271. Youth unemployment - a national emergency?

0:00This is a visceral issue for the country. Leading this review into young people and employment for the government, if they formed a city, that would be the third biggest in the UK. So it's one in eight from 16 to 24 year olds. So the scale of it is enormous.

0:15Steph McGovern:There's so many elements to this, but do you genuinely think we're going to see change? You might have anxiety and depression, but diagnosis shouldn't automatically lead to you being signed off by a GP with a fit note. then politically this is a huge issue for the government. Let's remember this is a government that was elected on a one-word slogan. What was it? Change.

0:50Steph McGovern:Hello and welcome to The Rest is Money with me, Steph McGovern. Now, Robert is currently in the Gulf with the Prime Minister at the time of recording this. I'm sure he'll have lots to tell us about it when he's back. So I've been left in charge. And today we have a friend of the show on Alan Milburn, who's a familiar face in British politics. He served as Secretary of State for Health and Social Care under Tony Blair. He was responsible for modernising the NHS, marrying together parts of the public and private sector. And he is also hot on social mobility as the former chair of the Social Mobility Commission.

1:23Steph McGovern:And in that vein, he's now very much focused on looking at the issues of unemployment and particularly those needs we talk about, you know, the one million young people not in employment, education or training. It's been described as a national emergency. So I want to find out from Alan what the problem is and what he's doing about it. So here's my interview with Alan Milburn. Alan, it's great to have you back. You were last on in July 2024. Now, I can't believe that. It doesn't feel like two years has gone by, but, you know, we're nearly at two years. There's not been much happening, really, has there?

1:59No, I know.

2:00Steph McGovern:I mean, very quiet, very quiet. Very quiet, yeah, honestly. Things are changing in the minutes at the moment, aren't they? But what is not changing is your focus and mission to try and work out why there are so many young people not in work and also what we can do about it. So when we last spoke to you, you hadn't started this review. Now you are leading this review. I know you're quite far into it. There'll be stuff coming out from it over the next few months. But can you just give us a flavour of what you've been doing and where you're at with it? So I'm leading this review into young people and employment for the government.

2:35It's pretty wide ranging. So we're doing it in two phases, I suppose. Phase one is trying to understand who they are, a million young people or thereabouts. if they formed a city that would be the third biggest in the uk so it's one in eight and 16 to 24 year olds so the scale of it is enormous um who they are uh what's going on where it might go and critically why do we think it's happening so that's basically phase one and then phase two we're looking at okay if those are the problems what are the solutions so it's a two-phase thing and then in between times there's a huge volume of interaction obviously with young people i spent part of yesterday with a group of young people talking about their lives what's going on their aspirations their hopes their dreams um a lot of visits to different parts of the country particularly where young people um who are neat are concentrated because they're in particular places maybe we'll come come back to that in a bit helping a lot to employers to local authorities to mayors to football clubs honestly i tell you what has been really uplifting for me a lot of it's really depressing because it's really bad and it's getting worse um but what's really uplifting is this is a visceral issue for the country people are worried about the next generation of young people i think maybe for the first time maybe in 100 years i don't know people are feeling parents and grandparents that their kids might be worse off than they they are or the opportunities that they had are not going to be available and people want to do something about it and that's the reason that i'm optimistic about it not just government government's got an important role to play but employers charities local authorities communities want to do something about this and

4:23Steph McGovern:boy oh boy does something need to be done yeah that's a really interesting point about how for the first time in a long time people think that their children are going to be worse off than them I mean, that's quite, that says it all, doesn't it? Because the whole, you know, the whole thing is that everyone betters themselves. You know, maybe the first time kids go to uni in the family or, you know, the first time they get above a certain pay and income. And that is just, God, it says it all that, that people feel so, I guess, pessimistic. Alan, there's loads more I want to talk to you about, but let's go to a quick break.

5:01Steph McGovern:we're proud to say that the rest is money is powered by octopus energy this year greg jackson is back to answer another question now this is something that we see a lot that i wanted to ask you about when you're building a business from scratch like what's the most important thing early on and what do people get wrong yeah look early on the most important thing is to start building a customer base. Until you've got customers, you have no idea whether the products and services you're offering are going to be the ones that people want. So a lot of people spend far too much time building out pages and pages of business plans, thinking too hard about what they're going to do rather than just doing it.

