Leader: Chronic joblessness has become the new normal across Europe

At home and across the continent, governments are failing to address the causes of youth unemployment.

The greatest achievement of the Keynesian governments that ruled postwar Europe was to banish the spectre of mass unemployment from a continent haunted by the memory of the 1930s. Any return to pre-war austerity was viewed as both politically and economically unthinkable. But today, chronic joblessness has become the new normal across Europe. Five years since the present crisis began, EU unemployment stands at 10.9 per cent (26.4 million) and youth unemployment at 23.2 per cent (5.5 million). As Danny Dorling writes on page 22, “Even where the youth unemployment rate is lowest, in Germany, unemployment accounts for one young adult in every 13; in Austria it is one in 11 and in the Netherlands one in nine. What we now call low youth unemployment rates were once the highest we had ever seen.”
 
In the UK, while a modest economic recovery is finally under way after three years of stagnation, youth joblessness rose by 15,000 in the most recent quarter to a dismal 973,000 (21.4 per cent). Of this total, 274,000 have been unemployed for over a year. The cost to the economy in higher benefit payments, lost tax revenues and wasted capacity runs into billions. For the individuals affected, the consequences are no less grave. History shows that those who suffer joblessness early in their lives are often permanently scarred, with the long-term unemployed working two months a year less, on average, and earning between £1,800 and £3,300 a year less after the age of 25.
 
While in opposition, the Conservatives rightly rebuked Labour for its failure significantly to reduce youth joblessness, which, even in the boom years, never fell below 12 per cent and began to rise as early as 2004. Yet in government they have made a bad problem worse. Upon entering office, the coalition cancelled the Future Jobs Fund (only for a subsequent Department for Work and Pensions study to show that it had been an unequivocal success, with a net benefit to the economy of £7,750 per participant) and abolished the Education Maintenance Allowance, which had ensured that thousands who might otherwise have joined the dole queue remained in full-time education. After youth unemployment rose to a record high of more than a million, the government responded by introducing the £1bn Youth Contract, promising employers wage subsidies worth £2,275 to take on 160,000 18-to-24- year-olds over the next three years. Since the programme was launched in June 2012, just 4,690 jobs have been created.
 
In the short term, a compulsory jobs guarantee – such as that promised by Labour –would help address the cyclical crisis, but in the long term more ambitious structural reform is required. This should not mean, as some on the right suggest, stricter curbs on immigration and cuts to pay and benefits for young people. A study by the National Institute of Economic and Social Research found that, between 2004 and 2010, youth unemployment among domestic workers rose fastest in areas with low numbers of migrants, and economists have consistently failed to find any evidence that the minimum wage deters employers from taking on the young.
 
Instead, the coalition needs to focus on improving the range and quality of apprenticeships available to the 50 per cent of teenagers who do not go to university, a group that was woefully neglected by the Blair and Brown governments. At present, just one in three large companies and one in ten small companies offer apprenticeships. Despite evidence that investment in skills is the greatest inoculation against unemployment, the number of youth apprenticeships fell last year. To reverse this trend, the government, with its fondness for outsourcing, could begin by making the offer of apprenticeships a condition of receiving public-sector contracts.
 
As the economy stutters back into life, prompting hyperbolic talk of “boom Britain”, the greatest danger is that those left behind by the recovery will be forgotten. If the country is ever to return to something close to prosperity, we cannot afford to continue to waste the potential of so many of our young.
Unemployed young people on the streets of Athens. Photograph: Getty Images.

This article first appeared in the 19 August 2013 issue of the New Statesman, Why aren’t young people working

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Theresa May defies the right by maintaining 0.7% aid pledge

The Prime Minister offers rare continuity with David Cameron but vows to re-examine how the money is spent. 

From the moment Theresa May became Prime Minister, there was speculation that she would abandon the UK's 0.7 per cent aid pledge. She appointed Priti Patel, a previous opponent of the target, as International Development Secretary and repeatedly refused to extend the commitment beyond this parliament. When an early general election was called, the assumption was that 0.7 per cent would not make the manifesto.

But at a campaign event in her Maidenhead constituency, May announced that it would. "Let’s be clear – the 0.7 per cent commitment remains, and will remain," she said in response to a question from the Daily Telegraph's Kate McCann. But she added: "What we need to do, though, is to look at how that money will be spent, and make sure that we are able to spend that money in the most effective way." May has left open the possibility that the UK could abandon the OECD definition of aid and potentially reclassify defence spending for this purpose.

Yet by maintaining the 0.7 per cent pledge, May has faced down her party's right and title such as the Sun and the Daily Mail. On grammar schools, climate change and Brexit, Tory MPs have cheered the Prime Minister's stances but she has now upheld a key component of David Cameron's legacy. George Osborne was one of the first to praise May's decision, tweeting: "Recommitment to 0.7% aid target very welcome. Morally right, strengthens UK influence & was key to creating modern compassionate Conservatives".

A Conservative aide told me that the announcement reflected May's personal commitment to international development, pointing to her recent speech to International Development staff. 

But another Cameron-era target - the state pension "triple lock" - appears less secure. Asked whether the government would continue to raise pensions every year, May pointed to the Tories' record, rather than making any future commitment. The triple lock, which ensures pensions rise in line with average earnings, CPI inflation or by 2.5 per cent (whichever is highest), has long been regarded by some Conservatives as unaffordable. 

Meanwhile, Philip Hammond has hinted that the Tories' "tax lock", which bars increases in income tax, VAT and National Insurance, could be similarly dropped. He said: "I’m a Conservative. I have no ideological desire to to raise taxes. But we need to manage the economy sensibly and sustainably. We need to get the fiscal accounts back into shape.

"It was self evidently clear that the commitments that were made in the 2015 manifesto did and do today constrain the ability to manage the economy flexibly."

May's short speech to workers at a GlaxoSmithKline factory was most notable for her emphasis that "the result is not certain" (the same message delivered by Jeremy Corbyn yesterday). As I reported on Wednesday, the Tories fear that the belief that Labour cannot win could reduce their lead as voters conclude there is no need to turn out. 

George Eaton is political editor of the New Statesman.

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