Archive for June, 2014

Tackling Youth Unemployment

Paul Gregg

Britain’s youth are better educated than any previous generation and desperate to work. Young people all over Europe have borne the brunt of this recession, not only in their job prospects but their wages, with young people’s wages falling to levels last seen in 1998 in the UK. The widespread problems of youth employment stem primarily from a lack of jobs but in the UK we are enjoying a mini jobs boom with employment up by over 1 million in the last two years. Yet youth remain at the margins of the labour market, getting just 12% of that increase in employment, despite them making up 40% of the unemployed. With unemployment generally falling, the critical position of young people is perhaps one of the most underappreciated factors of our labour market today. Here then the problem is of policy failure, a system that is exceptionally badly set up to meet their needs, rather than a jobs shortage or an unwillingness to work. With scarring effects on their future jobs prospects and earnings, which are add up costs to the Exchequer years into the future, this policy failure is costing us all dearly.

Not all that the government has done has failed though, for instance the raising of the participation age (RPA) to 17 has led to a substantial increase in 17 year olds staying in school. There has also been a moderate increase in apprenticeships among the young. In addition, the Work Programme has had some success at getting long-term unemployed youth into work. But the current system around the school-to-work transition has three deep seated flaws. Firstly, our system prioritises staying in education, until 18 from next year, and then switching entirely to emphasising an exclusive focus on job search, with tight restrictions on combining education and training with on-going efforts to find work. The number of young people leaving school lacking qualifications is falling but poor educational attainment and a lack of good quality vocational skills among those who don’t go to university is one of the long-standing problems, closely linked to our failure to build a better quality labour market. The Wolf Review showed that five out of ten young people reach 18 without good English and Maths, and our priority must be to put that right. But the social security system also needs to play its part for those who fall through the system. For too long, we’ve tolerated a situation where a system designed for adults actively dissuades young people who don’t have the skills they need for work from addressing that gap at the start of their careers.

Secondly, our system leaves young people lacking any work experience, except for apprentices. Young people need guaranteed work, which helps gets them back into the labour market, with a CV and work experience to bring to future employers. Any set of reforms seeking to address youth unemployment needs to support work experience, either combined with formal training as a Traineeship or through a work experience programme.

Thirdly, no government agency has an extensive reach into or engagement with employers. The governments hiring subsidy to employers was an outstanding policy failure with almost no take up. This was essentially because there was no agency responsible or capable of marketing the programme to employers and helping with addressing the bureaucracy. This was the role of Job Centre Plus in the past but now it is only concerned with monitoring and supporting job search by claimants; recruitment has gone on-line and employer engagement disappeared.  Work Programme providers and other bespoke private organisations are building such links but they are designed for single purpose functions and are not open to the government to engage employers about any new policy drive.

The media focus of the proposals outlined by Ed Miliband last week was on the means testing of unemployment benefits, but at its heart the proposals are for a phasing out of continuing education, training and work experience, with required and supported job search between the ages of 18 and 21. It can be seen as combining the old Educational Maintenance Allowance, which only required education participation, with benefits requiring job search. At younger ages those with poor qualifications combine study with workplace based training and job search. At older ages or for those with decent qualifications the focus switches to work experience and job search, whilst for those aged over 21 the focus is again exclusively on effective job search until long-term unemployment becomes a risk, when the Job Guarantee will kick in.

Thus these proposals have two important elements for improving the current model. A phased move away from education to focus exclusively on job search: for those with poor qualifications, little training and no work experience, combining efforts to redress these shortcomings, whilst maintaining job search. Plus a central role for work experience. The third element remains to be clearly addressed, that is how to gain employer engagement with this new model. For me this should be led by local partnerships formed from schools, FE colleges, local authorities and employers who should oversee the tracking and engagement of young people at risk of becoming NEET and engaging employers about apprenticeships, traineeships and work experience and, of course, hiring young people.


GCSE Students of England – Focus!!

Simon Burgess

The next few weeks might be a horrible time of year if you are 15 or 16. There are some big decisions coming up. One the one hand: the final exams for the GCSE courses, completing two years of work leading up to this moment.  There is a lot of studying still to do, notes to be read, exercises to be worked through, understanding to be really nailed down. Final revision.

