It’s early morning, and you decide to check your correspondence. There’s one new notification. Your heart flutters with excitement because nestled amongst spam emails and newsletters you’ve been meaning to unsubscribe from, is a message from your potential future employer.
‘Hello,’ it starts, ‘we are sorry for the disappointment this may cause, but we have decided not to progress your application …’
With a sigh, you close your computer before you can even finish reading.
This is the reality for many of Britain’s youth. Nearly one million young people are NEETs — not in employment, education or training. But, contrary to a popular stereotype, this is not a result of generational laziness.
NIC Nightmare
The largest contributor to youth unemployment, which has dominated headlines over the past few months, are the alterations made to employers’ National Insurance contributions (NICs) during the October Budget. As of April, employers have had to pay 15 per cent on salaries above £5,000, as opposed to 13.8 per cent on salaries above £9,100 previously. This is a dramatic increase. The decision, which came about as a result of an alleged ‘black hole’ in public finances, is predicted to raise £20 billion a year. However, it has also triggered the worst downturn in Britain’s jobs market since Covid.
Wages are one of the most significant costs for any business, but rising employers’ NICs have increased the amount firms must spend on each employee, essentially making it more expensive to hire new people. For large corporations, who can use their profits to absorb these rising costs, this means scaling back on plans to expand and pulling job vacancies. But for smaller businesses, the Chancellor’s decision spells disaster. Kerry Larcher, who has owned a hair salon in East London for three decades, has experienced a 29 per cent increase in NIC costs, forcing her to pause taking on new apprentices and even consider making some staff redundant.
‘I’m having to drastically reduce my overall employee numbers to cut costs just to stay alive,’ she told the BBC.
Job security is under threat, wage growth has slumped, and employment vacancies have plummeted as a direct result of NIC increases. The number of permanent job placements available has already fallen each month for two and a half years, but Reeves’ ‘tax raid’ on businesses has exacerbated this issue, particularly in job havens like the capital, which account for 80 per cent of the local employee decline over the past year.
With fewer employment opportunities to go around, more candidates will be fighting over the small number of vacancies that are still available. In this highly competitive environment, young applicants with less experience will suffer, struggling to make it past the interview stage. Additionally, when employers like Larcher are forced to lay off workers to keep their business afloat, it is young people, in entry-level or part-time roles, whose jobs will be axed first.
Erosion of Graduate Premium
Another key component behind rising youth unemployment is the erosion of the graduate premium. Once, degrees were the key to accessing senior jobs and significantly higher earnings. Now, the graduate premium has eroded so severely that studies suggest a high proportion of graduates would have been better off financially if they had not gone to university.
Currently, graduates are struggling to find employment, even in supermarkets. NIC increases are partly to blame for this. But clearly, a lot of degrees are not equipping young people with the skills employers are looking for. These ‘Mickey Mouse’ courses, which include the arts, criminology, geography, journalism and religious studies, are considered to be the worst value for money, as they lack the prestige and significant transferable skills that would improve a graduate’s resume.
‘In many cases, young people have been sent off to universities for worthless degrees, which have produced nothing for them at all,’ says journalist Peter Hitchens.
A study by Forbes found that less than a third of employers believe that graduates have the necessary skills to thrive in the real world. Furthermore, consistent underfunding for employment support post-education means that even students who are studying subjects with high returns will not be taught crucial skills, such as how to write a CV or maximise their performance during an interview. Despite their qualifications, more graduates are winding up unemployed because they are not adequately prepared for life after university, something that Gaby Hinsliff calls a ‘great betrayal’ of Britain’s youth.
Scarring Effect
We cannot ignore the impact that rejection has on young people’s confidence. With every unsuccessful application, their patience and self-esteem become that much thinner. Eventually, when searching for new roles, young people who have suffered previous rejection begin questioning whether they are good enough for the job, or whether they can bring themselves to apply for another vacancy, just to be turned down again. They will put themselves forward for fewer roles and, in turn, have a slimmer chance of successfully finding employment. Research shows that ‘psychological discouragement,’ caused by repeated rejections from potential employers, has a ‘scarring’ effect on both individuals and the economy.
While almost 400,000 of Britain’s NEETs are currently looking for a job, nearly 600,000 are not, suggesting that many have simply lost hope of finding one. This does not mean young people are soft. Gen Z have lived through the financial crisis, Covid lockdowns, the cost-of-living crisis and our current housing deficit. Economic uncertainty has been the backdrop of their whole lives. And now that it is time to enter the world of work, they have been greeted with a shrinking job market. Is it any wonder, then, that a sense of hopelessness has pervaded an entire generation of job seekers?
Youth unemployment creates a vicious cycle of self-doubt that leads to further unemployment. However, there is arguably no way to ever fully eradicate it. It is our economy’s incurable disease and our government’s cross to bear.
Young people are being let down by a hostile job market. Employment Minister Alison McGovern claims that improving job centres and bringing about the supposed ‘Youth Guarantee’ will solve all our problems. But the rising number of NEETs should be a warning sign that unless something seriously changes within our economy, the potential of future generations will never be unlocked.
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