft skills” are extremely difficult
to measure and even more difficult to teach. These non-technical qualities such as
persuasion, flexibility and punctuality are arguably something you are born with and
make it hard to learn in a class-room based environment and virtually impossible to
instil via government policy. (Adler, 2014)
4.4.2 Skill-Set Demand
The analysis of this qualitative information revolves around the idea that current job
market conditions are not suitable to the skills that young people have acquired
through education. The data showed how some of the respondents undertook
42. 41
university degrees in subjects that would allow them to enter their chosen industry
freely; however this was not the case at all.
In agreement with what was found in previous literature by (O’Higgins, 1997) who
stated that during the time of a poor economic conditions e.g. recessions then
aggregate demand for products generally decreases and tourism is renown in
economics as a luxury good; a product who suffers an elastic demand. This would
perfectly coincide with the data previously found because demand-deficient
unemployment is a strong indicator of youth unemployment. (Economics Online,
2013)
Tourism graduates generally seek jobs that revolve around that particular industry,
therefore if it is known from economic knowledge that demand for their employment
is likely to decrease during times of recessions then this can be perhaps attributed to
many other university graduates who find there is no demand for their skills once
outside university.
Further analysis helps illustrate the growing problem of lack of demand for young
labour once out of education as the data also shows how that some of the respondents
achieved niche qualifications where the supply of labour is large but the demand by
employers is relatively small.
Mentioned in the literature review by (Pissarides, 1986) is how during recessions that
the unemployment problem stems from a reduction of the inflow of employment
rather than outflow, this meaning that firms don’t necessarily sack workers but cease
to take on new employees. This can be compared and likened to the data found in this
investigation because company’s demands for new labour is reduced therefore those
43. 42
with specific qualifications find it hard to enter their desired industry.
Another consistent theme mentioned in the data is how many young people are
leaving education with very similar qualifications to fellow students which doesn’t
allow them to “stand out from the crowd” when it comes to being employed. The
issue with this that many youngsters are graduating with identical degrees to their
peers which doesn’t truly reflect the skills they have acquired, this can be blamed on
the constantly increasing number of university graduates in the UK which can be
illustrated below;
Figure 4
The steady increasing of graduates in the UK population illustrates why there is such
a significant issue with youth unemployment. As mentioned in the qualitative data,
there appears to be a lack of demand for graduate’s skills in the labour market and
Figure 4 shows exactly why there is a problem.
44. 43
However, an evaluative point to this data would be that if the % of university
graduates has been constantly rising since 1992 then why does there appear to be such
an issue with youth unemployment in the past 5 years. The reason is because generic
degrees being taught throughout universities in the UK has left young people
disadvantaged when applying for jobs because they are just one in a bunch of
graduates who are unable to stand out to employers because the skills they possess are
shared with all their fellow graduates.
4.4.3 Wage Expectation
The data shown in Figure 2 illustrates how university graduates wage expectations are
based around £10 000–15 000 per annum which is contrary to popular belief in the
labour market. Studies by (Murphy and Gawthorpe, 2013) show that the average 1st
year graduate salary is actually around £20 000 per annum. Therefore information
found in this investigation disagrees with that study and proves that graduates
expectations really aren’t that high and shouldn’t be too blame for their lack of
employment as most would expect a salary of roughly half of the actual figure.
This is further back up by information in Appendix 4 which also states how most
young jobseekers are “down to earth about their employment prospects and salaries”
so the argument that young people expect too much from their first year of
employment is thus proved incorrect.
4.4.4 Frictional Unemployment
Transitional, also known as frictional unemployment is something that all economies
must encounter as it is the period between moving from education to employment for
45. 44
young people, however the time spent in frictional unemployment is something that
should be minimised as statistics show that youngsters who spend longer than 12
months unemployed may suffer many long-term consequences found in previous
literature by (ACEVO, 2012) and find it even harder to find a job once past the 12
month mark.
