The Changing UK Labour Market for Young People: Trends Since Yi Zhang Low Pay Commission

Transcription

1 The Changing UK Labour Market for Young People: Trends Since 1992 Yi Zhang Low Pay Commission

2 Outline Introduction to the LPC and why we are interested in the youth labour market Trends in the labour market position and economic activity of young people aged between Labour market trends of age groups affected by the National Minimum Wage (NMW) youth rates year olds 18-2 year olds Conclusions 2

3 Introduction LPC makes recommendations to the Government on the National Minimum Wage (NMW). Government then accepts or rejects The NMW is a wage floor below which wage cannot fall Young people are treated differently as international evidence suggested they are more vulnerable to adverse impacts of minimum wages. Thus there are age-related NMW rates to reflect the inexperience and cost of required training needed for them to compete in the labour market 3

4 The NMW has age related rates and the Year Old Rate was introduced in 24 Pounds Adult rate Youth Development Rate(18-2 year olds) Year Old Rate Apprentice Rate Oct Oct 212-Sept Oct 211-Sept Oct 21-Sept Oct 29-Sept Oct 28-Sept Oct 27-Sept Oct 26-Sept Oct 25-Sept Oct 24-Sept Oct 23-Sept Oct 22-Sept Oct 21-Sept Oct 2-Sept June 2-Sept April 1999-May

5 The number of workers paid at their age-related NMW rate has risen since 24 with a sharp increase in the use of youth rates since the onset of the recession Proportion of workers paid at the applicable NMW (per cent, 5p band) April of each year Source: LPC estimates based on ASHE, Note: Estimates are based on a 5 pence band All 5

6 Trends in the labour market position and economic activity of young people aged between 16-24

7 The proportion of year olds has been falling since 28, and is predicted to do so until 224, as the population of those aged 25 and over grows faster than that for under 25s The number of year olds as share of the population aged 16+ (per cent) Source: LPC estimates based ONS data: labour market statistics, UK, , and 21 population projections, UK, Year

8 Youth employment declined from 1992, but picked up between 21 and 28, before falling sharply with the onset of the recession with few signs of recovery since 5,6 Introduction of the NMW April 1999 Start of the 28-9 recession 5,6 4,8 4,8 4, 3,2 2,4 1,6 4, 3,2 2,4 1,6 8 Source: LPC estimates based ONS data: labour market statistics, UK, , and 21 population projections, UK, June 1992 November 1993 April 1993 September 1994 February 1994 July 1994 December 1995 May 1995 October 1996 March 1996 August 1997 January 1997 June 1997 November 1998 April 1998 September 1999 February 1999 July 1999 December 2 May 2 October 21 March 21 August 22 January 22 June 22 November 23 April 23 September 24 February 24 July 24 December 25 May 25 October 26 March 26 August 27 January 27 June 27 November 28 April 28 September 29 February 29 July 29 December 21 May 21 October 211 March 211 August 212 January 212 June 212 November 213 April 213 September Employment for year olds (thousands) 8 Month

9 Compared with other age groups, young people have been most affected by the recession with the largest fall in their employment May 28 June 28 July 28 August 28 September 28 October 28 November 28 December 29 January 29 February 29 March 29 April 29 May 29 June 29 July 29 August 29 September 29 October 29 November 29 December 21 January 21 February 21 March 21 April 21 May 21 June 21 July 21 August 21 September 21 October 21 November 21 December 211 January 211 February 211 March 211 April 211 May 211 June 211 July 211 August 211 September 211 October 211 November 211 December 212 January 212 February 212 March 212 April 212 May 212 June 212 July 212 August 212 September 212 October 212 November 212 December 213 January 213 February 213 March 213 April 213 May 213 June 213 July 213 August 213 September Employment (pre-recession peak =1) Employment (pre-recession peak =1) 6 5 Age Age Age Age Age 5-64 Age 65+ Source: LPC estimates based on ONS data: employment rates for the age groups of year olds (YBTO), year olds (YBTR), year olds (YBTU), year olds (YBTX), 5-64 year olds (LF26) and 64+ year olds (LFK4), seasonally adjusted, UK,

