National Minimum Wage

Chapter 3: Young People, Interns and Apprentices
3.19 They extended their analysis up to 2010 and again estimated empirical age-earnings profiles
and wage-productivity gaps across different aged workers. They found that wage differences
reflected productivity differences between the age groups. They showed that wage
differentials between age groups had narrowed slightly within industries in the postrecession
period, relative to pre-recession, but that productivity differentials between age
groups had widened, although the productivity results were not statistically significant. They
concluded, however, that young workers’ wages had increased more than their productivity
contribution would warrant in the post-recession period, relative to prime-aged workers.
3.20 Having considered the earnings of those young people in work, we now move on to look at
the labour market position of young people, and assess whether the minimum wage has had
an impact on young people’s labour market activity.
Labour Market Position
3.21 Young people are hit harder during a recession as firms stop hiring and tend to make their
lowest-skilled and least-experienced staff redundant. This was particularly apparent during
the 2008-2009 recession when youth employment fell and youth unemployment rose.
However these trends need to be placed in context alongside changes to the population of
young people and the increasing proportion participating in full-time education (FTE), to
provide an accurate overview of how young people are engaging with the labour market.
The population of young people grew much faster than the working age population between
2000 and 2011, and so there was an increased supply of young people in the labour market.
However, the Office for National Statistics (ONS) forecasts that the population of young
people will decline over the next decade, which may improve the job prospects of young
people in the labour market, through reduced competition for vacancies.
3.22 In this section we use estimates of economic activity that we have derived from Labour
Force Survey (LFS) data. These estimates differ from those published by the ONS due to
the way we classify those individuals in FTE. The ONS classifies individuals in FTE as
unemployed if they are looking for part-time employment. We classify individuals in FTE as
either in FTE and employment if they also have a job, or in FTE only if they do not have a job.
Therefore, in our estimates, an individual cannot appear as unemployed if they are in FTE.
Because of this, our estimates of the level of unemployment for young people are lower
than those of ONS.
3.23 Figure 3.5 shows that the number of 16-17 year olds who were in FTE without a job has
increased from 529,000 (40.6 per cent of the population) in 1993 to 972,000 (67.0 per cent)
by 2011. Over the same period, the number in employment (including those also in FTE) has
fallen from 611,000 (46.9 per cent) to 348,000 (24.0 per cent). The number of 16-17 year olds
either unemployed or inactive has remained broadly flat over the period, both between
50,000 and 100,000, and by the third quarter of 2011 there were about 65,000 16-17 year
olds in each category (4.5 per cent).
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