A NEW study by a Scottish academic has revealed the profound and destructive effect that unemployment is having on the nation's youth.

The findings of professor David Bell of Stirling University show that graduates are being forced by the recession to take jobs far below their skill levels and as a result less well-educated young people are being squeezed out of the job market.

Many of the most highly qualified Scottish graduates are “trading down” in their hunt for a first full-time job and as a result their careers may never recover. This is having knock-on effects all the way down the jobs market, increasing the problem of a permanently unemployed underclass at the bottom.

As part of a new book published by the International Labour Office and the World Trade Organisation, Making Globalisation Socially Sustainable, Bell and Professor David Blanchflower of Dartmouth College analysed global employment statistics from the past six years. They found that trading down has become increasingly common since 2008, and is particularly stark among those in the 16-24 age group. The problem is exacerbated by older workers, established in their careers, being unlikely to move jobs during the recession.

Bell said: “Part of the trading-down story is that there’s a shortage of jobs. When there’s a shortage of jobs, people will cut their expectations of the kind of wages they could expect. They’ll decide the situation is bleak and it’s not worth waiting and they’ll trade down.

“This is the first generation where you are seriously wondering, ‘Will the living standards be as high as the generation before?’ And the longer the recession goes on, the less hopeful you can be.”

Taken with the most recent unemployment figures – the first since it became certain that the economy is turning downwards – the new findings look particularly worrying.

Overall unemployment in the UK now stands at a 17-year high with 2.57 million, or 8.1%, out of work, and youth unemployment at 991,000, or 21.3 %. In Scotland, overall unemployment is at 212,000, or 7.9%, and youth unemployment at 41,625, or 8.3%.

Robin Parker, NUS Scotland president, said: “It’s clear that more graduates are taking on lower-skilled jobs than they have in the past in order to get by. In these difficult economic times, many graduates have no choice but to take on any job they can get to keep up with payments on commercial debt they were forced to take on while in study.”

He praised the Scottish Government’s proposed minimum student income to reduce the need for students to take on large debts, and its pledge to guarantee every 16- to 19-year-old the right to be in education or employment, but said they had to ensure the guarantee was sufficiently funded.

David Watt, executive director of the Institute of Directors Scotland, said the professors’ research had highlighted a “massive issue” that would be made worse by the ageing population, and said employers had an important role to play.

“I have just returned from Japan,” he said. “I found that they are almost over-employing people to ensure that services are delivered well. We have been through 20 years of cutting back employment levels and I’m not sure it’s producing better service. There’s also an opportunity on the high street, since most of our shops could be open for a lot longer. We’re still very traditional and close at six o’clock.”

Richard Baker, Scottish Labour finance spokesman, said the findings were worrying for the Scottish economy. He said: “Our economy cannot compete as a low-skilled economy, it has to compete as a high-skilled economy. The Scottish Government needs to respond to this, especially given last week’s rises in unemployment and youth unemployment.”

He called for a cut in national insurance payments for employers of young people – echoing a suggestion made by Bell – and said that Labour wanted to see a temporary cut in VAT to stimulate employment.

He also called on the Scottish Government to expand the Future Jobs Fund from the voluntary to the private sector.