10 Youth unemployment has increased since 23 with further deterioration during the recession and remained well above its pre-recession levels 1,2 1, Introduction of the NMW April 1999 Start of the ,2 1, June 1992 November 1993 April 1993 September 1994 February 1994 July 1994 December 1995 May 1995 October 1996 March 1996 August 1997 January 1997 June 1997 November 1998 April 1998 September 1999 February 1999 July 1999 December 2 May 2 October 21 March 21 August 22 January 22 June 22 November 23 April 23 September 24 February 24 July 24 December 25 May 25 October 26 March 26 August 27 January 27 June 27 November 28 April 28 September 29 February 29 July 29 December 21 May 21 October 211 March 211 August 212 January 212 June 212 November 213 April 213 September ILO Unemployment (thousands) 2 Month ILO Unemployment level (RHS) Unemployed year olds not in FTE Source: LPC estimates based ONS labour market statistics, seasonally adjusted, UK,

11 Since 1993 young people s employment rate has fallen as fewer have found jobs. In contrast, their unemployment rate held up until the start of the recession Introduction of the NMW Start of the 28-9 recession May 1993 January 1993 September 1994 May 1995 January 1995 September 1996 May 1997 January 1997 September 1998 May 1999 January 1999 September 2 May 21 January 21 September 22 May 23 January 23 September 24 May 25 January 25 September 26 May 27 January 27 September 28 May 29 January 29 September 21 May 211 January 211 September 212 May 213 January 213 September Employment rate, Unemployment rate, Inactivity rate of year olds (per cent) Month Unemployment rate Employment rate Inactivity rate Source: LPC estimates based on ONS data, three-month moving average, seasonally adjusted, UK,

12 This move away from employment is into fulltime education 1 9 Intro NMW Start of the recession increase in tuition fees Q Q Q Q Q Q Q Q Q Q4 2 Q3 21 Q2 22 Q1 22 Q4 23 Q3 24 Q2 25 Q1 25 Q4 26 Q3 27 Q2 28 Q1 28 Q4 29 Q3 21 Q2 211 Q1 211 Q4 212 Q3 213 Q2 Quarter FTE FTE and employment Employment(NFTE) Unemployment(NFTE) Inactivity (NFTE) Source: LPC estimated based on LFS microdata, four-quarter average, UK, Q Q Proportion of all those aged 16 24(per cent)

13 Young people not in full-time education are more likely to be employed than those in full-time education, and their employment rate largely increases with age Employment rate by education status and age (pere cent) Age Not in full time education In full time education Source: LPC estimated based on LFS microdata, four-quarter average, UK, Q3 22-Q

14 For those not in full-time education, the employment rate of younger people has fallen more sharply over time 9 8 Start of the recession Source: LPC estimated based on LFS microdata, four-quarter average, UK, Q Q Q Q Q Q Q Q Q Q Q Q4 2 Q3 21 Q2 22 Q1 22 Q4 23 Q3 24 Q2 25 Q1 25 Q4 26 Q3 27 Q2 28 Q1 28 Q4 29 Q3 21 Q2 211 Q1 211 Q4 212 Q3 213 Q2 Employment rate (NFTE, per cent)

15 Labour market position of age groups affected by the NMW youth rates

16 Since 24, year olds have become much more likely to stay in full-time education, as fewer have become employed Intro NMW Roll-out of EMA Intro Year Old Rate Start of the recession Replacement of EMA with BF Q Q Q Q Q Q Q Q Q Q4 2 Q3 21 Q2 22 Q1 22 Q4 23 Q3 24 Q2 25 Q1 25 Q4 26 Q3 27 Q2 28 Q1 28 Q4 29 Q3 21 Q2 211 Q1 211 Q4 212 Q3 213 Q2 Proportion of all those aged (per cent) 1 Quarter FTE FTE and employment Employment (NFTE) Unemployment (NFTE) Inactivity (NFTE) Source: LPC estimated based on LFS microdata, four-quarter average, UK, Q Q

17 The proportion of 18-2 year olds in full-time education has steadily increased over time, and the labour market position of those not in full-time education was more adversely affected by the recession Proportion of all those aged 18 2 (per cent) Intro NMW Roll-out of EMA Start of the recession Increase in tuition fees EMA replaced by BF Q Q Q Q Q Q Q Q Q Q4 2 Q3 21 Q2 22 Q1 22 Q4 23 Q3 24 Q2 25 Q1 25 Q4 26 Q3 27 Q2 28 Q1 28 Q4 29 Q3 21 Q2 211 Q1 211 Q4 212 Q3 213 Q2 Quarter FTE FTE and employment Employment (NFTE) Unemployment(NFTE) Inactivity (NFTE) 17 Source: LPC estimated based on LFS microdata, four-quarter average, UK, Q Q2 213.

