Bank Officials Link Policy Changes To Rising Youth Jobless

Recent figures show that youth unemployment in the UK has surged to an 11-year high of 16.1%. This rate is in stark contrast to the 5.2% unemployment level reported for the general workforce, which is itself at a five-year peak.

The disparity highlights the disproportionate impact of labour market changes on younger individuals, raising questions about the effectiveness and consequences of current employment policies. Bank of England officials have voiced concerns about the implications for young people entering the workforce.

According to the Office for National Statistics, extended periods out of work at the start of a career can have long-lasting effects on individual prospects and economic productivity.

Policymakers voice growing concerns

Huw Pill, chief economist at the Bank of England, told the Commons Treasury Select Committee that policy changes have had a 'particular effect' on younger workers. He noted that new entrants to the labour market, including his own daughter, face immediate challenges in securing employment.

Pill added, 'Having your first job is an important part of being able to enter the labour market and be productive. The more difficult that is, the more long-lasting the effects can be.' Governor Andrew Bailey also commented on the situation, describing the current youth jobless rate as 'high', and pointing out its rapid increase relative to other age groups.

Both officials expressed concerns that this pattern could result in persistent negative outcomes, including potential impacts on mental health and long-term employability.

National Insurance and minimum wage increases examined

Changes to employer National Insurance contributions in the previous year have been identified as a key factor by Bank officials. The adjustments included both an increase in contribution rates and a reduction in the salary threshold at which employers must begin paying, raising costs for firms, particularly when hiring part-time or lower-paid staff.

Additionally, minimum wages for younger workers have seen substantial increases. Recent adjustments have brought the pay rates for under-21s significantly closer to those of older employees.

According to Huw Pill, these changes have affected employability for younger applicants, stating, 'Some of the changes have been particularly acute for that part of the labour market.'

Impact on employer behaviour and youth prospects

Policymakers noted that the combination of higher employer costs and increased minimum pay has influenced hiring practices. Bailey pointed out that some firms have stopped expanding their workforce, stating,

'Rather than an uptick in redundancies, some firms are just not hiring.' This trend may contribute to fewer opportunities for young people, who often rely on entry-level roles to begin their careers.

Pill highlighted that these economic shifts are compounded by other factors, such as the increasing role of artificial intelligence in replacing entry-level positions. As a result, the barriers to labour market entry have intensified for young jobseekers across the country.

Wider economic context and labour market resilience

Commentary from Alan Taylor, a member of the Monetary Policy Committee, reflected on the broader context. Taylor stated that the economy had been 'quite resilient' despite high interest rates, avoiding large spikes in unemployment seen in previous decades.

However, he added that signs of resilience have weakened in the past year. Earlier this month, the Bank of England revised its economic outlook, predicting that overall growth would slow to 0.9% in the current year, with general unemployment expected to reach 5.3%.

Some external analysts are more pessimistic; JP Morgan economists have suggested unemployment could rise as high as 6% by the year�s end.

Retail job cuts add to gloomy outlook

Recent survey data from the Confederation of British Industry show that retailers are cutting jobs at the fastest rate since 2021. Rising operational costs and tepid consumer demand have prompted high street businesses to reduce hiring and investment.

Adverse weather has also been cited as a factor deterring shoppers and affecting sales. Figures provided by the jobs website Adzuna revealed a sharp fall in graduate roles, with listings down 45% over the past year.

This has led some observers to warn of a potential 'graduate jobs crisis', further complicating the outlook for young people seeking employment in a challenging environment.