UK improves opportunities for young workers, but faces longer term challenges from automation

  • UK reaches best ever position in PwC’s Young Workers Index, 18th out of 35 OECD countries
  • Over next 15 years, up to 28% of UK young workers’ jobs could be at risk of automation, compared to 39% in US, 38% in Germany and 24% in Japan
  • New technologies will create many new jobs, but educating and training young people to enable them to move flexibly between careers as technology evolves will be critical
  • PwC’s technology degree Apprenticeship programme to provide local young people with a career pathway in technology

The UK could boost GDP by £43 billion if it reduces the number of young people not in education, employment or training (NEET) to match Germany, the best performing EU country. That would be equivalent to a GDP increase of around £7,500 per 18-24 year old, according to estimates in PwC’s latest Young Workers Index.

This year the UK reached its highest position since the Index began in 2006, climbing to 18th out of 35 OECD countries from 20th last year. The UK’s improvement reflects lower youth unemployment and NEET rates as the economic recovery from the financial crisis has continued, but it still lags behind many other OECD countries, with Switzerland, Iceland and Germany leading the pack.

Performance is varied across England, due to differing labour market opportunities and levels of educational attainment. The South of England has the lowest NEET rates amongst young people at 12% in the South East, South West and East and 13% in London. This compares to 21% in the North East, 16% in the West Midlands, Yorkshire and the Humber and 15% in the North West.

Matthew Hammond, PwC’s Midlands Regional Chairman and Birmingham Office Senior Partner, said:

“It’s encouraging that the UK has improved young people’s job prospects significantly in recent years, but the levels of young people not in education, employment or training are still too high relative to top international performers like Germany where there are better vocational education systems.

“Regional disparities in NEET rates also remain a concern. If the Midlands is to ensure regional prosperity in a post-Brexit world, more has to be done to ensure we close the gap with the South East and with our European competitors in places like Switzerland and Germany.”

PwC’s research also finds that, by the early 2030s, up to 28% of the existing jobs of young UK workers aged 16-24 could be at risk from automation, but new AI-related technologies will also create many new employment opportunities.

Across the UK as a whole, 30%of  existing jobs could face automation over the next 15 years, so ensuring young workers have the appropriate education and training to take on jobs will be crucial to maximising the UK’s long terms economic potential.

Across larger OECD countries the estimated percentage of existing jobs at risk of automation for younger workers aged 16-24 ranges from around 20% to 40%, with 24% of jobs at risk of automation for young workers in Japan, compared to 38% in Germany and 39% in the US.

Currently, nearly a quarter of 16-24 year olds (24%) in the UK are employed in the wholesale and retail jobs sector where the potential risk of automation could be as high as 44%. Workers in this sector also tend to have lower educational attainment and qualifications, potentially limiting their ability to move flexibly between industries and into new jobs in response to automation. Transport and manufacturing are other sectors facing high risks of automation, particularly for male workers with lower education levels.

In contrast, PwC analysis finds only around 5% of young people are employed in industries demanding science, technology, engineering and mathematics (STEM) skills, which could be long term beneficiaries of new digital technologies such as AI and robotics.

Matthew Hammond commented:

“Empowering young workers to succeed in an increasingly automated world will be crucial to the long-term success of the UK economy.

“For the UK to prosper we need to invest in creating a vibrant Tech sector right across the country and develop more people with the skills needed to help businesses transform.

“The demand for technology skills is rapidly increasing, while the pool of available Tech talent is shrinking. PwC’s recently announced technology degree apprenticeships with the University of Birmingham,  is an exciting way for us to start to grow the future of the UK’s technology industry and to open up these careers to a wide range of students, offering a clear pathway to meet the skills demands of the future.”

Looking at data for a number of OECD countries including the UK, PwC found education levels are a large factor in determining who is most susceptible to the rise of automation.

Some 50% of male young workers with educational attainment of  GCSE-equivalent or lower, are at greatest risk of automation, compared to just 10% of men with university degrees.

Women are on average, believed to be less susceptible to automation, with around 30% of  those with GCSE equivalent or lower most at risk compared to 9% of women with university degrees. This reflects higher female employment in sectors like health and social care that are relatively harder to automate.

Jon Andrews, Head of Technology and Investment at PwC UK, said:

“Our research shows that the impact of technology advances on jobs will be felt more profoundly by some groups than others, with education level a key differentiator.

“As new technology advances bring innovation we need to be careful that the impact of this is progressive and does not create barriers. Businesses have a critical role to play in creating the jobs and helping the UK workforce build the skills of the future.

“The future success of the UK economy will rely not only on technology innovation, but crucially combining this with the right human insight and business understanding.”

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