An Unstable Labour Base

At this exact point in time, the global job market is the most dynamic and unpredictable than it has ever been. The same will probably remain true for every moment henceforth, with no respite. This is especially true for the Information Technology (IT) sector, with new innovations coming up every day, the rise of Artificial Intelligence and Machine Learning, to name a few. And since the IT sector touches virtually every other sector, the ripples can be felt throughout — automation, cutting edge tech etc.

Being an employee today is drastically different from being an employee two decades ago. In today’s job market, you never stop being a student. The moment you stop learning and re-skilling, you’re out of a job. The population boom has also contributed to the pressure of being up-to-date and relevant in the job market. This situation has lately been causing problems in the UK, and there are disturbing statistics to back it up.

Based on data from sources including the Office of National Statistics, overall unemployment in the UK over the better part of the past decade has been consistently decreasing, but the youth unemployment (unemployment in the age group of 18–25) has been consistently increasing. Currently, the total unemployment in UK is around 5% and the youth unemployment is around 14%. From this, we could infer that unemployment among people over the age of 25 has been rapidly and exponentially decreasing.

Commenting on this trend, a concerned Chief Executive of the Employment Related Services Authority (ESRA), Kirsty McHugh, said “You are still three times more likely to be unemployed if you are under 25, than the rest of the general population.” This is the largest unemployment gap between young adults and adults in two decades. According to her, one of the contributing factors has been that for the first time in decades, the Government has no dedicated youth employment programme in place, and that the topic of youth unemployment is yet to pick up significant steam in mainstream British politics.

Furthermore, Government statistics also shows that the number of 16–18 year olds Not in Education, Employment, or Training (NEET) has risen significantly (more than 2%) from 2016 to 2017. These figures suggest that the 16–18 years age group is being neglected when it comes to career advice and training opportunities. This also shows that school and Universities have a long way to go in terms of making their graduates employable.

For one, this goes against Jacob Mincer’s human capital model. The human capital model was of the first and still one of the most important works in labour economics. He said that if there is a spell of unemployment in a person’s history, this decreases the probability of the person getting a job in the future as well. This might be because an unemployment spell without a reasonable explanation looks sketchy to employers. Mincer also said that lower your age, better your chances of getting hired. Clearly this is not happening, and it is a problem because not only is this a deviation from real-world trends, it’s also a deviation from economic theory.

This disparity seems to be occurring not because of any secret set of abilities you acquire as you get older, but because of basic job-skill inadequacy among young adults today. It is as if they are left to fend for themselves in the job market in the absence of any hand holding, which ends badly both for them and the economy. Some other reasons for this could be that older people are better equipped, experienced and more driven to adapt to a changing job market. Or it is possible that unemployment stings more for someone over 25 than a recent University graduate — both in terms of personal financial obligations and social status.

This huge rise in youth unemployment in the UK became more and more prominent after the sub-prime crisis in 2008–09. This is an interesting observation since another reason for this situation might lie in the concept of Unemployment Hysteresis. Hysteresis for unemployment means that after a recession, a sizeable chunk of the previously employed but currently unemployed workforce accepts a lower standard of living, and don’t try too hard to revert to their previously higher standard of living. At this stage, it is also more socially acceptable to be unemployed. The future generations of these families more often than not follow in the footsteps of their predecessors. The youth of the families in the UK affected in the 2008–09 crisis might have gone down this road as well. This is a vicious cycle which could keep continuing long into the future, unless broken.

This has severe consequences. This means that setting aside the much-debated problem of employee burnout, we have a totally new problem — Employees finding it difficult to start their engines for even the first time. Labour economics began with Jacob Mincer, but it’s never going to go out of fashion. In fact, as the job market keeps getting more and more complex, the importance of labour economics will only increase. However, even in the short term, this is not a problem that can be solved without socio-political repercussions. But for the sake of the British and the world economy, let’s hope that this issue is sorted out by a UK government in the near future.

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