Tag: apprenticeships

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Youth unemployment and the post-pandemic peak

Unemployment in the UK reached its highest level in nearly five years at the close of 2025, according to new data from the Office for National Statistics. Figures show the unemployment rate rising to 5.2% in the three months to December, up slightly from 5.1% in the preceding quarter.

This marks the highest unemployment level since the pandemic, coinciding with a slowdown in wage growth and increasing speculation that interest rates may soon be lowered.

Youth unemployment

However, young people are taking the heaviest hit, with unemployment climbing to 16.1% among those aged 16 to 24. (Click here for a PowerPoint of the chart.) This is the highest level in more than a decade, including the spike seen during the pandemic. Economists largely attribute this trend to rising payroll costs, which they say are discouraging employers from offering entry level roles. Long-term youth unemployment is also worsening, with recent data showing that a growing share of unemployed young people have been out of work for over 12 months, highlighting deeper and more persistent barriers to re entry.

At the same time, although wages for those in work continue to grow faster than prices, the pace of wage growth is steadily slowing, adding further pressure on young people already facing the most challenging labour market conditions in years. According to ONS data, the annual growth in average weekly wages, excluding bonuses, slowed to 4.2% in the last three months of 2025. Private-sector wage growth eased to 3.4%, bringing it closer to the 3.25% rate that the Bank of England believes is consistent with its 2% inflation target.

The impact on interest rates

The Bank of England is watching the slowdown in the UK jobs market closely as it gauges when next to lower its interest rates. In February 2026, the Monetary Policy Committee voted to hold the base rate (Bank Rate) at 3.75%. However, the committee voted with a majority of 5-4, with four members voting to reduce the rate to 3.5%.

The Bank of England uses interest rates as a policy tool to control inflation, the rate at which general prices rise in the economy. The current rate of inflation of 3.4% is above the Bank of England’s target of 2%.

In addition to the split vote, some economists believe that the easing in pay growth makes it likely that Bank Rate will be cut at the next meeting on 19th March. Paul Dales, chief UK economist at Capital Economics, said the fall in wage growth ‘supports the idea that the Bank of England has at least a couple more interest rate cuts in its locker’. A decrease in interest rates will be welcomed by investors.

What is behind the increase in youth unemployment?

Young people always tend to be the most impacted by a downturn in hiring. But economists warned that the rise in youth unemployment was a sign that employers are being more cautious about hiring younger workers. Openings for low-skilled entry-level roles and for new graduates have dropped steeply. Many businesses have slowed hiring due to an increase in costs because of measures in Chancellor Rachel Reeves’s last two Budgets. Businesses claim that the combination of increases in employer National Insurance contributions and a rise in the minimum wage mean they are facing higher payroll costs.

Peter Dixon at the National Institute for Economic and Social Research said, ‘there are indications that younger workers in particular are being priced out of the market’, supporting the explanation that raising the minimum wage might also be disincentivising the hiring of young people.

The ONS reported that the retail and wholesale sector saw the biggest fall in the number of workers on company payrolls, with 65,000 jobs lost in the sector since January last year. Meanwhile, health and social work saw the biggest rise in payrolled workers of any sector, adding 39,000 jobs in the year to January. Financial analyst at AJ Bell, Danni Hewson, suggested that those leaving the retail sector were now entering healthcare, with both sectors employing large numbers of women. However, she also warned that a recent surge in investment in artificial intelligence could hit young people the hardest as it could result ‘in a scarcity of entry level posts’ (see the blog Will AI make the world less equal?.

Job vacancies

Job vacancy data across the UK indicates a significant cooling in labour demand. According to the latest ONS figures, vacancies fell from 736,000 in the three months to December to 726,000 in January, signalling continued weakening in hiring activity. According to the job search site, Adzuna, the number of vacant positions has dropped to its lowest level in five years, with job listings sliding 3% in January to 695,000, marking the first time vacancies have dipped below 700,000 since early 2021. Notably, graduate opportunities have fallen below 10,000 for the first time since Adzuna started tracking in 2016, underscoring the deepening challenges for new entrants to the workforce.

This downward trend in job openings extends patterns seen throughout late 2025, with vacancies down 16% from the previous January and nearly 20% lower than six months earlier. This coincides with a rise in unemployment to 5.2%, slower wage growth, and a growing concern that young people are disproportionately affected as hiring slows. As opportunities shrink, competition has intensified: there are now 2.4 jobseekers per vacancy, up from 2.27 in December, with the most sought-after roles including warehouse staff, healthcare support workers, lorry drivers, labourers and kitchen assistants.

How can the situation be improved?

Pat McFadden, Secretary for Work and Pensions, has commissioned the former Health Secretary Alan Milburn to lead a review into the causes of rising youth inactivity. There will be a particular focus on mental health issues that are pushing young people out of education and employment. This initiative responds to the growing number of young people not in education, employment, or training (NEETs), many of whom are now classified as inactive rather than unemployed. Some receive health-related benefits and are therefore not required to look for work, while others fall outside the benefits system entirely, making them harder to identify and support.

