UK needs growth to combat youth unemployment
The number of young unemployed people dropped slightly in in the first quarter of 2012 - down by almost 20,000 on the previous quarter.
This drop is good news, if rather baffling given the economy’s slide into double dip recession. However, the total number of young people out of work remains over a million. The million figure is not meaningful in and of itself (especially since it includes around 300,000 full time students), but it should keep the issue in the headlines, and at the forefront of politicians’ thinking. Youth unemployment remains a crisis, and the Government remains under pressure to act.
This week it did. Nick Clegg announced a tweak to the wage subsidy being given to young people as part of the ‘Youth Contract’, launched earlier this year. In twenty youth unemployment ‘hot spots’ the subsidy will be available to young people sooner – after they have been claiming benefits for six months rather than nine. The rationale is surely that in places where the jobs market is extremely tough, the damage to young people’s future job prospects may have already been done by the nine month mark, and earlier intervention may help to prevent this.
It is good that the Government recognises youth unemployment as an ‘uneven’ phenomenon. Numbers are much higher in some parts of the country than others, which makes targeted intervention in these places worthwhile. For example, the rate of young people claiming unemployment benefits in Hartlepool and Blaenau Gwent, two of the areas identified, is more than double the national average (more analysis of the youth unemployment data can be found in The Work Foundation’s recent Missing Million report). Rates of unemployment among young people also vary by sex and race, but it is hard to imagine a targeted Government intervention along these lines.
This intervention does raise some interesting questions. First is the impact on access to the wage subsidies. The Government has budgeted for 160,000 wage subsidies. It expects these to be used roughly evenly over the course of the next three years, despite calls from ACEVO for the scheme to be frontloaded to ‘bazooka’ the problem. That means around 55,000 wage subsidies this year. There are currently roughly 100,000 18-24 year olds who have been claiming JSA for over 9 months. On the face of it, then, there will be stiff competition among the various Work Programme providers to secure the wage subsidy for their young ‘customers’, because the subsidy makes it much easier for them to secure their success fee (which still applies, and which is worth up to a maximum of £3,700 for an 18-24 year old).
The Government has not said anything specific about how the 55,000 wage subsidies will be allocated, given there are not enough to cover all the relevant young people. It also appears there is no geographic ring fencing applied. This means that extending the offer in the 20 hot spots could draw funding away from other areas, since Clegg did not announce any additional funding to go with the extension of the scheme, and since the ‘hot spot’ Work Programme providers will be able to use more of the overall allocation. Moving the eligibility from nine to six months increases the pool of potential subsidy claimants by about 50 per cent.
Nevertheless, this is probably no bad thing. The youth unemployment ‘hot spots’ have been identified as such for a reason. Young people in these areas are facing extremely tough job markets, and it is right that they get more help.
In fact, it is possible that part of Clegg’s rationale for extending the programme is a concern that there is a lack of demand for the wage subsidies. Previous wage subsidy programmes have suffered from low take up; a programme in 1995 (which admittedly offered less generous subsidies) only secured jobs for 2,300 young people, some way short of its 130,000 target. Furthermore, recent leaked figures from A4E, a Work Programme provider, showed that they are struggling to find people jobs, falling far below their targets. It does not reflect well on the Government for its flagship employment programme to fail, and extending the subsidy for young people is one way of boosting the numbers.
We have our own ideas about what Government can do to tackle youth unemployment. Our ‘six point plan’ includes:
1. Improve national coordination. Youth unemployment currently falls between the cracks of various ministries – namely DWP, Department of Education, and BIS. It would be more effective for one body to have complete oversight of the transitions young people make from education into work. We suggest a Youth Unemployment Unit (much like the successful Cities Unit) to be run by a high profile minister (Nick Clegg, with his clear interest in the area, jumps out as a potential candidate).
2. Improve local coordination. If there are cracks at the national level, there are more at the local level. The fragmentation of local services for young people is an obstacle to bringing young people and potential employers together.
3. Bring more people into the system. The Youth Contract, which is laudable, only applies to those young people claiming benefits, and a large proportion (around a third) of young unemployed people do not. It may be helpful for George Osborne that young people are not availing themselves of the nation’s welfare budget, but it means it is very difficult for national and local services to find these young people and support them back into work.
4. Tackle transport barriers. The high cost of transport means many young people are trapped looking for jobs in a very narrow area. This is very problematic for young people in areas of high unemployment. Help with transport costs would be an easy thing to do, and could have a quick impact.
Ultimately, however, all employment initiatives require jobs for people to go into. The recent anomaly of more jobs with a shrinking economy is unlikely to continue for long. It is therefore imperative that the Government is more active in its pursuit of growth. If we’re to tackle the crisis of youth unemployment, this has to be the top priority.