Recession burden falls on young shoulders
Published 05/06/2009 | 13:14
The deepest scars of the current downturn are in danger of being borne by a generation for which recession is a new and painful experience after more than a decade of growth.
The latest stark official figures show around one in six of the UK's 18 to 24-year-olds - 676,000 - were unemployed in the three months to March.
Despite recent signs of "green shoots", the unemployment rate among young people has just hit 16.1% - more than twice that of the wider population.
It is set to rise even further still as hundreds of thousands of anxious graduates pour into the toughest jobs market in years this summer.
Many blue-chip companies are still recruiting top talent in the downturn, but opportunities in hard-hit sectors such as banking are scarcer and firms are reporting huge demand for their graduate programmes.
The situation is expected to be so dire this year that the Government has produced a guide urging graduates to consider abandoning the UK to seek jobs abroad or volunteer.
While examination of the human cost of recession and the moves to tackle it has largely focused on falling house prices and the blows to pensioners' savings income from record low interest rates, youth unemployment has received less attention.
But in a climate of redundancies where overall unemployment is expected to top three million, younger people are more vulnerable as they are cheaper to cut and often have less favourable employment rights than older colleagues.
With widespread recruitment freezes also making the barriers to entry in the jobs market much harder to mount, labour economists have also warned of wider social problems in the years ahead from the phenomenon.
David Blanchflower, until last month a member of the Bank of England's Monetary Policy Committee, recently told MPs: "I have been particularly concerned about focusing on a group of people who turn out to be the group that is particularly hit, and that is the young."
"A spell of unemployment when you are young has a long-lasting effect through the rest of your life," he added.
The problem will almost certainly get worse before it gets better. In the wake of the milder recession in the early 1990s, unemployment among 18 to 24-year-olds peaked in early 1993 at 781,000 or 17.8%.
The burden on the state is substantial at a time when the "automatic stabilisers" of unemployment benefits kick in.
According to a report by the Prince's Trust last week, more than 450,000 under-25s in the UK are currently claiming Jobseeker's Allowance - up by more than 80% in the past year at a cost to the taxpayer of more than £23 million a week - well over £1 billion a year.
It highlights particularly high claimant rates among young people in Merthyr Tydfil and Blaenau Gwent, South Wales and Wansbeck, Northumberland.
Chancellor Alistair Darling announced plans to avoid a generation of young people "abandoned to a future on the scrapheap" in his recent Budget through a guaranteed job, training or work placement for all 18 to 24-year-olds who have been on the dole for 12 months.
But the Government's own figures for so-called 'Neets' - those not in employment, education or training - showed a rise to 820,000 in the third quarter of 2008, more than 70,000 above a year earlier. Including 16 and 17-year-olds, the number of Neets was close to one million between July and September last year.
A summer of discontent meanwhile lies ahead for this year's graduates, pushing the figures even higher as this year's crop of almost 300,000 leave their studies and struggle for the lifeboats in a stormy job market.
And in contrast with previous recessions, the average student will also leave with a debt of almost £20,000, the National Union of Students says.
According to the Association of Graduate Recruiters (AGR), graduate vacancies are set to fall for first time since 2003, with a projected 5.4% decrease this year.
Its initial survey showed banks were braced for a massive 28% cut in vacancies. There are some brighter spots - with the engineering sector expected to see jobs rise by more than 8% - but fewer candidates to fill them, as graduates for many years have shunned less fashionable sectors to chase the wealth of the City.
The AGR added starting salaries are set to be frozen for the first time in the history of its survey, with this year's average stuck at £25,000. There will be cuts in banking and financial services of up to 8% in some cases, it predicted.
All this awaits for a crop of graduates who are the first to have paid tuition fees for the full three years of their degrees.
Blue-chip firms are reporting huge interest in their graduate schemes. For example, a British Airways spokesman said the company had received 1,700 applications for 25 places. British Gas parent Centrica said it had received interest from more than 5,000 people for its own scheme, which takes on between 50 and 60 graduates a year.
Retailer Sainsbury's added that it had managed to fill 93% of vacancies by the end of March, two months earlier than last year, thanks to higher quality applicants.
A spokesman said: "One thing our graduate team has noticed is that we have actually seen an increase in the number of students choosing to start their careers immediately after graduating, rather than taking gap years."
The actual corporate impact of rising youth unemployment on companies' results themselves is less clear. Nightclub operator Luminar said its younger, largely mortgage-free, clientele are more selective in their choice of spending, but still favour big nights out, while online fashion retailer ASOS said younger fashion is so far proving more resilient.
But the problems faced by young people are legion - apart from the short-term woes of the jobs market. According to the Department for Work and Pensions, just 14% of people below the age of 34 are making any provision at all for their retirement.
Despite falling house prices, the property market also looks as much of a struggle today as it ever did in the runaway years of the boom.
Although the average age of first time buyers has edged down to 28, the deposit needed is now 25% - the biggest since the Council of Mortgage Lenders' records began in 1974. Numbers buying their first property fell to a record low of 30,600 in the first quarter of 2009 - around two-thirds below the peak of the boom.
Ray Boulger, senior technical manager at John Charcol, added: "First time buyers have traditional problems with a small deposit, which is not good in this market."
Even as the job market improves, young people will also face a rising tax bill for the best part of a decade - as the next Government attempts to put the public finances back on an even keel and cuts spending to tackle a £700 billion mountain of debt to be piled up during the next five years.
Getting off the dole queue may be one thing - but today's youth are likely to end up paying the price for a boom they never really shared in.