However, Pat McFadden said there was ‘more to do to get people into jobs’, and that tackling youth unemployment is a key government priority. He added that Labour was working to make it easier for young people to find and secure an apprenticeship, supported by a wider package of reforms. The reforms announced by McFadden include creating 50,000 additional apprenticeships. The government will also expand support for 350,000 people to move into work or training in sectors such as care and construction, with the risk of losing benefits if they refuse. They also include the provision of 55,000 state-funded, six-month work placements for the long-term unemployed.

While these measures are widely seen as necessary, campaign groups argue the government should go further by extending its ‘Youth Guarantee’ to cover all young people up to age 24, rather than ending at 22.

However, as Alice Martin, head of research at Lancaster University’s Work Foundation, notes, initiatives designed to help people return to the labour market have limited impact ‘if the jobs aren’t out there.’ Even graduates are finding that opportunities are scarce, and for those leaving education with few qualifications, the situation is even more challenging. Sectors such as retail, once a reliable source of first jobs, have been in long-term structural decline, a trend that is now accelerating and further narrowing the pathways available to young people entering the workforce.

The situation has prompted government discussions about postponing the planned rise in the minimum wage for 18- to 20-year-olds to address employers’ concerns and encourage more youth employment. However, on Wednesday, Keir Starmer stressed that Labour remains committed to its manifesto pledge to align the pay of younger workers with that of older employees. The Prime Minister confirmed that the promise to ‘remove the discriminatory age bands’ in the minimum wage system still stands, and that the increase scheduled for April will proceed as planned.

Starmer said ‘We’ve made commitments to young people in our manifesto, and we will keep to those commitments, including the commitment that we would make sure that the living wage and minimum wage will go up this April, which we can absolutely confirm to you will happen.’

Unemployment outlook

Multiple economic forecasts predict that unemployment will to continue to rise in 2026. The most frequently cited projection places the 2026 unemployment rate around 5.2%–5.5%. However, some economists expect businesses to regain confidence and begin hiring again later in the year, supporting a gradual stabilisation in job markets.

Yet risks remain significant: if that recovery fails to materialise, unemployment could edge toward 6% by the end of the year, with forecasts from JP Morgan suggesting unemployment may reach 2 million in the first half as firms delay recruitment following the recent rise in the employers’ National Insurance rate. This environment is proving especially challenging for young people, with early career opportunities among the first to disappear and delayed entry into work potentially limiting long-term earnings and progression.

As hiring becomes more cautious and entry-level roles tighten, the path into the labour market risks becoming narrower, underscoring the need for policies and conditions that support both employer confidence and opportunities for new entrants.

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Questions

  1. Explain why youth unemployment has risen more sharply than overall unemployment at the end of 2025.
  2. What are the costs to the individual of being unemployed?
  3. What are the wider non-monetary costs to society?
  4. Explain the main financial costs to the wider economy of a rising unemployment rate.
  5. Assess the likely impact of slowing wage growth on the Bank of England’s decision about whether or not to cut interest rates in early 2026.
  6. Discuss how falling job vacancies, particularly graduate and entry‑level opportunities, might affect long‑term labour market outcomes for young people.
  7. Evaluate the effectiveness of government policies such as expanding apprenticeships, increasing work placements, and reviewing youth inactivity in reducing youth unemployment.
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Unlocking happiness: how jobs shape young lives in developing nations

Have you ever wondered how your job affects your happiness? We all know that not all jobs are created equal. Some are awesome, while others … not so much. Well, it turns out that employment status and the type of work you do can have a big impact on how you feel – especially in developing countries where labour markets are usually tighter and switching between jobs can be more difficult.

A recent study by Carmichael, Darko and Vasilakos (2021) uses survey data from Ethiopia, Peru, India and Vietnam to answer this very question. The study found that the quality of work is a big deal when it comes to how young people feel. Not all jobs are ‘good jobs’ that automatically make you feel great. Although your wellbeing is likely to be higher when you’re in employment than when you’re not, there are certain job attributes that can push that ‘employment premium’ up or down. This is especially important to understand in countries like many in sub-Saharan Africa, where there aren’t many formal jobs, and people often end up overqualified for what they do.

What job attributes lead to higher wellbeing?

What then are the job attributes that are correlated with higher levels of wellbeing? The first is money: Okay, we know money can’t buy happiness, but it can certainly make life easier. We were therefore hardly surprised to find a positive and statistically significant association between hourly earnings and wellbeing.

We were also not surprised to find that a ‘poor working environment’ has a strong and highly significant negative effect on wellbeing.

Finally, feeling proud of your work is also found to be a strongly significant determinant of your wellbeing. After all, people tend to excel in things they like doing, which is probably part of the ‘transmission mechanism’ between ‘work pride’ and ‘subjective wellbeing’.

Which one of these attributes did you think had the greatest effect on wellbeing? Let me guess, many of you will say ‘earnings’. But then you would be wrong. Earnings were indeed positively associated with wellbeing and statistically significant at just about the 10% level, whereas work pride was very strongly statistically significant at the 1% level and had an effect on wellbeing that was four times greater than hourly earnings.

