Commentary: Young adults are growing increasingly economically dislocated

LONDON: People’s early interactions with the labour market are so critically important for shaping their futures that in the 1990s British researchers came up with the acronym “NEET” – standing for young people who are Not in Education, Employment or Training – to capture the group of adolescents and 20-somethings struggling to make the transition from compulsory schooling to the world of skills and work.

The concept rightly went on to become a staple of international economic statistics, with research consistently finding that NEETs are at risk of life-long socio-economic scarring, remaining at significantly elevated risk for worklessness and health problems for decades.

But the way NEETs are defined no longer makes sense in modern societies, and risks downplaying the situation that is unfolding across much of the developed world. Look at conventional NEET rates today and you will generally see flat or slightly descending lines over the past decade. 

Split by sex and you find that those flat lines are the result of combining rising rates of economic dislocation for men, with falling rates for women. Here lies a clue to the problem.

OBSCURING THE GREATEST CONCERN

As originally defined, NEETs include young mothers (or in very rare cases fathers) whose reason for not being in work or education is that they’re at home looking after their children. Counting young stay-at-home parents as part of a problem group of the economically disengaged and disadvantaged always felt like an odd fit (albeit defensible).

But the inclusion of the shrinking pool of full-time parents is now actively obscuring the fact that the group we are most concerned about – young adults who are neither in education, working or seeking work, or parenting – is marching upwards in many countries, not only for young men but women too.

In the United Kingdom, this group of young people who are increasingly disengaged from not only the economy but the rest of society has doubled in just over a decade from 4.5 to 9 per cent of the population aged 20 to 24. Rates have also climbed several percentage points over recent years in the United States, Canada and Germany, virtually doubling in the latter two cases. In almost all cases, these are record highs stretching back over several decades.

The figures are concerning enough, but there are additional factors beneath the surface which mean both that these groups are struggling more than in the past and that reversing the trends might be growing more difficult.

REVERSING THE TRENDS MAY GROW MORE DIFFICULT

One factor is the deterioration in housing affordability seen in many countries, leading to a growing share of young adults never leaving the parental home, which can diminish the incentives to work.

Another big challenge is the role played by anxiety and other mental health conditions.

In the UK, a large and growing share of socio-economically isolated young adults report suffering from a mental health problem that prevents them from working or seeking work. This, combined with the nuances of Britain’s welfare system, may be one reason the UK’s long-term youth worklessness trend is so steep. 

Changes in the relative rates of unemployment and disability benefits have led many people to transition over from the former to the latter, and once on health-related benefits many fear they will lose them if they seek to re-enter the workforce.

An additional UK-specific concern is that steep increases to the youth minimum wage and policy changes that increase the cost to businesses hiring low-wage workers are hitting employment rates for young people.

A third point highlighted to me by Louise Murphy, senior economist at the UK’s Resolution Foundation think tank and a specialist in young adult worklessness, is that this group has been acutely afflicted by the rise in time spent alone as smartphones and other digital technologies have displaced in-person socialising. In the US, young people who are not in work, studying or raising children now spend seven hours per day completely alone, up from five a decade ago.

Transitioning from long-term joblessness into the world of work has never been easy, but it will be especially hard for a group that struggles with anxiety and has grown increasingly socially isolated. 

It may also mean that the challenge today is as much about giving young people the confidence to make the leap as it is simply finding them a job.