5:39Steph McGovern:What surprised you most when you were launching Kraken? You know, the great fun of launching Kraken was it was the engine that powered Octopus to grow, you know, ultimately it's the biggest energy supplier in the UK with, I think, the best service. but we were able to license it to our rivals as well. So the interesting thing is the world is more complicated than you think and your competitors will work with you if it's in their interests. Cheers, Greg. Right, well, you'll be hearing more from Greg throughout the year but now let's get on with this episode. I sold my car in Carvana last night.

6:10Steph McGovern:Well, that's cool. No, you don't understand. It went perfectly. Real offer, down to the penny. They're picking it up tomorrow. Nothing went wrong. So what's the problem? That is the problem. Nothing in my life goes to smoothie. I'm waiting for the catch. Maybe there's no catch. That's exactly what a catch would want me to think. Wow, you need to relax. I need to knock on wood. Do we have wood? Is this table wood? I think it's laminate. Okay, yeah, that's good. That's close enough. Car selling without a catch. Sell your car today on Carvana. Pickup fees may apply. This episode is brought to you by Indeed.

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7:10Steph McGovern:So tell me about the people we're talking about. I mean, again, you know, living in the Northeast and spending a lot of time with young people, I see it myself. But what are you seeing in terms of who these people are and what's happened to them? So it's 16 to 24 year olds. Things are changing a bit. There are some constants and some things that are changing. So the constants are, look, it's grounded in economic and social inequality. You're a third more likely to be neat as a young person if you're growing up in Middlesbrough, for example, which you're very familiar with or Hartlepool or Norseley in the northwest near Liverpool or Nottingham or parts of Islington and so where there is social disadvantage there are higher levels of NEAT for young people and so that's pretty obvious so NEAT doesn't begin at the age of 16 unfortunately it begins much earlier in fact when I was in Bradford they've got a brilliant longitudinal study of 20 ,000 young people called Born in Bradford which they set up 20-25 years ago i was actually involved with it when i was the health secretary and sort of got dna from these um uh young people when they're babies they followed their outcomes over time what's happened to their education here's the really depressing thing when i was there three weeks ago the guy one of the guys who's running it john said to me look i can probably predict with a fair degree of accuracy at the age of three or four who's going to be neat not an education implant at the age of three or four yes at the age of three or four and so we know for example that you're three times more likely to be not in education employment or training as a 16 or 17 year old if you haven't been school ready at the age of four or five what does school ready mean it means that you're able to put your own coat on you're able to go to the toilet by yourself you're able to hold a book you're able to read a few words.

9:02So this is deep. I mean, not just about what's going on in the labor market and we can come to all of that, but this goes back to social inequality, lack of opportunity, places that have been left behind. So this is where it's concentrated. It used to be a phenomenon that was associated more with young women than young men, and that's changed. It's now more young men than it is young women, in good part, for good reasons, because rates of teenage pregnancy have fallen so so that's you know and so young women are you know less likely to have young kids than perhaps they were so you know they're not stuck at home caring um for their children so that's the profiles changed but the really really worrying thing that has changed is two things that related the first is there's been a doubling in the number of young people who are neat who report a health condition over the last 10 or 15 years and very many of them report a mental health or a neurodivergence condition like adhd or asperges or autism yeah autism so so um so so that's a really exponential rise this is definitely a more anxious generation there's no doubt about that about that so that has had a knock-on effect into the nature of youth unemployment because it's no longer about unemployment it's about detachment 61 % of this close to 1 million young people are economically inactive that means that they're not looking for work and if you're not looking for work and if you don't have work in your early 20s the chances that you're going to be in work in your 30s and 40s diminish exponentially and here's the most shocking statistic I've come across so far of many, 45 % of 24-year-olds who are not in education, employment, and training have never had a job.

