The pandemic has created a youth unemployment ticking time bomb and we all have a role to play. ISE is championing government support for employers. Tristram Hooley, ISE’s Chief Research Officer, considers what else can be done?

We all remember that fateful week in March when the UK was locked down. News of the pandemic meant that we all knew that something was going to happen, but when the government announced lockdown it was tighter than most of us expected. It quickly became apparent that we were moving into an unprecedented period. But, what none of us could have know was how long it was going to last.

Four months later and we are only just coming out of lockdown. What is more, as the local lockdown in Leicester shows, the end of lockdown is not going to be smooth or quick.

Implications for the student labour market

The government quickly realised that lockdown was going to have a major impact on employment. With businesses closed and no one going out, there was a danger of the numbers of unemployed people quickly swelling. Thankfully they moved quickly and decisively to introduce the furlough scheme and then to extend it when it became apparent that the lockdown was going to go on longer than expected.

Despite this over three million new people have started claiming universal credit since the start of lockdown, suggesting that unemployment is growing rapidly. Meanwhile analysis by the Institute of Employment Studies tells us that there are less than half the number of jobs being advertised at the moment as were available this time last year.

ISE surveys show the early impact on the student labour market. Overall employers look set to hire 23% less students this year than they were planning prior to lockdown. As lockdown drags on and the likelihood of long-term recession increases, the idea of a quick bounceback looks less likely. Student hiring has contracted substantially this year, and there is a good chance that it will contract even further next year.

If you are one of the 800,000 young people who is leaving school, college or university this year, these figures are pretty worrying. Not only is student hiring down, but the wider labour market is also depressed. As the furlough scheme begins to wind down from August, many businesses will be making staff redundant. Students will increasingly be competing with a glut of recently redundant workers with more experience than them.

The situation is going to be tough. The lockdown is already hardening into global recession. This is going to be bad for everyone, but it is likely to hit young people hardest. But there are still many possible economic futures and what we, our businesses and the government does will help to determine the path that the economy takes.

We need government support

The furlough scheme has helped the UK to avoid a serious economic collapse, but it will come to an end. This doesn’t mean that government can walk away from the labour market altogether. There is going to be strong need for No.10 to work in partnership with business until the crisis is over.

ISE has just unveiled its plan for the reconstruction of the student labour market, setting out three ways in which government can work with employers:

1. Increase employers’ capacity to hire young people

Many employers will face pressure to slow down or stop entry-level recruitment, to slash training and development and reduce the quality of jobs. Decisions to stop hiring or training workers will disproportionately impact young people. A race to the bottom is likely to exacerbate the recession and locking young people out of the labour market will reduce the chance of recovery. Government should seek to support employers to continue to recruit and develop young people by:

• Cutting national insurance contributions for all staff under 24 for a year.
• Covering the costs of the 20% off-the-job (study) time for all new apprentices under 24.
• Freeing employers up to spend their apprenticeship levy on the real costs of apprenticeships such as travel and management.
• Providing a small incentive for employers who offer work experience.

2. Underpin the functioning of the labour market

The recession is likely to be too big for employers to handle alone, even with government support. Government must step in and ensure the effective functioning of the labour market throughout the crisis. It should try to avoid mass unemployment and use the public purse to provide opportunities for young people rather than leaving them to languish on benefits by:

• Appointing an independent labour market monitor
• Offering an opportunity guarantee for all young people who have been unemployed for six months or more.
• Targeting additional support to areas and industries that are particularly hard hit by the crisis.

3. Support young people

Young people are facing the worst employment market for a generation. It is important that government provides a strong infrastructure for support to help them to successfully transition into work by:

• Supporting educators by providing resources for tutoring and support.
• Reviewing the fairness of the examination system in the current context.
• Providing access to career guidance and wider employment support.
• Investing in vocational education and providing young people with a maintenance allowance if they choose this route.
• Providing funding and support for young entrepreneurs.

Read our plan in full. Get involved by encouraging your organisation to support these policies by contacting ISE and through any direct links with policymakers.