Youth unemployment remains high in the UK as new Prime Minister Burnham pushes reforms to break the deadlock

(1) In the three months to the end of June, the youth unemployment rate in the UK edged down to 16.2%, but it remains higher than levels during the pandemic and is well above those in the Eurozone (14.8%) and the United States (8.5%). Entry-level job vacancies have decreased by 49% over the past decade, as companies, faced with rising costs, are more inclined to hire experienced employees rather than train young workers. (2) Economists warn that early long-term unemployment can leave a "scarring effect"—experiencing one year of unemployment at age 22 could lead to a 13% to 21% reduction in income 20 years later. The increase in employer national insurance contributions, rapid rises in the minimum wage, and years of weak economic growth have all squeezed company profits and hiring capacity, with labor-intensive sectors like hospitality and retail being particularly hard hit. (3) The Prime Minister has made addressing youth unemployment a top priority, planning to incorporate technical education into the curriculum for students from age 14, tailored to local labor market needs. He also aims to devolve power from Westminster to local governments to address regional disparities. In addition, he has pledged to cut commercial property tax for the key hospitality sector by around 20%. (4) Analysts point out that further expansion of support will face fiscal constraints—Burnham’s various plans have already pushed up costs. However, his track record as Mayor of Manchester, where he promoted the alignment of technical education with market needs and led regional economic growth, gives credibility to his reform agenda. The UK economy is expected to stagnate in the second half of the year, and the effectiveness of these reforms remains to be seen.