10:59And if you haven't had a job by your mid-20s, your chances of getting a job in your 30s, 40s, 50s has a long-term scarring effect. You can quantify it, actually. On average, they could lose up to a million pounds worth of income during in their lifetimes but that's on the tip of the iceberg so basically if you're a young person and

11:22Steph McGovern:you don't find a job by the time you're 24 which is you know this this measure of 16 to 24 year olds is what we're talking about you're unlikely ever to is basically what what you're saying here yes so there's a stickiness and very many not all not all of these young people end up in the benefit system about a third of them don't which is interesting so we've got about 300 000 so-called hidden needs that we know very, very little about. They're not even claiming benefits. So we're trying to understand what is going on there, but about 600 ,000 are claiming benefits. The number of young people, 16 to 24, who are claiming health and disability benefits has doubled in the last five years.

12:01So this is exponential. So there's something profound going on and it's having a long-term social effect. It has an economic effect because that's fewer people working at a time of skill shortages, low productivity, low levels of growth for the economy. And it obviously has a massive fiscal effect in terms of the bill to the taxpayer. So all of these things are reasons for deep concern.

12:25Steph McGovern:A big question then, Alan, is what are these 300 ,000 people doing? How are they making money? How are they surviving? Or if they're not making money, Luna, how are they living? We're doing a lot of polling and survey work amongst young people who are not in education, employment and training they're pretty hard to reach but we're doing a lot of polling or survey got a small team going out around the country talking to young people who are who are neat by the way i hate that term but i'm just i know i know it's a bit like brexit i hated that when it came in and it's stuck i know but it's sort of just the short hand just so people yeah um i've got a small team going out talking doing face-to-face interviews with about 400 young people trying to find out what's actually going on in your life how do you live are you living off the bank of mum and dad?

13:08Are you living in the house of mum and dad? And this is, by the way, one of the repercussions of all this. If these young people aren't working, the chances are that they're at home, in the family home, they don't leave. That has consequences for family dynamics, but it also has consequences for family income. You know, strain on the bank of mum and dad becomes even bigger over time. So, look, there's many reasons to be concerned about it. So, those are some of the things that we're finding out.

13:36Steph McGovern:Yeah. And obviously, one of the things that you often hear, particularly from older generations, when we talk about young people not being in work is, oh, that's because it's too easy now to go on benefits. That's because they're lazy. Gen Z, don't know they're born. When I was a kid, you got sent out. And you hear all that. um from what you're saying it sounds that you know maybe the welfare system is you know too easy to rely on but but that's not the bigger picture you're seeing because what you're saying is this is starting at a really young age it is starting at a really really young age and you know i think you know i want to avoid the blame game but if there is a blame game blaming young people is just such an easy lazy and in my view wrong assumption okay when i talk i was talking i was up in newcastle a month ago and uh actually where i grew up in benwell which you know on the west end of newcastle which is a very good area and i was talking to a group of young people there and you know one of the lads was telling me he'd applied for 200 jobs he'd applied for 200 jobs and he hadn't had by the way he hadn't had a job interview okay he hadn't had any feedback and in worse than that he had another single response so this is not lack of effort on his part he's trying Now, look, there is a responsibility on young people, like there's a responsibility on parents, and we should be clear about that.

14:54If there are opportunities available and there are jobs available, they should be going for them. So there's no doubt about that. But I think the problem is really less about, is this a snowflake generation? Are they to blame? Or more, what is happening in the labor market and what's happening in the system, which in the end, the state runs from early years all the way through to welfare. And on both sides of that equation, if you like, on the supply side and the demand side, there's a big failure. So the failure on the supply side is that if you think about everything from education, schools, all the way through health, it's been a mental health issue, all the way through to welfare, the question that you've got to ask is, are those systems set up to enable young people to make the transition from schools and education into employment and the answer is that they're not and welfare in particular isn't it it isn't so rather than saying the first question shouldn't be what is it you're entitled to on benefit the first question should be what are you able to do and how can we help you and you might have anxiety and depression.

