Matthew Tinsley is Economics & Social Policy Research Fellow at Policy Exchange.
The government finally launched its £1billion Youth Contract earlier this month in an attempt to help young unemployed people back into work. Today, the latest set of job market statistics will be published and yet again the focus will be on the plight of younger workers.
Employment prospects for young people are clearly important and helping them into work must be a key priority for any government. However, there remains a question over the impact this persistent focus might have had on unemployed people of other ages. Are we helping young people at the expense of older generations?
Many of the arguments used to back a strong focus of support on younger workers rely on evidence that young people suffer significant scars from periods of worklessness. The argument being that, as young people spend time unemployed their future employment and wage prospects deteriorate. Unemployment today causes long-term damage to their future prospects.
While the size, permanence and nature of these scars might be arguable, that they exist is well documented in academic literature. Unfortunately, little equivalent evidence exists on the scars felt by older, unemployed people. To fill that gap, Policy Exchange will soon be publishing a report that compares the scars felt by workers of different ages.
At the most basic level, an older worker – someone aged 50 or over – who is unemployed today has only a 40% chance of finding work within a year. Compare this to 18-24 year olds who have more than a 60% chance of finding a job after a year and you can begin to see the problem. The scarring effects of unemployment are also greatest for older workers. Spending 6 months out of work a few years ago decreases the chance of a person over the age of 50 being employed today by around 8%, nearly double the effect felt by 18 to 30 year olds.
The same is true when we look at future wages of those who do find work. Whilst we find no statistically significant effect of unemployment on future wages for young people, older people see their wages dramatically affected by time spent out of work. The higher cost to future wages for older workers should not be surprising. Financial and family commitments mean that the urgency to get back into work is greater for older jobseekers, who have to lower their sights in order to find work.
These increased unemployment scars will also be unsurprising to advisors in jobcentres across the country. They are simply a sign of the unique barriers to work experienced by older workers. Of the varied obstacles that exist, age discrimination is one of the largest, as is the problem of having their skills and experience based in sectors that no longer hold good employment prospects.
All of this means that the costs of unemployment for older workers can be extremely high. For some, it will mean that they never work again. But the costs are not just borne by the individual. The costs to the economy from the loss of valuable skills and experience are also large.
The older workforce is also playing an increasing role in the UK's workforce. This is driven by demographic trends and an increasing need for people to work for longer. Government policy also has a role. The State Pension Age has risen and is likely to rise even further. This means that the costs of failing to support our older workforce will only grow as these trends continue. It also makes it more important than ever to understand the ways in which the older workforce need support and for government policy to help to address the significant barriers to work that they face.
But this sort of targeted support has not been forthcoming. Indeed, in the name of supporting young people, some have even argued that older workers act as a barrier to youth employment. This is nonsense. The strength of the UK economy depends on using available skills and experience effectively. Instead of pitting different ages of workers against each other we should recognise that the success of any age group is good for the UK economy and for the prospects of the rest of the workforce.
The obstacles facing jobseekers are not solely determined by age but by a wide range of factors. A failure to recognise this in future policy decisions will lead to serious consequences for a large number of people who most desperately need to work.