Youth unemployment policy, so far...
18 March 2014
Tackling the UK’s youth unemployment crisis is one of the most pressing issues facing the Coalition Government. Given their first response had little impact it’s worth considering whether recent announcements will fare any better.
The Youth Contract
With youth unemployment at over a million in April 2012, ‘The Youth Contract’ was the centre-piece of the Government’s response. This included wage subsidies for employers taking on young people, as well as increased funding for apprenticeships, work experience placements and internships. Collectively, the schemes included under The Youth Contract banner were worth £1 billion over three years.
Yet, statistics released in February show that the Youth Contract has had limited impact. Take, for example, the wage subsidies. The Government allocated £374m to these over a three year period – which would amount to just over 160,000 wage subsidies of £2,275 each (or 4,000 each month for three years), paid when a young person on the Work Programme is employed for six months. Between April 2012 and November 2013, only 4,100 such payments were made.
While the number of eight week interim payments (which are available to small companies) has risen markedly since March 2013, it is still extremely unlikely that the scheme will reach anywhere near the desired level of take-up. Even if take up was to triple over the remaining two years of the scheme, the total number of young people achieving six months of employment through the scheme would be only 25,000.
Source: Department of Work and Pensions. Available here.
The Coalition Government has emphasised apprenticeships as a key mechanism to tackle youth unemployment. As such a key element of the Youth Contract concerned apprenticeships; specifically, the provision of 40,000 £1,500 grants available to smaller companies taking on an apprenticeship. This programme fell slightly short of its target but this is only a small part of Government spending on apprenticeships – the main source is subsidies for training for young apprentices. So, it is probably fairer to judge the Government’s performance in this area by looking at the impact of apprenticeships overall, not just this particular scheme.
Source: Skills Funding Agency. Available here.
Even with a wider lens, however, it is clear that the apprenticeships system has not played a significant part in reducing youth unemployment. The majority of the increase in apprenticeships in recent years has gone to the over-25s. The number of people aged under-19s starting apprenticeships is actually lower in 2012/13 than it was in 2009/10.
Therefore on two key fronts the Government’s policies to tackle youth unemployment have been ineffective. The Government’s short term measure to get more young people into work, the wage subsidies, has suffered from very low take up. It is concerning that £2,275 has been insufficient, but it suggests that stronger action was required. Secondly, while the growth in apprenticeships over the last five years has been welcome, it has mostly bypassed young people.
In a second part of this blog, I look at what the Government plans to do next. I would also like to flag up that we will soon release two new papers on youth unemployment: one on the geographic variation in rates across the UK, and one on youth unemployment in London.