16:05But that diagnosis shouldn't automatically lead to you being signed off by a GP with a fit note. Then you're on benefit. You get benefit as a child, child disability living allowance. About 80 % of kids who are on child DLA then go on to adult PIP, which is the adult benefit for people with health and disability issues. And then you're in the system and you're in the benefit system what we should be asking is a different question which is what can you do and how can we help you how can we support you if you need a bit of mental health counseling or support can we make that available to you can you work a few hours rather than having to work 40 hours if you do that the benefit system currently penalizes you which is crazy could you do an apprenticeship oh you go on an apprenticeship you lose your benefits this is mad seriously when you look at the system through that lens it isn't a system and it's not incentivizing young people to go into work.

17:02Steph McGovern:So you do think then there is a problem with the welfare system that needs to change? 100%, absolutely. And it needs, I think, probably to be quite profound. So we're looking at that now, what that could look like. But that's only, by the time you get into the welfare system, that's a failure. Okay, that's the critical thing. To use the sort of jargon, it's what happens upstream that counts. So what is happening in schools our schools every employer will say to me two things they'll always complain about the government fair enough and then they'll always say uh young people aren't work ready and what they mean by that they mean two things one young people are not being acquainted earlier enough with the labor market the disappearance of the saturday job and all of that but also they're saying schools aren't setting them up with the life skills not the academic skills that are required to succeed in the workplace so that's the real question that we have to look at is the curriculum right is the way that schools are regulated recognized rewarded is that setting up young people to be able to succeed in what is a highly competitive and fast changing labor market yeah so we're looking at that again as one of one of the sort of drivers if you like that sits behind this that that to me i mean this is exactly what i i care so much about because you know you mentioned my hometown Middlesbrough that's where I grew up obviously and that's where I went to school and saw a lot of you know young people who you know didn't have the structure at home to be able to do well at school academically but what what did help and you know I talk about this a lot because it's key to why I've done well you know I've gone defied the odds to do as well as I have and it's because it's not it's not because I'm special it's because the school really recognized that we did have skills they might not be purely academic but they are skills that are useful in the workplace like people who don't have structure at home often are quite good at talking themselves out of situations so that's a really good communication skill or for example really good at assessing risk because they have to deal with it in a you know quite a challenging way every day and again being able to assess risk is a great skill but and it was different for me because we were told what skills were and what were useful or employers and we did have that link with with industry really early on because we were sponsored by industry and we had all that but the worry now is it it's not like that in Middlesbrough anymore you know ours was a bit of a special school but also now when I'm back there and you know work with lots of the young people there they don't see themselves as having any skills and that point you make about that disengagement they just think oh it's not it's not for me I'm not you know if you say to them well what are you good at that I go I'm not I'm not good at maths I'm not good at geography I'm not good at and you're like no no no but what but that's they're they're not jobs they're you know you you've got all these other things and and as you point out with education it assesses them pretty much based on the academics and that's where you lose that engagement because then people feel worthless and then you can understand why it leads to a public health crisis but that's not a new thing no is it like you're not going to be telling the education secretary or the you know whoever else in government anything new and that's my worry is it hasn't changed and this is really dangerous yeah but i think we're in a we're in a perfect storm situation now um because you've got this big change you know when it was just youth unemployment youth unemployment was very strongly correlated with the economic cycle so basically if there was a downturn or a recession or whatever or economic growth was low then employers just turned off the recruitment app and the first people to suffer obviously were young people coming into the workplace and then when things picked up, they turned the tap back on, and young people came into the employment market again.

21:02But if 61 % of these people aren't in the labor market, aren't in the market for jobs, you've got a very different phenomenon now. And what you say about schools is right, which is obviously literacy and numeracy are core skills. Without that, you're being stuffed in life. So focus on academic standards is really important. But equally nowadays, we've got to have communication skills you know you've got to be able to collaborate you've got to have agility because work's changing you're not in one job for life anymore all of that's gone and ai will transform that even more as we know over time so the question is is the balance right in what schools are doing and i think you know a lot of people not everybody thinks that maybe that balance isn't quite right and i guess the final point is that you know i always but look i came from like you you know i came from you know i grew up in first of all in tow long county durham a little mining town and then west end of newcastle and lots of sort of really very very poor kids including me but everybody had potential everybody had something yeah everybody had some everyone's got skills everyone's some sort and what you can't have is a school system that sets up a cohort of youngsters to believe like you were saying that they're failures they're not good enough.

