Youth unemployment and the Government’s Youth Contract

Youth unemployment is not a new problem. Successive governments have tried to tackle the issue but with limited success. Youth unemployment has not fallen below 500,000 in the last 30 years and at least one in seven young people has been out of education and work at every point during that period. The youth unemployment rate is invariably higher than the unemployment rate across the whole of the population. In part this is because younger people tend to move more frequently between jobs as they try to establish their careers; therefore at any given point in time young people are more likely to be out of work.

However, there are also cyclical and structural elements to youth unemployment and variations according to geography and between social groups.

Youth employment has been adversely and disproportionately affected by the economic downturn since 2008. A substantial recovery in the youth employment rate will not be achieved without a return to economic growth and a substantial increase in new job vacancies.

The Youth Contract is welcome as a set of measures aimed at easing the labour market disadvantage felt by a significant proportion of young people. It consists of five main elements: wage incentive payments, additional work experience places, additional apprenticeship grants, more Jobcentre Plus (JCP) adviser support and careers guidance, and a payment-by-results initiative for 16–17 year-olds who are not in education, employment or training (NEETs).

Government policies will also need to take account of structural changes in the economy which have disadvantaged young people over the longer term and which are forecast to continue for at least the rest of this decade. Action is required to ensure that young people are prepared for the types of job vacancies likely to become available. Small businesses, which will be increasingly significant drivers of economic recovery, need to be encouraged to recruit younger employees.

The new Department for Education scheme for NEETs faces a number of challenges. It is not clear that the funding for the scheme will be sufficient to allow for the intensive interventions often required to provide effective support for the most disadvantaged individuals. The Education Funding Agency which is administering the scheme needs to ensure that the supply chains between prime providers and sub-contractors operate fairly and in a way that ensures the best possible service to young people. Piloting of direct commissioning by local authorities which have existing relationships with local providers, as part of the City Deals agenda, provides an opportunity to compare its effectiveness with the centrally-contracted approach.

Extra resources for JCP to support young unemployed people are welcome. Advisers will need thorough training to ensure they make the full range of options available to young people, whether through Youth Contract initiatives or other training and skills programmes. We understand the imperative to get young people off benefits and into work but an equal focus on skills training and matching skills to the requirements of local labour markets is likely to produce more sustainable outcomes.

4

The JCP Work Experience scheme has the potential to help many young people. However, JCP should focus on the quality of placements as much as the quantity and on young people without previous work experience who are most likely to benefit from the scheme.

We favour the Sector-based Work Academy approach which combines work experience with training and the guarantee of a local job interview. Resources from the Youth Contract should be allocated to strengthening Jobcentres’ capacity to make proper assessments of likely economic growth sectors in local economies. This will enable Sector-based Work Academies to be properly targeted and increase the likelihood of sustainable job outcomes.

The Government’s wage incentive scheme is a key element in the package of measures.

However, its target of 160,000 wage–incentivised jobs for young people over the next three years would significantly exceed anything achieved before in comparable schemes. The relative simplicity of the Youth Contract scheme may be successful in encouraging take-up where other schemes have failed, but targeted regional marketing campaigns may become necessary to ensure employers of all sizes are aware of the opportunities.

Delivering wage incentives through the Work Programme has both advantages and potential drawbacks. On the plus side, it focuses support on longer-term unemployed young people and the Work Programme payment structure is designed to incentivise sustainable outcomes. However, there is a legitimate concern that it will not offer value for money. It may prove more cost-effective to deliver wage incentives via JCP. The piloting of JCP delivery in unemployment “hotspots” should allow DWP to evaluate which delivery model is most effective and to change its approach if necessary.

The Youth Contract scheme is likely to alleviate the labour market disadvantage felt by the broad youth population. However, wage incentives of the kind offered under the Youth Contract may be less likely than some previous schemes to incentivise the recruitment of young people in areas of highest youth unemployment and those in particularly disadvantaged groups. In particular, DWP will need to consider carefully whether changes to the scheme’s design will be required to promote the employment prospects of disabled people and young black men.

Improving the transition from education to work is a crucial element in tackling the labour market disadvantages which young people face. In the context of the likely rise in the education participation age in England, the Government should take urgent action, drawing on the findings of the Wolf Report, to ensure that young people are not wasting time on courses of little or no labour market value.

It remains to be seen whether the Government’s recent changes to the way in which it expects schools to provide careers advice and work-related learning in England will improve students’ transitions to employment. Schools will clearly need help in fulfilling their role and we call on the Government to help facilitate a national infrastructure to improve cooperation between schools and local employers.

A great deal of support is already available for young people who have become disengaged from education and work. However, the proliferation of schemes and agencies is not cost-effective and creates complexity and confusion about where to find appropriate support and advice. One specific measure which is urgently required and which could be quickly 5 and easily introduced is a dedicated telephone helpline for employers who wish to offer job, training or work experience opportunities to young people.

More fundamental steps are needed to streamline youth employment provision if it is to be effective. Whitehall reorganisations can be time-consuming and disruptive and may not therefore be the right solution but there is a very strong case for the Government to act now to consolidate funding streams and improve cross-departmental working to ensure the Youth Contract and broader youth employment, education and skills policies are given the greatest chance of success.