Youth unemployment is the top risk to the UK economy, according to the Bank of England’s chief economist, who warned on Monday that young people face “double jeopardy” in the wake of the coronavirus pandemic.
“Risk number one macro economically from my perspective would be those issues of unemployment, and youth unemployment in particular,” Andy Haldane told MPs on the Treasury select committee.
“I think they pose the single-biggest threat to a sharp recovery in the economy, and that’s why I very much welcomed the announcements that the chancellor made the other week on that front,” he said.
Jobs were the main theme of chancellor Rishi Sunak’s summer statement, and there was a particular focus on young job seekers.
Young people entering the labour market will be able to benefit from the new Kickstart Scheme, a £2bn ($2.5bn) programme aimed at getting 16-to-24 year olds into work placements, while further cash has been set aside for traineeships and encouraging firms to take on apprentices.
“It’s clear already that the unemployment burden has fallen disproportionately on those who that are young, those that have fewer skills, and those that are paid the least. In some ways, those households and people are facing what elsewhere I’ve called ‘double jeopardy’ right now,” Haldane warned.
“They are most exposed to the health risk, because they are least likely to be able to work from home. And they are also facing the largest financial risk, because they tend to work in jobs in sectors that have been disproportionately affected by the crisis.”
Haldane cautioned that there were “limits” to what central banks could do to tackle youth unemployment.
“We can keep the cost of borrowing at incredibly low levels, and that we will do. That, by itself though, will not solve the sorts of issues — sectoral issues, skills issues, unemployment issues especially among the young — that you mention.”
It was fiscal policy, which is conducted by governments rather than central banks, that could tackle those issues, Haldane said.
Past downturns show that young people are the most disadvantaged in job-hunting during a recession, with their limited experience thwarting their chances as vacancy levels plummet.
But Sunak warned last week that unemployment was likely to rise across the country regardless of age group. He announced additional measure to “protect, support and create” jobs across the country.
The chancellor allocated an additional £1bn for the Department of Work and Pensions to help get people who have been made redundant back to work.
Funding will go towards a doubling of the number of work coaches in jobs centres.