Questions over youth jobless figures
The prime minister has described youth unemployment figures as "disappointing, once again" with the number of 16-to-24-year-olds out of work rising by 30,000 to 974,000, "the highest since comparable records began in 1992" according to the Office for National Statistics (ONS).
Taken at face value, the data suggest that the unemployment rate for young people rose by 0.8% to 20.6% - also a record high.
But a top economist, while agreeing that the situation is clearly dire, is questioning whether the numbers tell the whole story. Secretary of State for Work and Pensions Iain Duncan Smith has also said the headline measure is "misleading" and has suggested the ONS change how it reports levels of youth unemployment.
John Philpott, Chief Economic Advisor to the Chartered Institute for Personnel and Development, asks "is the situation really as unprecedentedly bad as the headline figures suggest?"
In a that "the relative scale of youth unemployment is only properly understood in the context of consideration of the transformation of the youth labour market in recent decades resulting from greatly increased participation in post-16 education".
He points out that this has the effect of reducing the proportion of the 16-24 year age cohort active in the labour market, "thereby raising the measured youth unemployment rate for any given level of unemployment".
"In other words, as the economically active supply of young people shrinks relative to the number of young people in the population the youth unemployment rate magnifies the scale of youth unemployment."
So how bad are things really? The first problem is that it is impossible to compare today's unemployment figures with anything before 1992 because of a lack of consistent data. One cannot, for example, compare the current situation with the early 1980s when concern about youth joblessness was just as great.
The next point to bear in mind is that youth unemployment rates are always higher than other cohorts. Usually they are around double the aggregate figure because young people tend to move in and out of jobs before settling down in the labour market ('short-term frictional unemployment' in the jargon) and, as John Philpott puts it, "youth unemployment is ultra sensitive to the economic cycle, rising relatively quickly during recessions when there are fewer entry level job vacancies and when employers cut their least experienced or least productive staff, but falling relatively quickly during periods of economic recovery".
It is "therefore unremarkable", he argues, that we have seen both relatively high and relatively fast-rising youth unemployment in recent hard economic times.
"Nonetheless things do on the face of things appear worse than usual at present, with the youth unemployment rate 2.5 times higher than the average rate of unemployment (7.9%). However, closer examination of the measurement of youth unemployment offers a somewhat different conclusion."
The jobless figures include full-time students who are actively looking for work. There are more than a quarter of a million such people included in the latest unemployment figures. John Philpott says it is "perfectly sensible" to count students because they "have some influence on the degree of wage pressure in the labour market". But he concludes that, with student numbers rising, their inclusion "does once again magnify youth unemployment as an indicator of social distress".
"Excluding them lowers the headline youth unemployment rate for 16-24-year-olds in the final quarter of 2010 from 20.5% to 15.5% and lowers youth unemployment as a proportion of the 16-24 age cohort to 9.4%."
Mr Philpott is not suggesting that all is well with youth unemployment: "young people have been relatively adversely affected by the recession as employers have preferred to retain experienced prime age and older workers." However, his argument does question whether the current situation is really that much worse than previous downturns.
In a letter to the ONS, Iain Duncan Smith makes a similar point. He writes that:
"[I]t is misleading for the 965,000 figure to be used, when nearly 275,000 under-25s counted as ILO unemployed are also full-time students. This is more than one in four of the total and, with staying on rates in education having risen over time, accounts for a significantly larger proportion of overall youth unemployment than was the case twenty years ago."
He concludes by asking that in future the ONS "give more prominence to the number of unemployed people not in full-time study, to ensure that an accurate context is set for the debate on support for young people."
However, David Blanchflower, a former member of the Bank of England Monetary Policy Committee has questioned Mr Duncan Smith's motivation:
"Could it be that he is getting his retaliation in first before youth unemployment hits the million milestone? If you want a distraction quibble about the data. [...] It would be better to try and lower youth unemployment rather than fiddle with the statistics."
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