22:17So how can we get that unlocked in each and every one of them to be able to realize their potential? That's the critical thing. I think the final point is what's changed on the demand side in the labor market is equally important because it used to be that when you and I were growing up, you could get a Saturday job, you could walk into a part-time job, et cetera. And the nature of the labor market's changing. So what employers are doing is really important as well. So if you look, for example at vacancies in you know a sector like hospitality restaurants pubs hotels where a lot of kids would start their working lives they're down by 50 percent in five years retail vacancies are down by not quite that but they've been falling for 10 years so jobs in shops and hotels and pubs and restaurants where a lot of kids would start their working lives those vacancies have been falling so that's a big problem apprenticeship starts are down by a third amongst young people in 10 years so these if you like entry routes into employment they are being closed off and if you put that together with the mental health crisis and some of the failures in the system you've got quite a big problem but isn't that partly the government's

23:33Steph McGovern:fault because it has become so expensive to employ young people so i have a retail business we employ nearly 100 people a lot of them are 16 to 24 year olds yeah then they are the first time jobbers and they are you know some of them are from pretty tough backgrounds and they're often the best ones running the business our most profitable store is run by a 16 year old she's amazing yeah she's she's brilliant um but it's become a lot more expensive to employ them you know we've seen and i understand why minimum wage needs to go up but it's come at all together at once you've got particularly for the youngest of the young people, it's gone up like 26 % over the last year or so and the last couple of years to employ them purely on their wages.

24:18Steph McGovern:Then with national insurance contributions on top, then with business rates going up as well, it's actually really tough for employers to employ young people. And so there is a government problem here with making the industries which provide those jobs just too expensive, particularly, as you say, hospitality. leisure retail they're the ones hardest hit by all of these essentially tax changes yes and obviously we're talking to a lot of employers you know small and medium-sized as well as sort of the bigger employers so you know obviously we talk a lot to you know i had a meeting the other day with the chairman of marks and spencers for example we're talking to sainsbury yeah exactly so i saw actually the other day over at m &s hq didn't offer me a sandwich which was very disappointing by the way but he did i can't afford to now alan but he did tell me that one in eight prawns sold in the uk sold in marks and spencers a little one in eight prawns one in eight prawns apparently so you learned something but yes so so i hear that a lot and obviously look if you're an employer and you know you know i am and have been an employer um every time we take on a young person And the truth is it's always a risk because they're unproven, aren't they?

25:35It's not like you're taking on somebody a bit older and they've got a track record and a CV and they've got a reference. So what we've got to do is make sure that the risks are minimized and the incentives are maximized for employers. So obviously we're looking at all of those issues in the round and we're looking at what employers could be doing more to make it easier for young people to come into the workplace. The really great thing I'm finding every conversation I'm in with every employer you know particularly when you're talking to employees in a local community as part of a local area they want to do something about it and they want to do something not just because honestly because it's a bit of like do-gooding or esg or whatever it is they want to do it because they themselves very often are struggling to recruit skilled labor and now that you've got levels of migration falling and a lot of employers are being overly reliant arguably on immigrant labor that's coming down in fact the net level of migration is probably going to be zero or below according to the OBR within the next year maybe even in this calendar year employers can't be on easy street anymore and just assuming that migrant labor is the answer so they're going to have to find a different source of of labor and that is you know there's a big here you have a million young people hold on a minute why aren't we enabling them into the workplace that's obviously a job for government as well but it's also a job for employers to think about what what do we need to be doing to make it easier for those kids to come into the workplace particularly if they've got you know it's not easy any of this but particularly if i haven't

27:10Steph McGovern:got high levels of anxiety for example yeah but but as you said but it's not just costa is also bureaucracy because you say it's much more difficult now to give kids work experience yes um and you know that for lots of businesses it's like why bother because it doesn't necessarily mean we're going to get any benefit from it they might come in do a week and then we never see them again and they have to burden the bureaucracy and the cost and the risk associated with that and also just given you know the changes we're seeing to employment rights and everything else it's just making it all trickier should there not be something just to make it easier for businesses to be able to do all this?

