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Youth unemployment in the Autumn statement: how does it stack up?

Today the Chancellor delivered his 2013 Autumn statement. Contained within the announced measures were several that, taken together, serve as a refresher of the coalition’s approach to tackling youth unemployment. Since youth worklessness and NEET-hood remains dizzyingly high in the UK, even as the rest of the labour market has recovered, some change in policy is definitely needed.

Firstly, he announced that 16 hours of training in English and maths for those that do not currently have a level 2 qualification in those subjects will be mandatory from the first day of claiming JSA. While most people will understandably be surprised that this isn’t already standard practice given the importance of basic skills to securing work, it actually signals quite an important shift in the UK’s employment policy regime. It recognises that a work-first option is not always appropriate for every job-seeker, and allows them to continue claiming while learning. While its delivery was couched in harsh rhetoric about the ‘culture of worklessness’, many young job seekers will genuinely benefit from this change. This should have been expanded to cover other forms of training, and accompanied by a separate youth allowance that young people claim instead of the standard suite of out-of-work benefits, as my colleague Graeme Cooke has argued in a recent paper.

Secondly, an extra 20,000 apprenticeships are being created. We need to see the detail, but so far the coalition’s apprenticeship performance has been good in terms of total numbers, but extremely weak in getting apprenticeships to those who need them most – particularly school-leavers, for whom apprenticeship starts have actually fallen. Without a change in approach to apprenticeships, so that young people rather than adults benefit from them, simply announcing more funded places is unlikely to do very much.

Finally, he announced the scrapping of employer NICs contributions for the under-21s, at a cost of £465 million in lost revenue. The argument for doing so is that young people are not being hired because they are too expensive, so reducing the costs to employers makes taking on a young person more feasible for many employers. While there is some truth to this logic, there are several factors that mean this scheme might not be all it’s cracked up to be:

  • It is worth noting that another policy, the Employment Allowance, is already granting 450,000 of the smallest businesses a temporary reprieve from paying any national insurance at all. Today’s announcement will do nothing to change their hiring behaviour.
  • This is unlikely to help those young people looking for a part-time job, since you have to be earning over the NICs threshold (currently £148 a week) before you and your employer start to pay in. Recent research published by IPPR found that having had a job while studying has an enormous positive effect on your chances of being in work once you leave education. If we want to encourage greater student employment, this is not going to do it.
  • It is already cheaper to hire under-21s, because of the lower minimum wage for this group. Interesting recent evidence from the Incomes Data Service on pay awards in the private sector finds that actually employers typically pay the young more than the youth minimum wage, often because they do not distinguish between employees based on age. This is particularly the case in larger employers (those who stand to gain from the announcement), and suggests that pay rates and the cost of taking on young people may not be the primary factor behind youth unemployment. It is likely that something more fundamental regarding the skills of young job-seekers is the issue. The danger is that this NICs cut gives a lot of money to these large employers but does not change their hiring behaviour.
  • Finally, given the qualifying factors outlined above, would it not be better to have spent these limited resources on another policy trying to tackle youth unemployment? They could have, for instance, offered more than just basic skills training to young job seekers from day one of a JSA claim, perhaps by creating apprenticeship training opportunities targeted solely at the young. Or they could have put it towards a job guarantee – which would offer vital work experience to long-term unemployed youth. As we are so often reminded, we live in an age of limited public resources, which makes scrutiny of tax giveaways such as this NICs cut all the more important.

Make no mistake, youth unemployment is a national emergency. While the new measures announced today are not going to solve it in one go, broadly they are welcome. In particular, the announcement on skills provision for young job-seekers points towards a much-needed reconfiguration of how the welfare state interacts with the young. For the more than a million young people who are NEET right now, the slow pace at which policymakers have come round to the solution must be frustrating.

By Nick Pearce and Spencer Thompson, economic analyst at IPPR

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One Response to Youth unemployment in the Autumn statement: how does it stack up?

  1. Mick Fletcher says:

    I don’t think you’ll find that he announced a compulsory 16 hours of English & Maths – that would be a cruel and unusual punishment. He announced compulsory English & maths but no more than 16 hours in a classroom i.e. the 16 hour rule stays in place. The much trumpeted ‘relaxation’ of the rule for traineeships relies on the fact that providers couldn’t afford to deliver anywhere near 16 hours of decent classroom study – its mainly work experience & capped at 6 months. Not even a step towards a youth allowance model.