Britain’s youngsters are increasingly out of work

The British did not have much to boast about in the 2010s. Wages and growth were stagnant; the country’s international reputation lay in tatters after the Brexit vote in 2016. But Britons could at least console themselves on one matter. Whereas many young continental Europeans were languishing on street corners—youth unemployment in Spain peaked at 56%—British school-leavers were largely spared. At the post-crash nadir, only one in five young people was unemployed.

That crumb of comfort was taken away last summer, when youth unemployment in Britain overtook the EU average for the first time this millennium. The rate has climbed from 9% in 2022 to 16% now (see chart 1). This has swelled the ranks of the nearly 1m people aged 16-24 who are not in education, employment or training, or NEETs in the jargon. Pat McFadden, the work and pensions secretary, announced plans to tackle the issue on March 16th. His flagship policy involves paying employers a £3,000 ($4,000) bung to hire young people who have been on benefits for six months.

Mr McFadden’s commitment is welcome but his solutions are inadequate. Two distinct problems drive worklessness and they need different remedies. The first is the more recent surge in youth unemployment—people actively seeking work but unable to find it. The culprit is a shortage of jobs. Britain’s economy is weak, with low consumer spending hitting retail and hospitality hard. Young people are especially exposed: over 40% of employed 16- to 24-year-olds work in those industries, against just 16% of over-25s. When shops and pubs started to shed staff, the young were the ones who suffered.

The government has made matters worse. In a victory for siloed thinking, Labour simultaneously increased payroll taxes, strengthened employment rights and concentrated minimum-wage increases on young people. The minimum wage for a 21-year-old will reach £12.71 an hour in April 2026, up from £8.20 in April 2020. While each measure might have been manageable alone, their combined effect has throttled employer demand.

The arithmetic is stark. A 21-year-old working three days a week on minimum wage will cost an employer £17,500 a year in April 2026, over £4,000 more than in April 2020 in real terms. Against that backdrop, the government’s proposed subsidy, estimated to help a narrow subgroup of 150,000 NEETs, can be only a partial fix.

More worrying is the second driver of high worklessness: the large inactive population of youngsters who are not even seeking a job. Nearly three-fifths of NEETs are economically inactive. Historically a major reason for this was women looking after children. But as teenage motherhood plummeted in recent decades, there has been a remarkable drop-off in people not working because they were caring for kids. This success has been thwarted by a countervailing trend: young Britons are getting sicker. The share of inactive NEETs citing ill health has nearly tripled over the past two decades (see chart 2). Today almost half report a disability, with mental-health conditions and learning difficulties to the fore.

Getting this group into work needs more than a £3,000 bribe to employers. The government knows it and has appointed Alan Milburn, a former minister, to examine what more can be done. Mr Milburn will need to tackle the benefits system, where disabled people are paid more than others but are often left with little support to find jobs. He must also probe what the government can do about the underlying causes of poor mental health among teenagers, whether poor sleep, social isolation or too much screen time.

But many of the things putting youngsters with health conditions off work afflict all teenagers. The system fails them on many fronts. Britain’s post-school landscape is a maze of poorly understood technical qualifications. Local authorities often lose track of where youngsters go, letting many NEETs slip through the net. Apprenticeship opportunities are increasingly taken up by older people: over half of starts are now by people aged above 25. This has left young people with fewer good options.

The complexity of what lies behind Britain’s youth worklessness means that the government cannot solve it with one NEET trick. It must act on all fronts. It should ease up on minimum-wage rises for young people, at least until employers’ demand for workers recovers. It needs to reform both the benefits and education systems so that nobody falls through the gaps. And it should double down on its recent efforts to focus apprenticeships on young people, for whom such schemes achieve the most good. Do all that, and Britons might have something to boast about once more to their continental cousins.■