Evidence from the questionnaire shows there is an apparent theme with young people
being unable to find an appropriate job once out of education as when asked what they
felt was the main reason they were currently unemployed, 40% of respondents stated
that “they did not feel the pathways to employment once out of education were good
enough.”
This is an extremely important theme and can be backed up by evidence found in the
literature review by (Econ Help, 2012) who also stated that student without the correct
guidance inevitably end up unemployed once out of education.
However, an important evaluative point would be that previous research by (Wilson,
2013) stated that it tends to be those with fewer qualifications who end up long-term
unemployed in their youth but evidence from the questionnaire in this investigation
argues that even those with university degrees are unable to find work due to the lack
of guidance when trying to enter the labour market.
The data gathered in Appendix 4 also verifies how young people with good
qualifications but have been unemployed for over 12 months find it extremely
difficult to find employment meaning that government intervention should be
assisting young people in finding work as soon as they leave education as the data
46. 45
analysed in this section shows that those who are frictionally unemployed for longer
than 12 months find it extremely difficult to find employment.
4.4.5 Minimum Wage
Data gathered from the interview in Appendix 4 states how the argument that the ever
increasing minimum wage should not be to blame for the increasing youth
unemployment rate. It stated that “although the minimum wage increases basic costs
for business, it was put in place to protect young people in this first place.”
This disagrees with previous literature by (Dickens and Machin et al, 1999) and
(Gorman, 2008) who empirically found that constant increases in the minimum wage
makes employing older, more skilled workers more appealing as they cost less than
their younger counterparts.
Yet the information from Appendix 4 can be fully backed up by statistical evidence by
(Bryan and Salvatori, 2012) whose study found that even during the 2008 recession,
the increase in the NMW only decreased basic working hours for youngsters by 3-5
hours and had no actual impact of youth unemployment levels, thus meaning is it
feasible to fully dismiss the argument that the NMW affects youth unemployment
levels by the primary data gathered in this investigation and by previous literature.
4.5 Analysis and Discussion of Government Policies
In this section, it will be covering one of the aims of this investigation and that is to
critically evaluate the effectiveness of government policies in targeting youth
unemployment. The three policies outlined in the literature review will be critiqued to
47. 46
decide whether they have successfully targeted the causes of youth unemployment
found in the literature review and primary data of this investigation. The policies that
will be analysed to decide if they have been a success or a failure are;
Wage Incentives.
Apprenticeship Grant for Employers.
Work Experience Placements.
4.5.1 Wage Incentives
As outlined in the literature review, from April 2012 the government decided that in
attempt to encourage employers to hire young people from the age of 18-24 they
would subsidise the wage costs that these businesses face. Although it is difficult to
measure the actual effect of the scheme on youth employment levels at this stage,
using secondary data from (Jordan and McGinigal, 2013) it is possible to analyse the
effect of the policy on employer’s attitudes towards employing young people and to
decide whether the government has sufficiently targeted the problem.
Early indications show that an analysis of the policy has already showed it to be a
statistical failure because the initial target of the youth contract was to help 160,000
young people find work over a three year period, averaging 53,000 a year.
Analysis of the scheme shows that it had the following effect on employers;
48. 47
0%
5%
10%
15%
20%
25%
30%
35%
Created an extra
employment vacany
Would not have
recruited a young,
unemployed
otherwise
More likely to keep
employee for 6+
months
More likely to
recruit young,
unemployed person
The Effect of Wage Incentives on
Employers
Figure 5 - (Jordan and McGinigal, 2013)
Through the analysis of this secondary data, including detailed qualitative interviews
with Jobcentre staff is can be indicated that although wage incentives assisted with the
hiring of young, unemployed people it did not however assist much with the creation
of new jobs. This is shown in Figure 5 as only 9% of employers created an extra
vacancy due to the scheme.
