A person who spends just six months not in employment, education, or training in their youth will – by their forties – lose up to £50,000 in earnings, says Jenny North
The start of a new year is a time of optimism and resolutions. This was never more true than in 2000 when we welcomed in the new millennium. At the time, there was great media attention on the first babies to be born that year as well as commentary on what they might expect from their lives in the 21st century.
But as our report Make NEETs history reveals, the millennium kids were born at a moment when structural problems with the United Kingdom’s youth labour market were beginning to show. The number of young people NEETs – not in employment, education, or training – climbed throughout the last decade, despite the booming economy. The recession drove the numbers higher still and currently there are around one million people aged 16 and 24 who are classified as NEETs.
The fact that young people are failing to make the transition from school to work or into further education is not a side effect of the crash of 2008. It long pre-dates it and there is good reason to believe it will outlive the recovery. Therefore, we are calling on British government to take radical action in 2014 to make youth unemployment a thing of the past.
So why 2014? It is the year the 604,400 children born in the year 2000 turn 14 – an important year for them as they make choices about the GCSEs they will study – which can have a profound impact on their transition from education into work and, in turn, their risk of becoming a NEET. Our report reveals a damning set of statistics, showing that one in five of the millennium kids are at risk of becoming a NEET between the ages of 16 and 24.
The starkest effect of spending time as a NEET is the wage scarring effect of youth unemployment. A person who spends just six months as a NEET in their youth will, by their forties, lose up to £50,000 in earnings compared with non-graduate peers; and up to £225,000 compared with graduate peers who have never been a NEET. In total, our millennium kids stand to lose a shocking £6.4bn in wages.
It is time that Britain developed a vision for its youth labour market, one which recognises that our NEET problem is structural and long-term – not just a hangover from the recession. That is why our recommendations are structural and encourage policy-makers and school leaders to ensure young people leave schools with the qualifications, skills and opportunities they need to succeed in today’s labour market.
We are calling for a Secretary of State for School-To-Work Transitions – someone who will stop the 68 per cent of young people who are not going to university from falling between the cracks of Whitehall departments, and who can build and deliver a youth labour market where the proportion of young people starting work each year is growing, not shrinking. We are calling for the pupil premium to be paid by results, not all upfront; schools should not be rewarded if they are failing to deliver results. Educational institutions should be paid a portion of their top-up funding on a per-pupil basis if they are able to demonstrate that 18 months after they leave school, pupils at whom the pupil premium is aimed have secured improved educational attainment, training or employment. This approach could significantly decrease the likelihood of a young person spending that damaging period as a NEET.
Finally, we’re calling for Ofsted to build school-to-work transitions into its inspection framework. The roots of NEET status are grounded, in part, within what happens at school. To change this, schools need to be accountable for the work-readiness of their pupils. We need Ofsted to assess what measures schools use to ensure that they are helping young people to avoid becoming a NEET. By building this into the assessment framework, we can bind employability to a school’s offer.
It is not too late for our millennium kids. If we are to reverse the youth unemployment trend, policy must not only focus on those who are already NEETs but also on what experiences, qualifications and skills our 14, 15 and 16-year-olds require while at school to prepare them for employment. The changes we are calling for would have an increasingly positive effect over time. Although importantly, they would focus minds in Whitehall and in schools on the fact that when it comes to NEETs prevention is better than cure. Let us make 2014 the year we act. Let us make NEETs history.
Jenny North is director of policy and strategy at Impetus – The Private Equity Foundation