25 February 2015

How can businesses help the young long-term unemployed back to work?

The job crisis facing the world’s young people is showing no signs of improvement. According to a report from the United Nationals International Labour Organisations (ILO) the global youth unemployment rate rose to a record 13.1% in 2013 – up from 12.9% in 2012 and 11.6% in 2007.

There are 74.5 million young people aged 15-24 out of work – an increase of more than 700,000 from the previous year.

The United Nationals International Labour Organisations (ILO) estimates that the youth unemployment rate will rise to 13.2% this year, as more young people become frustrated with a lack of job prospects and drop out of the labour market.

The problem is worldwide, with the Middle East having the highest youth employment rate at 27.2%. And the ILO says that the global situation will worsen until at least 2018.

Ireland’s spending on unemployment benefits and welfare costs increased from 0.9% of GDP in 2007 to 2.6% in 2011 according to the ILO.
Impact on mental health
Recent research from the Prince’s Trust found that 40% of jobless young people in the UK have experienced mental illness as a direct result of unemployment The report found that long-term unemployed young people are more than twice as likely to have been prescribed anti-depressants as their employed peers, and one in three have had suicidal thoughts.

Impact on governments
Long periods of unemployment not only cause personal issues for the young people themselves, they also increase the costs faced by governments due to more welfare payments. The ACEVO Commission estimates this costs tax payers £2.9 billion per year. Over the next ten years the total cost of youth unemployment could be as much as £28 billion in the UK. In Europe the figure has been estimated at over €150 billion or 1.2% of GDP, according to the European Monitoring Centre on Change (EMCC).

Impact on the economy
Large numbers of economically inactive young people means:

  • Governments have to pay out more in social security and other benefits
  • Governments receive less in tax receipts
  • Businesses suffer as unemployed young people have less to spend on goods and services
  • Governments may also see an increase in healthcare spending given the link between unemployment and mental health issues.

Long-term on wages and future job prospects
Further academic research (based mainly on US statistics) shows that people who spend a lot of time unemployed at the beginning of their careers are more likely to have lower wages and higher odds of being unemployed in the future. (see IPPR paper on Youth Unemployment in Europe). It is forecast that unemployment can cost young people up to 20% cut in wages, which can last up to 20 years.

Impact on future generations
Studies have shown that those who experience unemployment early in their life are more likely to be out of work again in later years. Moreover, they are likely to earn less over their working life than are their peers who find jobs more easily.
An International Monetary Fund report on global youth unemployment refers to the long-term impact of joblessness as having “scarring effects” – harmful impacts on an individuals’ health and general wellbeing and future earning potential. Potential employers can also believe that people who have been out of work for a long period of time will not be productive. The longer a person is unemployed, the longer the scarring effects are likely to last.

Corporate responsibility crucial
Amid concerns that the long-term unemployed could be locked out of the labour market for good, this problem is not just one that should be tackled by governments but employers too. But what can firms do to help the young long-term unemployed back into work?

A report by the Work Foundation says that employers have “a fundamental contribution” to make in tackling youth unemployment. They can provide job opportunities for young people as well as helping them to prepare for work in other ways.

The report authors make a number of recommendations for helping employers to provide practical day-to-day skills. They suggest that employers should:

  • Join school governing boards to oversee careers advice;
  • Invest in apprenticeships and traineeships, and;
  • Guarantee part-time jobs for the long-term unemployed.

The report also calls on the Government to create accreditation schemes for employers offering jobs to young people, and also provide tax incentives to employers who hire the long-term unemployed.
It also suggests that local business networks should share good practice and positive experiences around employing young people, as too often employers have negative perceptions about hiring young people.

Work experience and internships
The UK Commission for Employment and Skills (UKCES) states that there are several benefits to businesses offering work experience programmes to young people who have just finished their education. These include:

  • Short-term flexible resource. Employers get a short-term resource by offering a work experience placement, this could include offering flexible working hours.
  • High quality recruits. Work experience recruits are already familiar with the role and require less training.
  • Improved staff morale and skills. Existing employees can re-familiarise themselves with text book knowledge, as well as feel good about helping young people acquire transferrable skill sets in the workforce.
  • Improved company reputation. By being seen to be reaching out into the community, companies can improve their local, national or international reputation.

The UKCES report on youth unemployment in an international context calls on industry to make a “real commitment” to engage with young people to ensure that “no-one is left behind”. It concludes that educators and employers need to work together to create “stable and meaningful vocational pathways for young people” that have a “direct line of sight to the labour market”.

Policy Network, a lead international thinktank and political network, recommends that countries develop “positive and active re-integration strategies” for young people who become NEET (not in education, employment or training). It says that the rising levels of the global NEET demographic “cannot be ignored” and should be addressed collaboratively by policymakers, educators and employers.

For further information on how employers can engage with young people see:
Work Experience Placements That Work
Corporate Social Responsibility


Sign up to our blog updates