Yet an evaluative point to this would be that the aim of the policy was to recruit young
people into existing vacancies and not to necessarily create new jobs; therefore the
policy has been a success in this sense.
Furthermore, 29% of employers were likely to keep an employee on for longer than 6
months due to the scheme; this could also be considered a success as retaining young
staff is an issue discussed in the previous literature by (Ryan, 2001) who indicated that
laying off younger workers is normally most appealing when looking to reduce staff
levels, but the success of the policy in reducing the wage cost of young workers has
led to just under 1 in 3 employers retaining young recruits.
49. 48
In general, 71% of employers showed a positive attitude towards the wage incentive
scheme and believed that due to the low-level of bureaucracy who prevented the
success of wage schemes in the past; this time around the government had been more
relaxed with administration making the whole process easier for employers and
employees alike.
Figure 5 also showed how 33% of employers were now more likely to recruit a
young, unemployed person. This is important because it clearly shows that the scheme
has positively influenced the demand for young labour, which was in issue
encountered in the primary data and previous literature where the demand for such
labour was deemed to be a cause of youth unemployment. Therefore the scheme could
‘tip the balance’ in favour of recruiting a young person.
Yet numbers show that since the scheme’s launch wage incentives had been issued to
4,690 recruits from the period June 2012 till May 2013 when its target was around
53,000. Although since April 2012 youth unemployment has fallen by 59,000 and
youths claiming JSA has decreased by over 67,000, due to the low-take up of the
scheme means that the fall in youth unemployment cannot be attributed to the wage
incentives. So although the scheme may have had positive effects on the attitudes and
action of employers, statistically speaking it hasn’t done enough to target the problem.
4.5.2 Apprenticeship Grant for Employers
The Apprenticeship Grant for Employers (AGE) is a government funded subsidiary
programme of the Youth Contract that supports businesses to recruit individuals aged
16-24 into employment, aimed at businesses who would not otherwise be in a position
50. 49
to do so.
This scheme was aimed at two of the main causes of youth unemployment found in
this investigation; preparation for work after employment and ensuring the
employability of young people in the labour market.
It furthermore addresses the issue raised by (Semboja, 2007) in that it is targeting
“demand and supply conditions in the labour market” because it is not creating
artificial jobs but training young people to fill the roles of jobs that are constantly
required in any economy, exemplified by the apprenticeships being offered in
business, administration, law, engineering, manufacturing and retail accounting for
75% of the total scheme.
Data in this investigation found that 75% of respondents were “poorly prepared for
work once leaving education” so the implementation of this policy particularly targets
this issue and is seen to prepare youths for employment by giving them a career
pathway.
However, previous literature by (Wilson, 2013) stated that young people
qualifications less than level 2 accounts for 39% of the youth unemployed and this
policy has been targeting those at higher qualification levels. Most of the
apprenticeships offered are not made available to those young unemployed persons
with few qualifications and in this sense, the scheme can be seen not to be addressing
the issue of targeting the youth who are the most difficult to employ and accounting
for over 1 in 3 of the unemployed.
Furthermore, the success of future young apprentices gaining employment through the
scheme can be illustrated below using information from (Department for Business
51. 50
0%
10%
20%
30%
40%
50%
Very Important Quite Important Would Help Not Important
Effectivness of the Grant for
Future Youth Employment
Innovation and Skills, 2013)
Figure 6
Therefore, through the analysis of Figure 6 it can be seen that the scheme has been
effective in the sense that 46% of employers consider the AGE as a huge contributor
to future employment of young people.
However once again, with regards to the policy’s self-set targets it can be considered a
failure as the target of 40,00 apprenticeships for young people has not been met as it
delivered 29,00 through the year 2012/2013, although there were many issues
surrounding the policy such as current the economic climate and availability of
resources when it was introduced but a completion rate of 75% for each apprentice
should be considered a success and the policy has performed well in the related areas.
