It will be no surprise to anyone that this week’s Employment Outlook Report, produced by the Paris-based Organisation for Economic Co-operation and Development, spells out more doom and gloom in an already ailing labour market.
Commenting on the report, Holger Schmieding, chief economist at Berenberg Bank, memorably remarked that rising unemployment across the OECD and the Eurozone was “already baked into the cake”, with young people and the low-skilled hit hardest.
Young people who spend significant periods out of work are likely to suffer reduced earnings and long term unemployment for life— the so-called ‘scarring effect’. Business loses out on a generation of young employees, and as any baker knows, leaving a key ingredient out of the cake means the results are flat and sour.
Here in the UK, youth unemployment rates have been rising since 2005. The recession is only partly to blame: the UK Commission for Employment and Skills (UKCES) has found that structural factors like word of mouth recruitment practices and a decline in entry level jobs are locking young people out of work.
Employers place huge emphasis on experience when taking on new staff, even for entry level roles, but just one in four offer work experience opportunities. And with opportunities for Saturday jobs on the decline, young people are trapped in a catch 22: they need experience to get a job, but a job to get experience.
More good jobs for young people must be a priority for any government wanting to improve our economic outlook. But there are sound business reasons why this needs to be a priority for employers, too.
Young people bring creativity, drive, digital skills and new ideas to business. When employers do take on young people, they are overwhelming satisfied with their readiness to work, their literacy and their attitudes.
So how can businesses get more young people on board?
If we’re to make a real and lasting change, we need to look at hard-wiring good jobs for young people into the labour market.
Changing the way money flows around the skills and employment system would be a good start. Take apprenticeships. They are a proven method of getting young people with the right skills into the workforce, yet currently only around 15 per cent of employers offer them.
I believe that the public funding for apprenticeships should be directed straight to employers as opposed to colleges and training providers. This should be done via the pay-as-you-earn tax system and be conditional on the apprenticeship meeting quality standards including decent pay and conditions, high quality training and the opportunity to progress. This is a fundamental difference that gives employers the purchasing power to ensure that apprenticeships are right for them.
It’s not a magic wand, though, and more needs to be done to ensure other young people don’t get left behind. Young people are undoubtedly cost effective to recruit and train. But even if recruitment is out of the question, there are other ways to nurture young talent. Work experience, internships, mentoring, partnerships with local schools and colleges - these are things that even the smallest employer can get involved with. Indeed, the UK Commission for Employment and Skills is calling on all employers to have a “youth policy”. This is not a prescriptive approach or HR protocol, but simply a recognition of the role they will play in helping young people into work.
Ultimately, one thing is obvious. The government and policy makers alone cannot solve the youth unemployment challenge. That lies in the hands of employers. But government and other stakeholders can work together to create the conditions for business to create more and better jobs – to bake a better cake.