This blog post was co-authored with Richard Dorsett and first appeared on the NIESR blog.
In recent years there has been growing concern about the number of young people failing to make a successful transition from education into employment. Increasingly, this appears to be a structural, rather than cyclical, problem. We see evidence of this from that fact that although youth unemployment in the UK was falling in the late 1990s and early 2000s, it started rising again as early as 2004, long before the general downturn in the economy.
This is an important issue, not least because making a successful transition from education into the labour market is important for young people’s long-term economic success; periods of unemployment during these early years may have long-term scarring effects on later employment on earnings prospects.
Today we publish research, building on work funded by the Department of Business Innovation and Skills, that considers this important question of how young people’s transitions out of compulsory education have changed as the labour market around them has evolved. Our report analyses the transitions of four cohorts of young people, those born in 1958, 1970, 1980, and 1990.
The most obvious change over this period is hardly surprisingly. The dominant type of transition has gone from being a direct transition between school and work to a transition involving at least two additional years of education beyond that which is compulsory. The former type of transition was followed by over 90% in our earliest cohort, but the size of the group has declined to under 4 out of 10 in the most recent; meanwhile those following a transition including additional education have grown from 4% to over half. This reflects the changing nature of the labour market, in which there are now fewer jobs available that do not require additional education.
However, another more worrying trend has accompanied this change. An increasing proportion of young people experience a transition that we characterise as “potential cause for concern”; the proportion seeing a transition of this type has risen from 4% in the earliest cohort to 12% in the most recent one. These transitions are marked by extended periods out of the labour market or moving in and out of work. As noted above, previous evidence warns that experiences of this type have worrying long term consequences.
Young women and those who are from non-white ethnic backgrounds have gone from being more likely to experience a transition likely to affect their long-term economic outcomes negatively than young men and those from non-white ethnic backgrounds, to being less likely over the period we analyse. By contrast, coming from an advantaged background has remained a strong predictor of avoiding a transition of this type across all four cohorts. It seems likely that the changes described stem from the higher likelihood of staying in education for young women and those from non-white ethnic backgrounds, leaving them better placed, on average, to avoid a difficult transition into the labour market.
Our research has highlighted important changes that have occurred in the labour market over the past 30 years. These are long-term trends that economic recovery will not necessarily alter. There remains a clear role for labour market policies to help smooth this transition, such as discussed in previous NIESR research on this issue.