Youth unemployment: A million reasons to act? Tony Wilson Centre for Economic & Social Inclusion

Youth are faring much worse than adults Percentage point change in unemployment proportions

And this downturn much worse than last Percentage change in unemployment in months after peak

Particularly for long-term unemployed Percentage change in 12mth+ unempl in months after peak

This is not all a cyclical problem Proportion of young people not full-time education, not employed

In a bit more detail – year olds

In a bit more detail – year olds

Unemployment highest at 18 and 19 Unemployment by age

The policy response 1. Equip young people for work 2. Increase youth recruitment 3. Tackle long-term unemployment 4. A longer-term vision

The policy response 1. Equip young people for work 2. Increase youth recruitment 3. Tackle long-term unemployment 4. A longer-term vision

Under-achievement at heart of problem Skills mismatch – quals of new recruits and unemployed

A lot of educational reform... Drive to localise/ remove prescription Less ring-fencing Raise attainment Three elements key: Raising participation age Are more places enough? Vocational reform Implement Wolf Review in full Careers advice and guidance Are incentives, accountability right?

Financial support is important Education Maintenance Allowance Always a trade-off deadweight v impact Clear impact on retention in learning Biggest impacts on e2e, PLAs Bursary scheme One third the value Guaranteed support limited to the very few

For the short-term unemployed... JCP Offer (flexible adviser support) Get Britain Working Work experience, Work Academies Work Clubs Flexible Support Fund - £150m? Fee remission for training, Level 2 guarantee Early days...

1. Equipping young people for work Recommendations: Test outcome incentives in careers advice Accept CBI proposals on involving employers Destinations data for former learners at age 24 Expand coverage of Bursary, encourage bonuses Review use of FSF, JCP flex, SFA training...

The policy response 1. Equip young people for work 2. Increase youth recruitment 3. Tackle long-term unemployment 4. A longer-term vision

More apprenticeships are welcome High satisfaction, higher wages, more learning 440,000 last year 270,000 under But 75% of growth has been in over 25s And 16-17s basically flat Few employers offer them – 6% (NESS 2009) Not all new recruitment

2. Increasing youth recruitment Recommendations: Stronger incentives to offer to unemployed May now be happening... Simplify – e.g. roll out outcome payment pilots Expand Apprenticeship Training Agencies Risks, but can target u/e and reach SMEs

The policy response 1. Equip young people for work 2. Increase youth recruitment 3. Tackle long-term unemployment 4. A longer-term vision

The issues, and risks, are different Interventions need to address three key issues: Loss of confidence – despondency – despair Loss of skills The signal that LTU sends to employers As with all labour market interventions, there are risks: “Deadweight” – it would have happened anyway “Substitution” – stops someone else getting a job “Displacement” – job is lost/ not created elsewhere “Lock-in” – intervention delays return to work

And responses tend to focus on: Support to look for work Wage subsidies Training and volunteering Intermediate Labour Markets/ transitional jobs

Support to look for work Not just fortnightly signing... Coaching, mentoring, travel to interview, transitional costs, CRB checks/ accreditations etc Low cost, effective – good value for money But not enough on its own

Wage subsidies Low take-up: “Six Month Offer” subsidy – 8,400 payments for young people in 15 months of operation ( ) New Deal Employment Option – averaged around 10,000 payments a year ( ) Employer NICs holiday – 2,300 payments in first year (1996/7) May be awareness, level, targeting... Deadweight risks – estimated at 35% to 70% in New Deal, higher in some others (up to 85%) But long-run benefits for those that get them

Training for the unemployed Clear correlation between level of qualifications and likelihood of being in work But training for unemployed has disappointing results – “lock-in” risks often outweighing additional benefits True in UK, US, France, OECD... Within that, on-the-job training and work experience is considerably more effective than classroom training Volunteering – least effective in New Deal evaluation

Transitional jobs and ILMs Major lock-in risks – can more than outweigh benefits – and high unit costs So often highly targeted – but can reduce take-up Largest returns for low “objective” employability StepUP led to 23pp increase in employment probability for low objective/ high subjective group Often negative returns for those closer to labour market And StepUP found much smaller impacts for youth

Did Future Jobs Fund work? Inclusion evaluation: Popular with participants, engaged employers Boost to communities and VCS But... not always focused on sustainability Training often inconsistent And support from DWP insufficient Value for money: Net cost to govt £3,946 per participant £9,000 per job outcome Equates to 70 days fewer on benefits Comparable to New Deal for Young People

4. Tackling long-term unemployment Recommendation: Targeted wage subsidy scheme –new jobs lasting six months Must go with the grain of Work Programme £2,000-3,000 would create a six month job: Covers two thirds of total costs One third recouped through existing WP funding model In-work support and training With jobsearch support near the end of the job Learn lessons – maximise private sector role, sustainability

The policy response 1. Equip young people for work 2. Increase youth recruitment 3. Tackle long-term unemployment 4. A longer-term vision

The system was broken in 1980s Now too disjointed, too much responsibility, not enough accountability A single Youth Employment and Skills service JCP support and benefit system for 18-24s Funding for education, adult skills for under-25s, large majority of Apprentice money, outreach Underpinned by “Universal Youth Credit” To maximise attainment, employment and opportunity: 90% reaching Level 3 and 100% Level 2, by age 24 5% not in learning or employment at any one time 80% employment rate for those not in full-time learning

Centre for Economic & Social