Lastly with regards to increasing the employability of young people in the labour
market, the following table can help illustrate the effectiveness of the policy in
enhancing the chances of being employed and also the effect on earnings per hour for
the apprentice;
52. 51
Table 1
Using the data from this table, it can be estimated that young people with level 1
qualifications would earn 15% more if they achieved an intermediate apprenticeship
and 23% more if they achieved an advanced apprenticeship.
This information is vital when considering the potential effects of youth
unemployment on cost to individual wages that was discussed by (Gregg and
Tominey, 2005) in the literature review. So it can be concluded that participation in
the AGE can allow young people to avoid this ‘wage penalty’ and earn more than they
would have without the apprenticeship.
Another aim of the policy can be seen as effective when looking to increase the
employability of young people as the probability of being employed after undertaking
Effect on earning per hour
(% change)
Effect on the probability of
being employed (%
change)
Level 2 qualification 0.060 0.039
Level 2 qualification X
apprenticeship
0.091 0.028
Total Effect 0.151 0.067
Level 3 qualification 0.155 0.074
Level 3 qualification X
apprenticeship
0.074 0.023
Total Effect 0.229 0.097
53. 52
an intermediate apprenticeship increases by 7% and increases by 10% if an advanced
apprenticeship is obtained.
Overall, the AGE can be seen to be successful in setting out to achieve its aims and
objectives by addressing some of the main causes of youth unemployment in the UK
which can be empirically backed up to an extent, but the target audience of the policy
is those with previous work experience and a wealth of qualifications which leaves
many young, less qualified, less employable young people in danger of not being able
to enter the programme.
4.5.3 Work Experience Programmes
Youth’s face barriers to entry in labour market due to lack of experience so this must
be targeted by UK policies such as the Work Experience Programme. The inability for
youths to enter the labour market can be backed up by the data in Appendix 4 which
stated how “the mismatch in the labour market between employers and young people
is that they lack general, practical work experience”
As outlined previously by (Jackson and Rowe, 2012) in the literature review, the work
experience programme was aimed at providing 250,000 work experience programmes
targeted at 18-24 year olds claiming JSA.
Initially, this seemed like an appropriate policy because it helped target potentially the
main cause of youth unemployment in the UK; lack of work experience acting as a
barrier for youths into the labour market. However, upon closer analysis by it
appeared that the government had been far too ambitious with its target of 250,000
because the job centre became under so much pressure to deliver this large number of
54. 53
placements that it sacrificed quality over quantity and sourced a “huge proportion” in
the retail sector, which although was satisfying the targets but did not guarantee a
useful experience to enable youths to find future employment. (House of Commons,
2012)
Furthermore, there is also much debate as to the impact of the scheme on young
people’s employment prospects. An analysis of the first 1,300 participants found that
51% had come off benefits 13 weeks after starting the placement; a figure which the
Trades Union Congress didn’t expect to be too different for non-participants in the
scheme.
However, a more recent analysis by the DWP found that the impact of the scheme on
the likelihood of receiving benefits compared to if they had not participated was -6%,
as illustrated in Figure 7.
Figure 7
Through the analysis of this graph it can be safely concluded that the policy can be
seen as effective in addressing the issue of reducing the number of youth’s on JSA,
55. 54
who ultimately contribute to the unemployment level.
After 16 weeks of the programme, 46% are off benefits who participated compared to
the 40% of comparable non-participants. 35% are recorded as being in employment
compared to 27% of non-participants so although the impact of the scheme isn’t
greatly significant, there is still clearly a positive net effect on those who participate in
the Work Experience programme.
Conclusively, the work experience policy should be targeted at those who stand to
benefit from it the most; those with little existing qualifications as without careful
monitoring by the government, work experience may be counter-productive for
youths with already strong employment prospects.