Putting yourself in a poor working environment on the other hand would reduce your wellbeing by almost twice as much as the earnings coefficient.

Policy implications

What does all this mean for policy-makers? If we want to make life better for young people in low-income countries, we need to tackle the problems from multiple angles.

First, young people need to be helped to get the skills they need for the job market. This can be done through things like training programmes and apprenticeships. However, not all of these programmes are created equal. Some have great results, and others not so much.

But that’s not the whole story. In many countries, there’s a massive informal job market. It’s a place where people work but often don’t have the rights or protections that formal employees do. So, even if young people get trained, they might not find the ‘good’ jobs they’re hoping for.

Changes also need to be made on a much bigger scale. This often includes decentralising public investment to include rural areas, improving infrastructure, and encouraging private investment. Strengthening labour market rules and social protection can help too, by making sure that work is safe and fair.

In a nutshell, where you work and what kind of work you do can make a big difference to how you feel.

Conclusions

If policy-makers want to help young people in low-income countries, they need both to give them the skills they require and to create better job opportunities. But policy-makers also need to make bigger changes to the way things work, like boosting production and making sure jobs are safe and fair.

In the end, it’s about making life better for young people around the world. Let’s keep working on it!

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Questions

  1. How does the quality of work impact the happiness and wellbeing of young people in low- and middle-income countries (LMICs), and why is this significant in the context of job opportunities in sub-Saharan Africa?
  2. What are some potential solutions and strategies discussed in the article for improving the wellbeing of young people in LMICs, particularly in the context of employment and job opportunities?
  3. Have you ever experienced a job that significantly (positively or negatively) impacted your wellbeing or happiness? Reflect on your experience and how it influenced your overall life satisfaction?
  4. How is AI likely to affect the wellbeing of young professional workers?
  5. How is the pandemic likely to have affected job satisfaction?
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‘A massive confidence boost for the UK economy’

Unemployment figures for the UK have been going in the wrong direction for some time. With consumer expenditure, investment and hence aggregate demand remaining low, job creation has been severely lacking. However, 2 pieces of news have emerged in the last couple of days, which as David Cameron said was ‘a massive confidence boost for the UK economy’. Tesco and Nissan have both announced the creation of thousands of new jobs.

Over the next 2 years, Tesco has said that it will create 20,000 new jobs through store improvement and the opening of new stores. Whilst it is not clear how many will be full-time, part-time or apprenticeship placements, it still represents net job creation. This huge investment represents what many are calling a ‘fight-back’ from Tesco, who issued its first profit warning in 20 years, following weak Christmas trading. That announcement slashed their shares by over £5bn and is perhaps partly responsible for this planned investment.

Despite this good news, criticisms have emerged that the major supermarkets are simply inflating the job creation figures and that the actual number of new jobs will be significantly less than the 20,000 suggested. This follows allegations made towards Asda, who claimed to have created 30,000 jobs. However, evidence from records at Companies House suggests that new job creation by the company was closer to 7,000. Whatever the true figure, it still means new jobs, which can only help UK unemployment data.

In addition to this, Nissan has also announced that it will be creating 2,000 new jobs, as it begins production on a new model at its Sunderland factory. The jobs will be created as part of a £125m investment, including a £9.3m grant from the government. This is especially good news, given the area where many of these jobs will emerge. The North East is a region that has been hit particularly hard by the recession and the grant from the government has come from its regional growth fund. Nissan has said that even in hard economic times, it is possible to sell cars, as long as they are competitively priced. Neither of the plans discussed above will create jobs immediately, but perhaps the key is that it creates confidence, which is a rarity in the UK with the current economic situation. The following articles consider these job creation plans and their wider implications.

Tesco plans to create 20,000 UK jobs over 2 years BBC News (5/3/12)
Tesco to create 20,000 jobs in UK fight-back Telegraph, Jamie Dunkley (6/3/12)
Tesco’s UK boss defends ‘new jobs’ claims Sky News (5/3/12)
Tesco to freshen up with 20,000 new staff Financial Times, Andrea Felsted (5/3/12)
Now Tesco creates 20,000 jobs – with pay Independent (9/5/11)
Nissan to build new car in Sunderland BBC News (6/3/12)
Nissan pledges 2,000 new jobs at North East plant Sky News, Gerard Tubb (6/3/12)
Nissan Invitation compact car set to create 2,000 jobs Telegraph, Roland Gribben and David Millward (6/3/12)
Nissan to create 2,000 new jobs by building compact car in Sunderland Guardian, Dan Milmo(6/3/12)

Questions

  1. Explain the process by which net job creation should provide a boost to the economy.
  2. Will these new jobs have any impact on the government’s budget deficit?
  3. Why is there concern that the supermarkets are inflating the employment creation figures?
  4. What type of unemployment has been created by the recession? Why have certain areas, such as the North East been affected so badly by the recession and austerity measures?
  5. Which factors could have led to Tesco’s weaker trading figures towards then end of 2011? Why did this lead to a £5bn loss in the value of the group’s shares?
  6. Nissan has said that cars can be sold as long as they are competitively priced. To what extent do you think price is the main competitive weapon in the market for cars and in the supermarket industry?