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Cost of youth disadvantage in UK at new high

The Prince’s Trust and RBS reveal that youth unemployment could cost the UK economy up to £155 million a week 1.

The Cost of Exclusion report warns that the price of youth disadvantage in the UK is at a new high. A conservative estimate of youth unemployment costs per week - based on lost productivity being equivalent to Jobseeker’s Allowance - would be £48 million. Based on the lost productivity of unemployed young people being equivalent to the average weekly wage for their age group today, the cost of youth unemployment is £155 million a week.

The new report, based on research conducted by the Centre for Economic Performance at the London School of Economics, highlights a steep rise in the number of long-term unemployed young people, with the number of 16-to-24-year-olds unemployed for 12 months or longer recently hitting a 16-year high.2

Moreover, the number of 16-to-24-year-olds claiming JSA for 12 months or longer has increased more than fourfold since before the recession - from 5,840 claimants in 2008 to more than 25,800 claimants in 2010.

Martina Milburn, chief executive of The Prince's Trust says: “The annual cost for an individual jobseeker can be as much as £16,000. The argument for intervention and support is unquestionable. For a fraction of this cost, The Prince's Trust can support a jobless young person through an intensive personal development course, helping them leave the dole queue for good."

Significant rise

The report shows how the significant rise in youth unemployment since before the recession has left the UK with a much higher youth unemployment rate than many of its European neighbours, such as Germany, Denmark, Austria, Norway and The Netherlands.3

Fionnuala Earley, RBS Economist says:

As the UK struggles to clear record levels of national debt and to compete on an international scale, we simply cannot afford to ignore the growing costs of youth disadvantage. By giving young people the skills and confidence they need for the workplace, we can help address the deficit, lift the load on the taxpayer and strengthen our economy and communities across the UK.

According to the research, young people with few qualifications have been hit particularly hard by the recent recession. More than a quarter of young men with few qualifications are now unemployed - a much higher proportion than in previous recessions.4

The Cost of Exclusion report goes on to show how educational underachievement in the UK costs £22 billion for a generation. 5

This represents the impact of education on wages and employment chances and the ‘wage scar’ over a lifetime. 

Martina Milburn adds:  "Youth disadvantage in the UK is a financial burden on us all, but at The Prince’s Trust we also see the devastating effects on individuals and communities.

Every day at The Trust we meet another young person who is caught in a spiral of joblessness and poverty. With the right support, these young people can break this cycle and get their lives back on track.

The report - which explores the costs of youth unemployment, educational underachievement and crime in turn - also shows that the cost of youth crime is as much as £1.2 billion a year.6

About The Trust

The Prince’s Trust has helped more than 600,000 young people gain skills and find work since 1976 and continues to support 100 more every working day.  More than three in four young people supported by The Prince’s Trust move into work, education or training. The Trust works with 14-to-30-year-olds who have struggled at school, have been in care, are long-term unemployed or have been in trouble with the law. 

1 The Prince’s Trust & RBS report gives £155 million as an upper estimate of the cost of youth unemployment based on productivity loss and Jobseeker’s Allowance (JSA). The weekly cost of JSA for 16-to-24-year-olds is £22 million. The report gives a conservative estimate of lost productivity in terms of foregone earnings as £26 million and an upper bound estimate of £133 million. See Cost of Exclusion, chapter 1.

2 According to the Office of National Statistics, October 2010, 232,000 young people were unemployed for 12 months or longer.

3 The Cost of Exclusion (2010), page 22. See also the European Labour Force Survey (Eurostat, 2010).

4 The Cost of Exclusion (2010), page 13. See also Gregg and Wadsworth (2010).

5 This calculation is based on the estimated lifetime cost of an individual not having qualifications (£45,000) multiplied by the number of young people in the population who have no qualifications. See The Cost of Exclusion, chapter 3.

6 This cost has been calculated using the average cost associated with each crime committed, together with information on the total number of convictions. See The Cost of Exclusion, chapter 2.

Executive summary and link to full report

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