AI, Covid and taxes: what is behind steep rise in youth unemployment?

"Youth unemployment is at the highest level since the Covid pandemic, as younger people bear the brunt of a worsening slowdown in the UK jobs market. Excluding the peak recorded during the autumn of 2020, when the country was entering the second pandemic lockdown, the jobless rate for 16 to 24-year-olds running at 15.3% is at the highest level in a decade."

"The UK economy is underperforming its potential. Sticky inflation, elevated borrowing costs, subdued consumer demand and Donald Trump's erratic trade wars are all contributors, while budget uncertainty has not helped. This backdrop is discouraging employers from hiring. Young people typically suffer most when the economic chips are down. The reasons are brutal but obvious: lacking experience, employers see entry-level workers as expendable."

"Rachel Reeves's 25bn increase in employer national insurance contributions (NICs) in last year's autumn budget is widely acknowledged to have driven up unemployment including by the Bank of England. Adding to employment costs, the chancellor's tax-rise was twofold: the headline rate was increased from 13.8% to 15%, and the earnings threshold at which the tax applies was cut from 9,100 a year to 5,000."

The UK economy is underperforming its potential. Sticky inflation, elevated borrowing costs, subdued consumer demand and Donald Trump's erratic trade wars are contributing factors, while budget uncertainty has reduced employer confidence. Employers are discouraged from hiring, and younger workers typically suffer most during downturns due to limited experience and being viewed as more expendable. A £25bn increase in employer national insurance contributions raised the headline rate from 13.8% to 15% and lowered the earnings threshold from £9,100 to £5,000, increasing employment costs. Employers blame the threshold cut for reducing part-time opportunities in retail and hospitality. Employer NICs exclusions exist for under-21s and apprentices under-25.

Read at www.theguardian.com