Reliability of Sources
During the analysis of both causes and policies, secondary data has been used from
the Department for Work and Pensions, Department for Business Innovation and
Skills and the House of Commons. All these sources are government funded and run
and the validity of them should all be held in high-esteem. The issue would be that
perhaps they would sometimes publish bias data towards making the youth
unemployment figure look smaller than it actually is and publishing results that would
enhance the effectiveness of the aforementioned policies.
However, due to the nature of the information published, it would not appear that they
have been bias because analysis of the policies through the government information
has led them to look like they have had an effect on the unemployment figure but not
a substantial enough effect to question the integrity of the data.
56. 55
Chapter 5 - Conclusion
5.1 Conclusion of Causes
With reference back to the aims and objectives of this investigation, the different
causes of youth unemployment have been addressed and analysed through both
primary and secondary data to decide what the underlying cause is behind the issue in
the UK.
Firstly, the data gathered that showed how 75% of respondents were poorly prepared
for work after education and this was backed up by a statement in Appendix 4 which
also demonstrated that young people lack the ‘soft skills’ required for employment,
this shows that it is a key cause of unemployment found in this investigation.
In answer to the research question, it can therefore be concluded that the government
is not addressing this issue as there is a distinct lack of any policy intervention
primarily targeting the preparation of youths for employment once out of education.
It is clear that many young people are not being equipped with the skills to progress
into further education or the world of work; something that needs to be addressed
from a young age.
The current education system and skills being taught within it are not relevant to
current labour market conditions and these needs to be addressed. Findings from the
data illustrated a lack of demand for current young people’s labour; however the
government has addressed this issue via the Wage Incentives policy which has helped
increase the demand for young labour. Although this can only be seen as a temporary
fix in a long-term structural problem.
It can also be concluded that the government is addressing the issue of young people
57. 56
lacking work experience which is preventing them entering the labour market through
the work experience programme. Findings from Appendix 4 and secondary data
illustrated the need for practical work experience when applying for jobs so the
importance of that policy is key to this investigation.
A key cause found was the extended time young people spent in transitional
unemployment, findings showed how the lack of clear pathways and guidance once
out of school left many young people NEET for over a year and becoming increasing
difficult to employ. It is absolutely essential that post-education options are improved
which is where the government has attempted to address the issue through the
Apprenticeship Grant for Employers to encourage the employment of young staff.
Between 2012/2013 almost 75% of apprenticeships were accounted for by those 25+
years old and this has to change.
There were was no evidence of the minimum wage or high wage expectations having
any effect on youth unemployment in the data, these arguments have been verified
empirically so both causes can be dismissed.
5.2 Conclusion of Policies
The Wage Incentives scheme has been critically evaluated and can be concluded that
although it appears to have had a positive effect on employer’s perceptions towards
young people as 33% are more likely to now recruit a young, unemployed person
however only 9% created an extra vacancy due to the scheme.
Findings show that 71% of participants showed a positive attitude towards the scheme
and the government have attempted to address the issue of demand-deficient
58. 57
unemployment through subsidising the cost of young labour however it would appear
that the policy only recruited under 5,000 recruits which is 49,000 short of its target
meaning that its actual reduction in the youth unemployment rate was 12%. The
scheme may have had positive effects on the attitudes and action of employers;
statistically speaking it hasn’t done enough to target the problem.
The Apprenticeship Grant for Employers scheme was aimed at another two main
causes of youth unemployment which was the increasing the employability of young
people in the labour market and preparing young people for work after education but
the policy failed to provide apprenticeships for those who needed them the most,
instead it recruited already employable youths and neglected the 1 in 3 poorly
qualified youths who constituted a significant portion of the unemployed. It achieved
just over 50% of its target apprenticeships but increased employability by 10% for
those who participated. It conclusively had positive effects but was targeted at the
wrong audience.
Work Experience Programmes was arguably the most successful policy as it attacked
the main cause of youth unemployment found in this investigation which was lack of
practical work experience before finding a job. Although many of the placements
lacked quality and were arguably created to fill the over-ambitious 250,000 spaces
promised by the government, it still had positive effects on increasing the chances of
employment by 35% after the placement had finished.
