Contribution
There are many ways that we can express it, but none of them are good: youth unemployment is at 15.9%; it is up 10%; it is up 1.5 percentage points; it is up over 100,000 in the last year; it is at a 10-year high—higher than in the covid era.
Let us be clear: this is not economic inactivity we are talking about; it is unemployment. The definition of unemployment is not about who is claiming benefits; it is about having had no income whatever—not having worked for a paid hour—in the reference week. It is about being available for work and actively looking for work. That is the number that has gone up. The increasing number of people who are both studying and seeking to work—for whom, by the way, zero-hours contracts are especially relevant—is a particular issue, and I will come back to that point.
Unemployment overall has gone up, but it is young people who have borne the brunt; the rate of increase has been almost twice as high for young people as it has overall. To be fair, that is usually the case—when there is rising unemployment, it is always young people who feel it first and hardest. Why? Well, as the shadow Secretary of State, my hon. Friend the Member for Faversham and Mid Kent (Helen Whately), said, the first thing that employers do when things look uncertain or difficult is to stop hiring. A hiring freeze is the quickest way to cut down the payroll.
Secondly, if companies have to let people go, I am afraid that redundancy is cheaper when it comes to younger people, so they sometimes deploy a LIFO rule —last in, first out. There is then the secondary effect that the more experienced workers can fill the vacancies. On top of that, we have the situation at the moment whereby sectors that disproportionately employ young people—in shops, restaurants, hotels and throughout retail, hospitality and leisure—have been particularly hard hit by the national insurance and business rates hikes.
I said that youth unemployment usually tends to rise faster and be higher than overall unemployment. That is true, but historically it is not as true in this country as it is in the rest of Europe. There are exceptions—in Germany and the Netherlands, for example—but it is the case in southern Europe. After the crash under the previous Labour Government in 2007-08, there was talk of a lost generation in southern Europe as youth unemployment rates soared so high.
Why should the situation in those countries be different from the situation in countries like ours? There is a fancy economics term for it: insider-outsider theory. That theory basically says that when there are economic troubles in a system that has very heavily regulated labour markets, very high levels of employment protection and the very heavy involvement of trade unions, all the help tends to go to the people in work, and it is those trying to get into work—the outsiders—who suffer as a result. Historically, our country has had more liberalised—although not totally liberalised—labour markets, which has meant that we have not had those problems with youth unemployment to the same extent as some of our near neighbours in Europe, and we have tended to recover more quickly when they do occur.
Right now, we have the historical rarity—I am not sure it is unique, but it is certainly a rarity—that the ratio of youth unemployment to total unemployment in the UK is higher than it is in the EU. That is before we feel all the effects of the Employment Rights Act 2025; I am sure that some effects were there already, but we have yet to feel the full effect. That Act will discourage taking on new workers, especially new untested workers, and that is of course what youth unemployment is.
Let me talk about one aspect of the 2025 Act: zero-hours contracts. These contracts have a special place in Labour mythology, which comes from the time when the last leader of the party, the right hon. Member for Islington North (Jeremy Corbyn), used to bring them up every week at Prime Minister’s questions, saying that they were an epidemic, ripping apart our country. At the time, the Conservatives researched how big a deal zero-hours contracts were, and it turned out that fewer than 3% of workers had a zero-hours contract for their main job. There were others who had one for a second job, including many working as bank staff in the NHS. There were also lots of students on them. It turned out that the average number of hours on a zero-hours contract was 25, and—here’s the bit that nobody could accept—the average job satisfaction of people on a zero-hours contract was higher than it was for workers overall.
Those on the Government Benches have been grimacing a little, but I do not know how many of them know that the proportion of people on zero-hours contracts has gone up since the general election of 2024. They are just a part of our economy. They are also heavily skewed towards young people, such as students working in sectors like hospitality and other seasonal occupations. About 40% of people with a zero-hours contract job are under 25.
I myself was once a young person with a zero-hours contract—I just did not know it was called that. If colleagues across the House think back to their first job, perhaps washing up in a restaurant or working shifts in a shop, they probably did not know at the start if they would be working exactly the same number of hours every week and so on; it turns out that a lot of us probably had our first opportunity in the world of work through a zero-hours contract. It will be true for people even after the Employment Rights Act—those with such a contract will have some extra guarantees included in nit. However, it will also be a bigger deal, from an employer’s point of view, and it will add some risk to taking on young people. What will be the balance for employers and employees? It is, for Ministers, a leap of faith.