18 The gap in employment rates of different age groups has widened, with younger people more adversely affected by the recession than their older counterparts 8 7 Intro NMW Intro Year Old Rate Start of the recession Q Q Q Q Q Q Q Q Q Q4 2 Q3 21 Q2 22 Q1 22 Q4 23 Q3 24 Q2 25 Q1 25 Q4 26 Q3 27 Q2 28 Q1 28 Q4 29 Q3 21 Q2 211 Q1 211 Q4 212 Q3 213 Q2 Employment rate (per cent) Quarter Source: LPC estimated based on LFS microdata, four-quarter average, UK, Q Q

19 18-2 year olds saw the largest rise in their unemployment proportion since the start of the recession, but have showed signs of recovery, though still remaining well above its pre-recession rate 2 18 Intro NMW Intro Year Old Rate Start of the recession Q Q Q Q Q Q Q Q Q Q4 2 Q3 21 Q2 22 Q1 22 Q4 23 Q3 24 Q2 25 Q1 25 Q4 26 Q3 27 Q2 28 Q1 28 Q4 29 Q3 21 Q2 211 Q1 211 Q4 212 Q3 213 Q2 Unemployment proportion (per cent) 2 Quarter Source: LPC estimated based on LFS microdata, four-quarter average, UK, Q Q

20 When looking at the combined picture for young people aged between 16-2, we can see a clear shift towards full-time education, and recent changes in policies don t appear to have affected this trend Number of 16-2 year olds (thousands) 2,5 2, 1,5 1, 5 Intro the NMW Roll-out of EMA Intro the Year Old Rate Start of the recession EMA replaced by BF 1993 Q Q Q Q Q Q Q Q Q Q4 2 Q3 21 Q2 22 Q1 22 Q4 23 Q3 24 Q2 25 Q1 25 Q4 26 Q3 27 Q2 28 Q1 28 Q4 29 Q3 21 Q2 211 Q1 211 Q4 212 Q3 213 Q2 Increase in tuition fees 2,5 2, 1,5 1, 5 FTE only Employment (inc those in FTE) Unemployment (NFTE) Inactive (NFTE) Source: LPC estimated based on LFS microdata, four-quarter average, UK, Q Q

21 LPC research findings using LFS 1 The Low Pay Commission has commissioned many research projects since 1997 many have used the LFS. The main findings are: Some evidence of a negative impact of minimum wages on employment for young people (15 24), plus impact was exacerbated in the presence of an economic downturn (Dolton and Rosazza Bondibene, 21) Positive and statistically significant increase in probability of employment (up to 4 6 percentage points) on becoming 22 but no effect on becoming 18 or at any other age (Dickens et al 21) No negative employment effects from the NMW when workers cross the age threshold and become eligible for the adult rate but did find that the NMW lowered the probability of young males being in employment one year prior to them becoming eligible for the adult rate, at the age of 2 (Fidrmuc and Tena Horillo, 211 and 213) Young NMW workers had a greater probability of job loss than other workers, but also a greater probability of job entry. The effect on job entry exceeded the effect on job loss (Fidrmuc and Tena Horillo, 213) 21

22 LPC research findings using LFS 2 Some evidence of a negative effect on hours worked among youths, exacerbated during the recession (Bryan et al 212) Updated research found some, albeit weaker, evidence of a reduction in hours. The results implied that the NMW reduced basic hours for young people during the recession relative to the pre-recessionary period. (Bryan et al 213) Evidence that young workers (18-21) are close complements to older workers (55+) but some weak evidence that as the NMW has increased, employers in the low-paying sectors have substituted away from year olds to older workers. No evidence of employment effects (Lanot and Sousounis, 213) The introduction of the Year Old Rate had not affected participation in full-time education (De Coulon et al 29) 22 No impact on schooling (Lanot and Sousounis 21)

23 Conclusions Despite a falling population, young people have fared relatively poorly in the labour market Employment among the youngest people has fallen The labour market positions of different age groups have diverged, with younger people the most adversely affected by the recent recession More young people have been moving into full-time education since 1992, and this was reinforced by the introduction of the Education Maintenance Allowance (EMA). As a result fewer became employed Those young people in full-time education have also become less likely to be employed The introduction of the Year Old Rate of the NMW (in October 214) coincided with the roll -out of EMA (September 24) Recent changes in policies such as the replacement of EMA with the Bursary Fund and the increase in tuition fees have not yet had an adverse impact on the number of young people remaining in full-time education 23

24 Thank you! Any questions? 24