The UK has experienced a constant decrease in youth unemployment by around
60,000 per year since the policies were initiated so they can be classed as a sort of
success, however it is far away from their target figure and those who need help the
most.
59. 58
Finally, implementing crisis-response policies such as the AGE, Work Experience and
Wage Incentives is simply not enough nor is purely reforming the education system.
Stronger links between education policy and labour market policy is essential if the
government wishes to fully address the issue, particularly focusing on those who need
assistance the most. The UK needs guarantees of quality vocational training and real,
quality work experience that prevents young people becoming inactive.
How well is the UK government addressing the issue of youth unemployment? As it
stands, it is fighting a forest fire with a water pistol.
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SAMPLE QUESTIONNAIRE – APPENDIX 1
Youth Unemployment: How well is the UK government addressing this issue?
The purpose of this research project is to determine the reasons for such chronic youth
unemployment currently being experienced in the UK. The information you give will
be used as part of an investigation into whether the UK government is correctly
addressing the issue with its policies targeting youth unemployment. The timing of
this questionnaire should take approximately 5 minutes. If you would prefer not to
participate then thank you for your time and you need not complete the questionnaire.
If you are happy to participate then can you please answer the questions as accurately
as possible. All information given will be treated confidentially.
___________________________________________________________________
1. Are you male/ female? _______________________
2. What is your age (18+)? _______________________
3. Please indicate the highest educational qualification you have?
GCSE
A-Level
Degree or above
4. One a scale of 1-4, how well prepared for work were you after leaving education? (4
being the most prepared)
_______________________
5. What is your first year salary expectation after University? (if applicable)
£ 10 000 – 15 000
£ 15 000 – 20 000
£ 20 000 – 25 000
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£ 25 000 – 30 000
6. Would you say there is currently a demand for your particular skill set in the jobs
market? Try and give as much detail as possible
7. Are you currently in employment?
___________(If no, please answer 9….If yes, please answer
8)
8. Is it the type of employment you expect/think your skills set are suited to?
9. If you had to give one reason for being currently unemployed, what would it be?
Please give details.
66. 65
SAMPLE Participation Consent Form – Appendix 2
Reference Number -
Title of Project - Youth Unemployment; how well is the UK government
addressing the issue?
Name of Researcher - Tim Mogford
___________________________________________________________________
Participant to complete this section: Please tick each box.
1. I confirm that I have read and understand the information sheet
for the above study. I have had the opportunity to consider the information,
ask questions and have had these answered satisfactorily.
2. I understand that my participation is voluntary and that I am free to
withdraw at any time, without giving any reason.
3. I agree to take part in the above study.
Signature of Participant _________________________________ Date
___________________
Signature of person taking consent_________________________ Date
__________________
67. 66
Participant Information Sheet – Appendix 3
Youth Unemployment; How well is the UK government addressing the issue?
Project Summary
The purpose of this research is to establish why there is such a major issue with youth
unemployment in the UK currently and whether the policies that the UK government
are implementing are targeting the causes. Your participation will enable the
collection of information to be studied and analysed to decide whether these policies
are effective in solving the problem. It will all be undertaken as part of a study at
Cardiff Metropolitan University.
Why have you been asked to participate?
You have been asked to participate because you fit the segment of the population that
is required for this study, as the definition of “youth” in my study is between the ages
of 18-24 so you have been selected for that purpose. Furthermore, you may have
recently graduated and consequently in employment or seeking employment. If the
latter is the case, then information will be required from you regarding why you think
you have been unable to find a job and also discussing your expectations once you
had left university. The questionnaire will take approximately 5 minutes to complete.
Your participation requires the answering of a few small open and closed questions
and is completely voluntary; you may withdraw at any time.
