Youth in Revolt: Where are Our Jobs? UK Edition

The UK has faced unemployment problems over the past few years.  Well, who hasn’t?  But as countries are beginning to climb out of disastrous times, a huge problem remains in the UK: young adults are unable to find jobs.

Financial Times reports that almost 1 million able bodies between the ages of 16-24 are unemployed in the UK.  20.5% of the age group is unemployed, a record high in the UK.  However, this is a common trend throughout the EU, which averages a 21% unemployment rate for the said demographic. 

While the UR has not changed from the past month for the UK as a whole (7.9%), FT reports that the fragile job market is still making it hard for many to get employed, and the youth are the ones who are taking the hit.

The Recruitment and Employment Confederation have been thinking of ways that could help solve this unemployment problem.  The Adam Smith Institute has considered a strategy that could fix the problem: waive the minimum wage standard for people under 25.  This would make it optional for private sector companies to pay minimum wage to people under the age of 25.  Naturally, this could be a lucrative deal for employers. 

While this might work in proving as an incentive for many companies, the fact that these people will be working for next to nothing could potentially affect their work ethic.  Many corporations prefer paying above the minimum wage to create a higher demand for the certain position.  While this may solve a short term problem of younger people being unemployed, undercutting the minimum wage could create animosity between employees in the work space.  People who are currently working at a business would not accept a pay decrease and while people will the same jobs (and possibly more experience or skill), they may be paid far less than their peers.

And with that stated, what could potentially keep a company from doing a “fire sale” on their minimum wage employees?  This incentive could create a price discrimination that would result in unequal unemployment if not regulated properly.  I can’t see this minimum wage law bending, and while youth unemployment is a concern, companies may have to recognize it on their own that hiring youth has incentives in itself.

Is making the minimum wage optional for people under the age of 25 a good strategy to solve the youth UR?  What other ways do you think could fix this problem?

References: Youth unemployment hits record high. Financial Times. 16 Feb 2011.

(Post by Evan Amano)