Juvenile Unemployment, Relative Wages and Social Security in Great Britain

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A feature of the British economy over the last decade which has given rise to increasing concern is the marked increase in the level of unemployment among younger members of the labour force relative to that among other age groups. In i 980, some 2 0 % of the unemployed were below the age of twenty years as compared with only I 2 % in I 970. Over this period the unemployment rate among workers aged less than twenty years rose from 3-6 to nearly 27 %; the latter figure excluding those participating in special short-term employment schemes. The probable causes of and possible cures for the growth injuvenile unemployment has been the subject of much debate from which a number of competing hypotheses emerge. Broadly speaking, these fall into two categories. First, there are those that attribute prime responsibility for the increase in juvenile unemployment to structural factors within the labour market. Among the factors identified is the system of minimum wages imposed by the wage councils which, it is claimed, has prevented the real earnings ofjuveniles from falling sufficiently in response to the general decline in the level of economic activity. As a result, the ratio ofjjuvenile to adult earnings has risen, leading to a disproportionately large reduction in the demand for juvenile labour (Miller, I98I). At the same time, it is argued that increased eligibility fcr state benefits among school leavers, coupled with less rigorous procedures for ensuring that benefit recipients actively seek work, have increased the level of voluntary unemployment among young persons (Miller and Wood, I982). The alternative view is that the growth in juvenile unemployment is nothing more than a reflection of a general decline in economic activity (Pond, I982). A number of arguments are advanced for why juvenile unemployment is more adversely affected by such a decline than that of adults. First, the existence of screening and hiring costs mean that reductions in the demand for labour are met initially by cuts in recruitment, with disproportionate effects on the employment of young persons. In addition, younger workers tend to have fewer firm-specific skills and hence lower fixed costs of employment which increases their probability of being made redundant. Institutional procedures such as 'last-in, first-out' redundancy procedures act to reinforce these factors. For those who subscribe to the latter view, the solution to the problem of juvenile unemployment lies in the expansion of the overall demand for goods and