Project Risks
The research involves the completion of a questionnaire which will be documented
for later analysis. I am not seeking to collect any sensitive data on you; the study is
only concerned with your job expectations and employment status post-university. I
do not feel that there are any significant risks associated with this study but if you do
feel at any time that I have asked an inappropriate question(s) then you may withdraw
from the study and your decision will be respected to the utmost.
How we protect your privacy?
All the information provided will be held in full confidence. Careful steps have been
taken to ensure that any information you may provide in the questionnaire will in no
way be directly linked to your personal details. Your details, such as consent
68. 67
signature, will be held in a secure location different to your questionnaire answers to
maximise privacy. Once the study has been completed, all research data will be
destroyed permanently and any of your personal information will be destroyed
accordingly.
YOU WILL BE OFFERED A COPY OF THIS INFORMATION SHEET TO
KEEP FOR YOURSELF
If any further information is required about this project, please contact:
Tim Mogford, Cardiff Metropolitan University, Tel: +44 (0)29 2041 6138
email - ST10001364@cardiffmet.ac.uk
69. 68
INTERVIEW – Appendix 4
The purpose of this research project is to determine the reasons for such chronic youth
unemployment currently being experienced in the UK. The information you give will
be used as part of an investigation into whether the UK government is correctly
addressing the issue with its policies targeting youth unemployment. If you would
prefer not to participate then thank you for your time and you need not complete this
interview. If you are happy to participate then can you answer the questions as
accurately as possible. All information given will be treated confidentially. This
interview should take approximately 5 minutes.
___________________________________________________________________
1. What is your role in the organisation and how long have you worked here?
My role is area manager of the Jobcentre plus based in Cardiff city centre.
2. Firstly, an open question to try and gain as much background information as
possible, in your opinion why do you think there is such a current mismatch in
the jobs market between employers and employees? With specific reference to
16-24 year olds if possible?
From my experience, it appears that the current mis-match in the youth labour
market can be blamed on the lack of work experience that youths have when
looking for work. In ever increasingly difficult job market conditions, those
applying for even low-level jobs now can be older with more experience so
employers generally hire the older workers who tend to be more reliable and have
had potential experience in that industry before.
3. Do you feel that jobseekers (18-24) are coming in well prepared for
employment?
A lot of the young people who come here do generally have good
qualifications and some with very good CV’s but we do see our fair share of
youngsters who have been out of employment since they left school and have
70. 69
found it very difficult to not only find a job but hold down a job once in
employment.
4. Do they have they have the right sets of skills required to find a job? What
about soft skills? (E.g. Attitude)
Many of them lack soft skills such as general dedication and commitment. We
see time and time again youngsters missing simple appointments with the
Jobcentre when it’s sometimes their only task of the week. How do they expect
to be employed when they can’t attend one meeting a week?
5. Do you think the ever rising minimum wage can be to blame for the youth
unemployment problem?
There is a case for the minimum wage causing increasing youth
unemployment but in my opinion I don’t feel it has had much of an effect.
Although it would appear that a minimum wage increases the cost of labour
for businesses, it was put in place to protect youngsters being discriminated
against when it comes to being paid. If it wasn’t in place, there would be just
as much controversy surrounding young people being underpaid.
6. Do you think that young jobseekers expectations are too high?
No I don’t, many of the young jobseekers are quite down to earth about their
employment prospects and most will take whatever is given to them but there
are obvious exceptions such as some with university degrees who sometimes
aren’t willing to even apply for low-level jobs in customer service, retail etc
but the threat of taking away their JSA soon fixes that problem.
7. What types of jobs are 20+ (recent graduates) year olds looking for?
They tend to inquire mainly about graduate schemes and how we can help
them but many of these company’s just require an online application and
rarely use the Job centre to advertise their roles.
71. 70
7TH
March 2014
Letter to Organisation – Appendix 5
Dear Sir/Madam,
I am a third year undergraduate student in Cardiff Met University and
am currently undertaking some primary research on youth unemployment in the UK
between 1992 and 2013 and how effective current government policies are at reducing
this issue and how effective they may have been in the past.
