Youth unemployment is an existential crisis for Britain
Without action we risk leaving a generation on the scrapheap
Authored by: Alan Milburn, Former Secretary of State for Health and Social Care, and Chair of the Independent Review into Youth and Work
Three months ago, I started a government-commissioned independent review to understand why a million young people in the UK are not in education, employment or training, and what needs to be done to tackle it. I agreed to do this because it is essential to the future of the country and the lives of those young people scarred by being left on the scrapheap.
The first months have shown me that, if anything – I underestimated the scale of the problem. It is complex, and shocking. I’ll share fuller findings over the next six months, but I want to use this space to test early thinking, invite challenge and platform the voices of experts, young people and the projects working hardest to support them.
Today’s context is unlike anything the country has faced before.
Three Labour Eras
Since the late 1970s, the UK has lived through three major labour market transitions. We failed the first – deindustrialisation. We bought our way through the second - the knowledge economy and globalisation. Now we face a third technological revolution. To successfully manage this transition, for the first time Britain must do what it has always said it wanted to do but never fully delivered – upskill and develop all of its own people to meet the needs of an economy set to be disrupted like never before.
Era 1: Deindustrialisation (1979–mid‑1990s)
The scale of industrial collapse in the 1980s is hard to overstate. In 1970, 8.2 million people worked in manufacturing1. A million of these jobs had already gone by the time Margaret Thatcher rose to power. Within four years (1979-1983), another 1.5 million disappeared – a pace of job destruction unparalleled in peacetime. By 2007, manufacturing employment had fallen below 3 million2.
For many communities, this was an extinction level event. Communities built around a single industry – coal in South Wales, steel in Teesside, shipbuilding on Clydeside – saw entire occupational structures vanish. As a young man growing up in Benwell in Newcastle’s west end I saw the destruction at first hand and the resulting mass unemployment
Incapacity benefits (then, as now) paid more than unemployment benefits3. For an older man in Barnsley or Merthyr Tydfil with a bad back and no realistic prospect of a job, the rational move was obvious. The benefits system made incapacity the path of least resistance in the absence of jobs. The main labour market adjustment to industrial decline was not unemployment but withdrawal into ‘permanent sickness’
Incapacity became a self-fulfilling prophecy.
And here is my honest verdict on what happened next: Britain chose the easy path over the right one. We lacked the imagination to ask what these communities could become. We lacked the ingenuity to build the bridges that might have got people there. Instead, we did what was administratively convenient - we absorbed people into the benefits system, closed the door, and called it a solution. Out of sight, out of the labour market, out of the national story.
The places that lost their industries became the places with the worse life expectancy, higher rates of chronic disease, poorer mental health, with millions trapped in economic inactivity.4 When Britain faced the most profound structural economic change since the war, the state had no positive answer. What it had was the benefits system. And so, the benefits system became the policy.
Era 2: The Knowledge Economy (late 1990s–2010s)
The second era under New Labour was more of a success story. Between 1997-2007, GDP grew by approximately 3% a year 5– one of the longest unbroken expansions on record. Public investment – up6. Child poverty – down7. Minimum wage raised pay at the bottom without reducing employment8, and youth unemployment was taken seriously. The New Deal for Young People genuinely increased job entry rates9.
But the underlying weaknesses never went away. Welfare reform remained incomplete. The labour market polarised into what economists called “lovely and lousy jobs” - high skill professional roles at the top, low wage insecure service work at the bottom, and the decent mid-skill jobs that once sustained working communities hollowing out in the middle10. Between 1998-2017, London’s economic output grew by 70%.11 Places like the Welsh Valleys remained far below the national average.
The lesson of this era is simple and uncomfortable: headline growth can coexist with deep structural exclusion. Booming cities and rising migration masked the fact that too many communities lost out and were left behind.
Era 3: The Current Crisis
Today, something genuinely new is happening. Three developments are colliding to create a challenge unlike anything before.
1. Youth inactivity is structurally different
Youth unemployment has always spiked in downturns, but young people remained available for work and returned when conditions improved.
What is truly worrying today is that the majority of our NEET population are classified as economically inactive rather than unemployed. Even accounting for the huge number of young people who want to work but are prevented from doing so by barriers such as mental health conditions, many are not looking at all.
The fastest growing group on health-related benefits is under-35s. The share of 25-year olds on these benefits has risen by 4.9 to 7.0%.
12
This time we are not failing to reskill people who lost industrial jobs. We are not even giving them a chance in the first place.
2. The labour supply shortcut has closed
For decades, Britain could avoid building its domestic skills base because migration provided ready-trained workers. Net migration reached 944,000 in the year to March 202313 while employer investment in training per worker fell by more than a third since 200514.
Why invest in an 18 year old with no experience when a fully skilled 25 year old could be hired from abroad?
That shortcut is now closing as net migration levels plummet. But restricting migration does not automatically reverse two decades of declining employer training investment. All too often employers benefit more from poaching trained workers than training their own. We need active policy interventions to break that logic.
3. Technological disruption is accelerating
Nobody knows whether AI will destroy or create jobs over time. History suggests new technologies create more in the long run - but transitions can be painful, prolonged and never automatic.
