Your youth unemployment editorial (18 September) sees the crisis clearly, but reaches for the wrong tools. Placements, apprenticeships and work coaches cannot conjure jobs that do not exist. We need macro solutions to macro problems. Youth unemployment is not a crisis of skills or geography. It is insufficient government deficit spending. There is not enough money circulating to employ everyone who wants to work and that is a policy choice, not an accident.
Macroeconomists divide the economy into three sectors: government, households and businesses, and the rest of the world. One sector’s spending is another sector’s income. Put simply, government spending is income for the non-government sectors.
All transactions across these three sectors add to zero. With the UK running a persistent current account deficit, money flows continuously abroad. Unless the government runs a deficit large enough to offset that outflow, households and businesses cannot accumulate financial assets. So jobs vanish, wages stagnate, and young people bear the brunt.
Indeed, unemployment has long been used deliberately as an inflation management tool. As the US economist Stephanie Kelton notes, orthodox economic policy assumes that a certain amount of unemployment is necessary. When the Bank of England raises rates, it intends to slow activity, and the inexperienced young are always first out of the door.
So what should Labour do? Not pay employers £3,000 to hire someone that the market won’t touch (an admission that demand is absent), but become the employer directly. A job guarantee, publicly funded and locally administered, would offer anyone a job at a living wage doing socially useful work. It expands in downturns and shrinks in booms, stabilising wages precisely when the economy needs it. It is not welfare. It is work.
As a currency issuer, the UK is not constrained like a household. The question is never “can we afford it?”, but “do we have the real resources?” On youth unemployment, we plainly do.
Simon Ripton
Co-founder, Resilient Economy CIC
It doesn’t take a graduate qualification in economics to see that Rachel Reeves’s increase in employers’ national insurance contributions has reduced their ability to take on new people. She has also created a timebomb – as, by reducing the number of new people getting jobs, she has also reduced the number of people able to start paying into pensions.
What will happen if young people not in education, employment or training (Neet) never get jobs and so those not on benefits don’t get pensions? I believe the government pays the pension contributions of those on benefits, so surely they could reduce costs by putting money into creating more jobs?
How does one stop being a Neet at 24 when jobs don’t magically appear just by getting older? My son is 27 and did what he was supposed to do and got a first-class degree in a Stem subject, but now I support him on my pension. He was unable to do a placement for his degree because of Covid, and 6% compound interest means that his student loan is now a third more than when he graduated.
He has applied for almost 500 jobs, temporary and part-time roles, graduate training schemes and apprenticeships. He has even done a government-funded data technician digital skills boot camp, and is now close to giving up.
Susan West
Quorn, Leicestershire
