Corona crisis could increase youth unemployment by 600,000 this year – and scar young people’s prospects for far longer

The current economic crisis risks pushing an additional 600,000 18-24-year-olds into unemployment in the coming year – and causing long-term damage to their pay and job prospects unless major new support is provided ­– according to new Resolution Foundation research published today (Wednesday). 

With evidence from previous recessions showing that young people who’ve just left full-time education are hit harder than other age groups, the report assesses the labour market prospects of the ‘corona class of 2020’.

The report calls on policy makers to improve these poor job prospects, and help young people avoid them, by spending longer in education. Recommendations include a job guarantee to reduce youth unemployment and flexible arrangements to help young people stay on in education for a further six months.

Class of 2020, supported by Nuffield Foundation, finds that around 800,000 18-24-year-olds are expected to leave education this year, when – according to the Office for Budget Responsibility (OBR) scenario – unemployment is forecast to rise by 6 percentage points. This would be twice as large as the increase following the financial crisis.

The report finds that with education leavers most exposed to this surge in unemployment, and young people most affected by job losses so far, an additional 600,000 18-24-year-olds (including those who left education in recent years) risk being unemployed this year.

Furthermore, Class of 2020 finds that those leaving education this year are likely to face reduced pay and employment prospects even after the economy has recovered.

The report finds that the employment rates of graduates entering the labour market during this crisis are projected to be 13 per cent lower, three years down the line, than they would have been absent the crisis. Employment rates for mid- and low-skilled workers risk falling even further (by 27 per cent and 37 per cent respectively).

Those who are working are likely to face reduced pay too. The report finds that, one year after leaving education, the pay of graduates is projected to be 7 per cent lower, and 9 per cent and 19 per cent lower for mid- and low-skilled workers.

The nature of the current crisis poses particular challenges for young people. Over the past decade, one-in-three non-graduates, and one-in-five graduates, have got their first employment experience after education in sectors such as retail, hospitality, travel and leisure.

However, there are currently huge questions over work for existing furloughed staff in these sectors, let alone for those wanting to join the workforce.

Given the acute challenges facing the corona class of 2020, the report says that the Government should prioritise support in two areas: helping more young people to stay in education for longer, and targeting job support at those who are entering the labour market for the first time.

The report highlights the huge benefits of staying in education for another year. It finds that a mid-skilled young person could halve the risk of reduced employment by leaving education in 2021, rather than 2020, even before the benefits of additional learning are included.

To support staying in education, the Resolution Foundation says the Government should introduce new maintenance support for young people across further and higher education.

Special arrangements should also be made to fund short courses at university and college, so it is easier for people to stay on for up to six months to boost their education and skills.

For those leaving education into the labour market, the elevated risks of long periods of unemployment should be tackled with job guarantees for young people – a policy that was proven to be effective in the financial crisis – and by focusing apprenticeship opportunities on young workers.

Kathleen Henehan, Research and Policy Analyst at the Resolution Foundation, said:

“The 800,000 young people set to leave education this year amid an unprecedented economic crisis are facing huge immediate unemployment risks, and longer-term damage to their careers.

“The ‘corona class of 2020’ could face years of reduced pay and limited job prospects, long after the current economic storm has passed, unless the Government provides additional support – and fast.

“A new maintenance support scheme could help thousands stay in education and build-up their skills, while those entering the labour market for the first time should be supported by a Job Guarantee offering critical employment experience.”

Alex Beer, Welfare Programme Head at the Nuffield Foundation said:

“The effects of the COVID-19 crisis are exacerbating existing inequalities and we are pleased to be funding this important analysis which highlights risks to young people’s job prospects.

“It is important that the Government, higher education providers and employers act now to limit the long-term effects of the economic downturn, by creating opportunities for those entering work and training and supporting those who choose to stay in education.”