Covid-19: how youth unemployment is taking on worrying new patterns

5 August 2021

By Hans Dietrich, Golo Henseke, Juliane Achatz, Silke Anger, Bernhard Christoph, Alexander Patzina

Despite economic and institutional differences between the two countries, youth unemployment figures in both the UK and Germany rose during the Covid-19 pandemic and reached a peak in August 2020. Since then, they have generally gone down in both countries. Three aspects are important in this regard: the total number of unemployed youth, the pattern of how young people enter into unemployment, and the length of time they remain unemployed. Our new analysis shows that not only have more young people lost their jobs, they have also spent more time out of work. Despite these similar patterns, youth unemployment in the UK has remained consistently higher than in Germany.

This two-country analysis is part of a broader European perspective.

The development of youth unemployment during the Covid-19 pandemic

After the 2008 recession, the number of young unemployed in the European Union and most member states fell from 2013 to 2019. The onset of the Covid-19 pandemic reversed this trend: youth unemployment figures rose across Europe, but with substantial differences between countries.

Figure 1 shows the number of unemployed youths for the EU, Germany, and the UK from 2005. Youth unemployment in the EU worsened during the Recession and its direct aftermath (2009-2013). Nevertheless, almost all European countries have recovered since 2013. In 2019, youth unemployment was at an all-time low. Whilst the British figures closely followed the European trend, youth unemployment in Germany was only hardly affected by the 2008 recession. Since 2005 youth unemployment decreased with only a temporary blip in 2009.

Youth unemployment figures started to rise again immediately with the introduction of containment measures in March 2020. In both countries, the number of unemployed youth rose until August 2020 and has decreased since in different patterns (see Figure 2). However, the UK’s total number of young unemployed is around twice Germany, although the latter has the larger youth labour force. Higher enrolment in post-secondary education and a smooth transition from apprenticeship training into the labour market in Germany contributed to that difference.

Increase of youth unemployment rates

Covid’s effect on youth unemployment is also evident in the country-specific rates. Germany’s level of youth unemployment has been far below most other European countries since the early 2000s, and this has not changed during the pandemic. The rate in Germany increased by 1.7 percentage points from 5.8 percent in 2019 to 7.5 percent in 2020. It remained the lowest in the EU. In the UK, youth unemployment rose by 2.1 percentage points from 11.4 percent in 2019 to 13.5 percent in 2020, but remained below the European Union average (see Table).

From a broader European perspective, the Covid-19 pandemic increased youth unemployment rates in almost all European countries, except for Greece, which was already struggling with very high youth unemployment rates (see Table).

Inflows into youth unemployment in Germany

Because of Germany’s employment protection schemes, employment in standard, open-ended contracts changed little during the pandemic. But, people on non-standard employment contracts were less fortunate. Their contracts were less often renewed and more frequently terminated than before the crisis. This is evident in an accelerated transition of young people from work into unemployment at the start of the Covid-19 period.

As the pandemic progressed, the transition rate from employment into unemployment for young people fell below pre-pandemic figures (see Figure 3). Besides inflows from work, education leavers without continued employment contributed to increased youth unemployment. Since data for the inflow into youth unemployment in the United Kingdom are not available, this analysis focuses on Germany only.

Duration of unemployment among young people is increasing

The Covid-19 pandemic did not only increase individuals’ unemployment risk, it prolonged the duration of young people’s unemployment experience. Figure 4 displays the share of long-term unemployed with more than 12 months out of work. Although the share rose in both countries, the proportion of long-term jobless youth in the UK was higher than in Germany and rose faster, which led to a widening gap over time. Whilst brief spells of unemployment during school-to-work transitions are not unusual, long-term unemployment can jeopardize future career opportunities by devaluing skills and qualifications.

Conclusion

Covid-19 has led to increased youth unemployment in Germany and in the United Kingdom since March 2020.

Job loss contributed to rising youth unemployment only at the very beginning of the pandemic. Later in the pandemic, the inflow into youth unemployment was mainly fuelled by transitions from vocational education and training or university into unemployment..

However, the level of youth unemployment rose not only because more people lost their jobs. Young people also spent longer periods out of work, which means later outflow out of unemployment. Above all, this increase of long-term unemployment poses a fundamental challenge for the labour market policy all over Europe, since it bears the risk of leaving deep scars in the lives of many young people.

Funding for this research is provided by the Economic and Social Research Council as part of their rapid response to Covid-19 (ES/V01577X/1). The project is a collaboration  of the University College London with  the Institute for Employment Research (Institut für Arbeitsmarkt- und Berufsforschung). We are grateful for the valuable inputs of our project team and collaborators. The views expressed here are the authors’.