Those most at risk are the people the system is already failing: those with no qualifications, no professional networks, no savings to retrain. The uniquely British problem is not AI itself. It is that we enter this transition with weak vocational training, declining employer investment in skills, a poorly designed welfare system and a million young people already outside the labour market. We are not prepared as a country for the disruption that is coming.
The choice before us
Each of these developments would be serious in isolation. Together, they are an emergency.
More and more young people are falling out of the labour market before they ever enter it - often in the very same areas that lost their industries forty years ago. Migration, the labour supply mechanism that once masked underinvestment, is closing. And we face a technological revolution that will reward adaptability precisely when our education and skills system is doing too little to generate it..
We must learn the lessons from labour market history. The pattern is clear. In the first transition, we failed and paid the price for decades. In the second, we papered over structural weaknesses with growth and migration. Today we cannot afford to fail to get it wrong again when we already have a generation who are often on benefits before they’ve ever held a job. This is not a cohort nearing retirement. It is a generation just starting out. If we fail them now, we pay for it for the next forty years. No migration boom to hide behind. No growth cycle to paper over the cracks. Just the bill. Avoiding that will require a system reset – from education, through health to welfare and the labour market.
In future posts I will set out ways in which we can ensure that a generation on the scrapheap is not destiny. It is a choice. And we can still make a different one.
Footnotes:
1 C Deb, 20 July 1978, vol 954, col 373. Available here: https://hansard.parliament.uk/Commons/1978-07-20/debates/8d6128cd-ec81-409b-a4e2-ed125332f96d/ManufacturingAndServiceIndustries
2 ONS, UK Workforce Jobs SA: C Manufacturing. Available here: https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/timeseries/jwr7/lms
3 See: IFS, Comparing weekly incapacity benefits and unemployment benefit levels over time, March 2025: Available here: https://ifs.org.uk/data-items/comparing-weekly-incapacity-benefits-and-unemployment-benefit-levels-over-time
4 https://www.economicsobservatory.com/how-has-deindustrialisation-affected-living-standards-in-the-uk
5 https://www.ons.gov.uk/economy/grossdomesticproductgdp/timeseries/ihyp/pgdp
6 https://ifs.org.uk/taxlab/taxlab-data-item/uk-government-spending-over-time
7 https://ifs.org.uk/sites/default/files/2024-10/Child-poverty-trends-and-policy-options_1.pdf
8https://assets.publishing.service.gov.uk/media/5c9e0e72e5274a527faae38a/20_years_of_the_National_Minimum_Wage_-_a_history_of_the_UK_minimum_wage_and_its_effects.pdf
9 https://www.nao.org.uk/reports/the-new-deal-for-young-people/
10 https://blogs.lse.ac.uk/politicsandpolicy/lovely-and-lousy-jobs/
11https://www.ons.gov.uk/economy/grossdomesticproductgdp/datasets/regionalgrossdomesticproductallnutslevelregions: Table 10-11
12 https://ifs.org.uk/sites/default/files/2024-07/Recent-trends-in-and-the-outlook-for-health-related-benefits-PDF_1.pdf
13 https://commonslibrary.parliament.uk/research-briefings/cbp-10446/#:~:text=The%20updated%20estimates%20now%20have,the%20year%20ending%20June%202023.
14 https://learningandwork.org.uk/falling-short-understanding-further-falls-in-employer-training/#:~:text=Employer%20investment%20in%20training%20continues,almost%20one%20quarter%20(23%25).
We can debate the structural failures, and we can imagine structural solutions - reducing the cost of hiring, incentivising employer investment, reforming welfare conditions. But these remain symptomatic fixes, not cures. They address the moment of entry into the job market, not what's missing long before it.
Because the structural failures you describe have compounded into a single psychological outcome: a generation that has never been given a reason to believe the economy was built for them. The NEET crisis isn't primarily a skills problem. It's a confidence problem. It's an agency problem. Twenty years working at the intersection of youth mental health and employment tells me these aren't separate crises - they're the same one. No traditional qualification framework, however well designed, solves for that.
Recent research from Starling and Tapestry names this precisely: a 'culture of futurelessness' - not apathy, but a structural failure to produce credible stories about what lies ahead for young people collectively. Their data shows a cliff edge of optimism at age 16, after which fear of the future accelerates sharply. What replaces collective hope is the privatisation of it - young people retreating into individual resilience because shared progress no longer feels real.
The golden pathway needs a parallel, not a competitor - one with genuine product market fit for the young people the current system was never designed to serve. That pathway has to start earlier, feel different, and be sequenced around belonging and agency before it asks anything of young people in return. It needs to offer a third space for young people to explore who they are and the roles they can play, together, away from the competitive individualism that's been the operating system for forty years.
The question for this review isn't whether such a model is possible. It's why it isn't yet infrastructure. Since launching in October last year, I've seen 41 young people come through my business NWC (New Working Class) and come alive - finding the self-worth, role definition and real work experience that means they are ready to participate in the economy and their community. Not because we fixed them. Because we started with belonging. In a short pilot it has demonstrated the power of prevention, so they choose not to fall into the psychological void between education and employment.
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