How can young people access work in a changing labour market?

Alan Milburn’s report on the employment challenges facing young people in the UK was the central focus of the discussion, held on 16 June. We explored the implications for companies and investors across the VocTech ecosystem, both in the UK and internationally.

The report has recently acquired even greater importance, given its prominence in a directional policy speech given on 29th June by Andy Burnham, the likely next UK prime minister. Burnham stated that he took Milburn’s findings “very seriously” and promised “an education system based on parity between academic and technical”.

Provocations from the breakfast included:

• Can young people be helped to take on responsibility earlier, rather than wait years to build experience?
• Should the problems with young people’s skills be addressed earlier in their educational journey, before they become detached from work and learning?
• How can pathways into in-demand roles be made clearer and more attractive?

Key takeaways:

The AI skills dilemma
There is an emerging Catch-22 at the centre of how organisations are hiring in an AI world. This is likely having a detrimental effect on young people’s prospects.

• Anecdotally, AI works very well for those who have the experience to know what good looks like, whether this is a financial model or a research report. Such experienced people can spot errors and critique details in AI outputs because they have created and seen so many similar pieces of work before. In short, they have gone through the cognitive struggle of becoming experts.
• Arguably, there is not yet much evidence for this, this is creating a short-term problem for young people and a long-term problem for employers and society. If employers rely on the experts who are prompting AIs, and don’t hire inexperienced young people, they will likely make short-term productivity gains; but the pipeline of future experts will dry up. If they invest in young people, they will lose out on the cost savings of AI and have greater costs than their competitors.
• The loss of productivity and rise in costs may in fact be doubly challenging. AIs may not only do the work more quickly and effectively; young people may also need to be paid to make relatively worse spreadsheets or reports more slowly, so that they can learn what good looks like.
• Finding a way through is going to be challenging without creative thinking, and possibly further subsidies for training young people.

The economics of youth employment
The immediate causes of the unemployment crisis for young people may be much simpler: minimum wage and National Insurance rises. These have not only made employing young people more expensive, but removed any gap between hiring them and choosing an older person with more experience. This may be a particular issue in lower-margin sectors such as retail and hospitality, where entry-level hiring has historically provided first jobs.

Where the jobs are
Real labour demand does exist, for example in health and social care, and construction. Young people are of course suitable for roles in these sectors. However, pay, funding constraints, and the demanding nature of roles make applying for these jobs relatively less attractive.

Barriers in recruitment
Several attendees felt recruitment processes are increasingly broken or discouraging for young candidates. Long timescales, automated filtering, and lack of feedback can put young people off applying or continuing.

Technology: opportunity or obstacle?
Recruitment technology was discussed as both a problem and an opportunity.

• The opportunity: use technology to provide better feedback, clearer next steps and fairer routes into work.
• The risk: technology makes it easier for employers to filter people out without improving the candidate experience.
• AI-enabled hiring processes could worsen transparency issues if candidates do not understand why they were rejected. Care is needed.

The role of policy and support
Some participants felt more tangible support is needed for young people who are out of work, similar to other countries such as the Netherlands. There was also discussion of gender imbalance and whether the causes of youth unemployment differ by group.

As policy emerges, there is a need to balance resources allocated to supporting young people (e.g. benefits and healthcare, notably for mental wellbeing) with education to build their skills.