Why are young people leaving the labour market?

Economic inactivity, the proportion of people who are neither working nor looking for work, has risen since the start of the coronavirus pandemic.

This trend is evident among young people, with an increase in those who are leaving education and not entering the labour market.

This Insight discusses the rise in economic inactivity among young people, and the reasons behind this.

The rise in inactivity among young people

Between November 2022 and January 2023, 2.61 million young people (aged 16 to 24) were economically inactive according to the Office for National Statistics (ONS) Labour Force survey.

Since the pandemic, 62,000 more young people have become economically inactive, an increase of 2%. The inactivity rate for young people has risen from a pre-pandemic rate of 37.1% to 38.2%.

In comparison, the youth unemployment rate has fallen from 12.3% in January to March 2020 to 10.8% in November to January 2023. The employment rate has decreased from 55.2% to 55.1% over the same period. There has been an overall decrease of 37,000 in the number of people aged between 16 to 24.

More young people are entering education

There was a sharp increase in the number of young people leaving the labour market to start or re-enter education since the start of the pandemic.

In January to March 2021, 2.3 million people aged 16 to 24 were economically inactive and in full-time education, compared to 1.9 million in January to March 2020. Although this has contributed to the increase in youth inactivity, being in education is associated with positive effects on future income and living standards.

The Office for Budget Responsibility (OBR) predicts this divergence from the trend is likely to reverse as this particular cohort finish education and enter the labour market.  The most recent quarter demonstrates this reversal: as shown in the chart below, in November to January 2023, 1.9 million people aged 16 to 24 were in full-time education and economically inactive.

Young people not in education, employment or training

To look more closely at the changes in youth economic inactivity since the start of the pandemic, we can focus on those aged 16 to 24 who are not in education, employment or training, or “NEET”.

At the start of the pandemic, the ONS Labour Force Survey recorded a fall in NEET figures from 11.4% between January and March 2020 to 10.6% between January and March 2021. This was due to young people entering full-time education.

There has since been an increase in NEET figures as these individuals have left education but not entered work. The most recent data from the ONS Labour Force Survey show 18.1% of those aged 16 to 24 and not in full-time education are economically inactive, compared to 16.7% the year before (November to January 2022).

Those who are NEET, especially because of long-term sickness, are less likely to move into employment or study than those who are unemployed.

Young people are leaving the labour market for health reasons

According to the ONS Labour Force Survey, the largest relative increases in economic inactivity due to long term sickness between 2019 and 2022 were among those aged 16 to 24 and those aged 25 to 34. There was a 29% increase in economic inactivity among those aged 16 to 24 and a 42% increase among those aged 25 to 34 years.

Among these age groups, the largest overall increase in people with long-term sickness was due to mental illness, which rose by around 20,000 (a 24% increase).

The second largest increase was for progressive illnesses such as cancer, which rose by around 14,000 people (a 69% increase).

According to analysis of ONS Labour Force Survey figures, 25.6% of young people aged between 16 to 24 who were NEET and inactive in October to December 2022 cited long-term or temporary sickness as the reason for their inactivity. Before the pandemic, 20.5% cited long-term or temporary sickness.

Economic inactivity is increasing among young men

Research by the Resolution Foundation, a living standards think tank, found that the main reason for young men aged between 18 to 24 leaving the labour market is ill health, particularly poor mental health.

Recent figures from the Labour Force Survey support this view: in 2022, 26.0% of young men who were economically inactive and NEET cited ill health as their reason, whereas in 2019 this was 19.6%.

Economic inactivity is decreasing among young women

The biggest change among young women has been the decline in the number who are NEET and economically inactive for family care reasons. The ONS Labour Force Survey shows that in October to December 2022, 22.0% of women who were NEET were economically inactive because they were looking after the family and/or home. In 2012 this was 44.9%.

Much of this change happened between October to December 2019 and October to December 2020, when the percentage of women who were NEET and inactive due to looking after family/home decreased from 32.6% to 21.3%.

There are two factors behind the decrease in inactivity due to looking after the family/home among young women in the long run: young women are becoming less likely to have children, and the young women who do have children are more likely to be in employment.

This trend continued in 2021 and 2022, as flexible working allowed young women looking after the family/home to enter the labour market. However, there has been a recent increase in economic inactivity among women aged 16 to 24, from a record low of 9.1% being NEET in 2021 to 11.8% in 2022. According to PwC’s annual index of women’s employment outcomes, this increase in inactivity in the UK may be due to the rising cost of living and higher childcare costs.

Further reading

• House of Commons Library, Why have older workers left the labour market?
• House of Commons Library, How is health affecting economic inactivity?

About the author: Isabel Buchanan is an enquiry executive at the House of Commons Library, specialising in the labour market and postal services.

Photo Credit: Savvapanf Photo on Adobe Stock