We’ve had three announcements this week that paint a worrying picture for the job prospects of young people. First, the job search website Adzuna published figures showing that the number of graduate vacancies fell to 8,383 in June, down 46 per cent on the year and down 84 per cent from their 2017 peak.
Second, a Lancaster University survey of 1,000 business leaders showed that a third of firms had reduced the number of entry-level jobs.
Third, this morning’s ONS update showed that the proportion of Neets – that is, 16- to 24-year-olds not in education, employment or training – remained stagnant at 13 per cent. It’s pretty grim reading all round.
In news reports covering all three releases, AI was touted as the main culprit: with entry-level jobs ‘threatened by AI’; employers ‘cutting entry-level roles in favour of AI’; and the Big Four accountants ‘seeking to use AI’ instead of junior hires.
The AI spectre in the job market is a recurring theme. The IPPR thinktank has warned that eight million British jobs are at risk of being replaced by AI and the OECD says three-quarters of London jobs may be at risk. Meanwhile, the British Chambers of Commerce says firms that have used AI for more than a year recorded net job losses of 8 per cent.
But how much is AI actually to blame? Is it cover for the government’s obsession with pulling fiscal levers which drive up employment costs?
It’s worth noting that the Adzuna data doesn’t actually mention AI at all, so AI’s effect is perhaps only implied. The Lancaster University survey reports that two-in-five employers say that investing in AI has reduced the number of entry-level roles, but not by how much. It follows previous research from the university in June which found that average weekly ‘starter’ vacancies had fallen by almost 50 per cent in a decade.
The decline in these types of jobs seems to fit in with the wider jobs crisis. Earlier this month, ONS figures showed that 13,000 jobs disappeared in July, the same as in June, while almost 100,000 have been lost in the past year. Elsewhere, retail and hospitality jobs, normally a mainstay of youth employment, have shed 226,000 jobs since 2023. These aren’t the type of jobs necessarily threatened by AI. So what’s to blame?
Well, the former chancellor Rachel Reeves hiked employer National Insurance contributions by £25 billion. At the time, the OBR modelled that the threshold change could wipe out 50,000 full-time equivalent jobs and add around 2 per cent to firms’ overall payroll. Business rates have also risen, alongside tougher regulation on hiring new starters under the Employment Rights Act, parts of which came into force in April.
Likewise, the government’s increases to the minimum wage and its drive to equalise wage brackets for all ages have also increased the cost of employing younger workers. Since 2019, the hourly wage cost in real terms for an under-18 has increased by 39 per cent, for an 18- to 20-year-old by 33 per cent, and by a striking 56 per cent for over-21s – though that last figure also reflects the age threshold of the compulsory National Living Wage dropping from 23 to 21 in April 2024. With all that in mind, it’s not surprising that the number of Neets reached 1.1 million last year.
For apprentices the situation is just as bleak. Competition for apprenticeships has quadrupled since 2023, while the number of places has halved to 3,700. The minimum wage for apprentices is now 55 per cent higher in real terms than it was in 2019. With such rises, it's no wonder companies are hiring fewer young employees.
It’s easy to point to the big scary tech and say that jobs for the young are being hoovered up by artificial intelligence. While that’s true to some extent, the government’s squeezing of businesses has revealed a general crisis of economic intelligence – artificial or otherwise.
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