I would very much like to arrange a meeting with someone in the Jobcentre plus who
could answer some questions regarding current young people actively seeking
employment. The meeting would not last very long and would just consist of some
short open and closed questions to try and establish why there is such a current
mismatch in the labour market between employers and employees.
It would be extremely beneficial to my dissertation if someone could find the time to
attend the meeting with me and just shed some light on topics such as what types of
jobs are young people looking for at the minute? Are their expectations too high? And
what is your opinion on the minimum wage and its impact on employment levels.
Hope to hear from you soon,
Tim Mogford
Contact Details
If any further information is required about this project, please contact:
Tim Mogford, Cardiff Metropolitan University, Tel: +44 (0)29 2041 6138
email - ST10001364@cardiffmet.ac.uk
72. 71
Appendix 7 – Ethics ApprovalApplication
When undertaking a research or enterprise project, Cardiff Met staff and students are
obliged to complete this form in order that the ethics implications of that project may
be considered.
If the project requires ethics approval from an external agency such as the NHS
or MoD, you will not need to seek additional ethics approval from Cardiff Met. You
should however complete Part One of this form and attach a copy of your NHS
application in order that your School is aware of the project.
The document Guidelines for obtaining ethics approval will help you complete this
form. It is available from the Cardiff Met website.
Once you have completed the form, sign the declaration and forward to your School
Research Ethics Committee.
PLEASE NOTE:
Participant recruitment or data collection must not commence until ethics
approval has been obtained.
PART ONE
Name of applicant: Tim Mogford
Supervisor (if student project): Stephen Bibby
School: School of Management
Student number (if applicable): ST10001364
Programme enrolled on (if applicable): BA Business Economics
Project Title: Youth Unemployment; how effective
is the UK government in addressing
the issue?
Expected Start Date: 01/01/2014
Approximate Duration: 10 weeks
Funding Body (if applicable): Not Applicable
Other researcher(s) working on the project: Not Applicable
Will the study involve NHS patients or
staff?
No
Will the study involve taking samples of
human origin from participants?
No
In no more than 150 words, give a non technical summary of the project
73. 72
The purpose of this research is to establish why there is such a major issue with
youth unemployment in the UK currently and whether the policies that the UK
government are implementing are targeting the causes. Literature will be reviewed
regarding current and past policies to see what has been effective before and
whether it is applicable during this cyclical youth unemployment phase. There will
be a comparison made between the UK and other European countries to see what the
fundamental differences are as well as looking at the UK in the 1990’s during its last
youth unemployment spike. The result of the project will be to determine whether
the UK is doing enough regarding its policies and how effective these policies will
be. Using information from the methodology section regarding what recent
graduates and the Jobcentre’s views are on the situation, and whether the
government are actually targeting the perceived causes.
Does your project fall entirely within one of the following categories:
Paper based, involving only
documents in the public domain
No
Laboratory based, not involving
human participants or human tissue
samples
No
Practice based not involving human
participants (eg curatorial, practice
audit)
No
Compulsory projects in professional
practice (eg Initial Teacher Education)
No
If you have answered YES to any of these questions, no further information
regarding your project is required.
If you have answered NO to all of these questions, you must complete Part 2 of this
form
DECLARATION:
I confirm that this project conforms with the Cardiff Met Research
Governance Framework
Signature of the applicant: Date:
FOR STUDENT PROJECTS ONLY
Name of supervisor: Date:
Signature of supervisor:
74. 73
ResearchEthics Committee use only
Decision reached: Project approved
Project approved in principle
Decision deferred
Project not approved
Project rejected
Project reference number: Click here to enter text.
Name: Click here to enter text. Date: Click here to
enter a date.
Signature:
Details of any conditions upon which approval is dependant:
Click here to enter text.