27:49Steph McGovern:Is that what you're focusing on telling government as well? I think in the end, there's a sort of deal to be done. I mean, my sense is there's a huge amount of goodwill amongst employers. It's not that they want to penalise this generation of young people. They want to provide opportunities for young people. The government can help or hinder that. Some of the things that the government is doing, for example, the youth guarantee, which is offering wage subsidies, for example, for young people who've been unemployed for a while, just to help with the costs of employing people. I think that's a perfectly sensible thing to do.

28:22There's a big reform of the apprenticeship system that's needed. Far too many apprenticeships, frankly, go to older workers, which is just, when we were growing up, an apprenticeship was all about a young person learning a trade, getting onto the first rung of the career ladder and then progressing.

28:40Steph McGovern:But we can't forget about the people whose industries are changing and they need to be re-skilled and everything. All of that, but it's just overly skewed at the moment, and it should be focused on young people. So I think there's a lot that government can do to help with that, and government can probably do more. But then I think there's got to be a deal with employers to say, okay, but you guys need to play your part as well. So what are you going to do to turn on that youth recruitment tab to make, I don't know, supported internships available, flexible working available? And I know all of this, I understand, you know, as an employer, I know all of these things are not straightforward.

29:18They never are. But if we're going to solve this problem, then it can't just be about what the government does. This has got to become a national cause for the country. It's got to become a movement for change where we're all accepting, whether as parents, as government, as local authorities, as mayors, as employers, we all have a part to play in solving this.

29:37Steph McGovern:So we've talked loads there, Alan, about what the problem is. Let's talk about solutions. But first, we'll go to a quick break.

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31:38Steph McGovern:On the apprenticeship point, again, I did a kind of apprenticeship with Black & Decker before I went to uni. Yeah, Spenny Mower. Yeah, that plant. And, you know, that was something which, again, our school really promoted, that vocational education. a lot of the young people I'm talking to it's not given to them as an option at school it's you know lots of schools benefit from the kids staying on for sixth form because they get that extra income you've got you know local further education colleges you know have been woefully underfunded for for years now and it is more expensive to put on these vocational courses because of all the kit you need and there's great businesses who are providing that in some wonderful colleges that have been and particularly around here but there is this issue of it not being presented as an option to people particularly at 16 maybe it is a bit further down when the schools don't have anything to gain from keeping them but from a at that beginning point schools are bothered about keeping them in the sixth form and also the academics again you know because that is cheaper to fund as a course and because it's you know that a lot of prestige is seen and going to university and that's where they want to tell their you know young people that you know the parents and everything this is where our however many kids go to uni or whatever so there is still that massive disconnect and a lack of parity of esteem and that offering not happening to young people early enough yeah so i agree with that and i think schools have got a special responsibility in several regards here one if you look at other countries that have got far lower rates of young people not in education employment and training than ours um so think of holland for example but third the rate that we have ireland half the rate germany much lower japan much lower one of the common characteristics is work experience is much more baked into what schools do here it's totally haphazard i mean it really is very often kids are just tall off you go go and find a week's work experience it's actually really important because then they get a taste of the workplace and critically then they're able to tell a future prospective employer i've done this so at least they've got something to point point to so we've got to look at work experience careers advice is again i mean it's actually improving from a terrible base though like honestly well that's got to be much more part of what schools do making sure the kids by the time they leave are work ready and not just academically qualified is the third thing that they've got got to do But the fourth thing, which is the one that you pointed, Steph, is there's been a big emphasis.

34:14Look, I'm a chancellor, as you know, of a university, actually the university where I went to as a student over in Lancaster. And I'm very proud of it. And I think higher education is a brilliant route for a lot of kids. But the truth is we need more vocational skills. And particularly, as I say, migration is falling now. So we've got to plug a big gap in the skilled labor market. Think about construction. The government wants to build a million and a half homes. We've got to have sparkies and we've got to have plumbers and we've got to have bricklayers and all those type of skills that are desperately needed.

34:46And so schools have got a really important responsibility, not just to assume that it's the higher education route that is the destination for students.