But on the other hand: the World Cup. In Brazil. England qualified, and while no-one thinks of England as favourites … who knows? Who would want to miss watching Gerrard and the team confounding the pundits and cruising into the semis?

What to do? This is a classic question of time preference: jam today (watching the game) versus jam tomorrow (getting the grades and higher lifetime income). What is the trade-off between grades and goals?

Our research < > can help. We have studied < > the decisions of about 3.5m students facing this dilemma in previous summers. We compared the GCSE performance of as-good-as-identical students in years with World Cups (or the European Championship) and years with no exam-time distractions.

On average, grades were slightly lower in World Cup years. We interpreted this as some students taking some time out from studying to keep an eye on the tournament. While there are other possible explanations, our statistical techniques rule out more or less everything else.

That’s on average. Some groups of students saw sizeable declines in their grades. Again, the interpretation of this has to be that they prioritised the tournament and seriously cut down on study time.

How much does this matter? It depends on how close to the key borderline the student’s performance is likely to be.  Achieving at least 5 good passes (C grade and above) including English and maths is widely regarded as a necessary minimum for further education or getting a good job. For students who are near this borderline, a grade or so either way matters a lot.

Missing out on 5 good GCSE grades can be very costly. Estimates suggest an average total lifetime cost of around £30,000. This seems a very hefty price to pay for watching some football.

The moral of all this research and numbers: if you are likely to be close to the 5 Cs borderline, stick with the studies, let others suffer the pain of watching England, and get the grades. In the future, you will have earned the money – and the right – to sit back and fully enjoy World Cups.


Grammar school systems increase inequality

Lindsey Macmillan (IOE), Matt Dickson (University of Bath), Simon Burgess (CMPO)

The role of grammar schools is still a hotly contested topic in education policy in England. We contribute to this debate by showing that earnings inequality is higher under a selective system in which pupils are allocated to secondary schools based on their performance in tests at age 11. While selective systems have declined since their heyday in the mid-1960s, a number of areas retain a selective system and some believe < > that this system should again be expanded.

In our recent paper, we moved away from typical questions around grammar schools such as whether access to them is fair (it isn’t) and what the impact of grammar schools is for the marginal student (debatable), to ask about the longer term impacts of these type of systems on earnings inequality.

Using a nationally representative panel data source, Understanding Society, we considered the adult earnings distributions of over 2500 individuals born between 1961 and 1983, comparing those who grew up in an area operating a selective schooling system to those who grew up in very similar areas operating a comprehensive schooling system.

We ensure that the areas we are comparing are very similar by matching areas that are comprehensive to selective areas based on the average hourly wage, unemployment rate and proportion of private schools in both areas. The rich data source also allows us to control for things that may be driving the choice of area and the later earnings distributions, such as parental education and occupation when the individual was 14, gender, age, ethnicity and current area of residence.

We therefore compare the adult earnings of people who have very similar characteristics, live as adults in very similar areas and grew up in very similar areas: the main difference being that one area operated a selective system and the other a comprehensive system.

When we consider these two groups then, we see that earnings inequality is greater for those who grew up in areas operating a selective system compared to those who grew up in comprehensive areas. Comparing individuals of similar characteristics, the variance of earnings (2009-2012) for those who grew up in selective areas is £29.22 compared to £23.10 in non-selective areas. Put another way, the difference in pay between those at the 90th percentile of the wage distribution and those at the 10th percentile for those who grew up in a selective system is £13.14 an hour compared to £10.93 an hour in comprehensive systems.

On a personal level, if you grow up in a selective system and end up with earnings at the 90th percentile, you earn £1.31 more an hour (statistically significant) than the similar individual who grew up in a comprehensive system. At the other end of the scale, if you grow up in a selective system and don’t do so well – earning at the 10th percentile, you earn 90p less an hour (statistically significant) than the similar individual who grew up in a comprehensive system.

We can also compare the 90-10 wage gap between selective and non-selective areas to the overall 90-10 wage gap in the sample. As noted, in selective areas the 90-10 wage gap is £2.21 an hour higher than in comprehensive areas. This accounts for 18% of the overall 90-10 wage gap in our sample. So selective systems account for a large proportion of inequality in earnings. The message is clear. Grammar systems create winners and losers.

There are also interesting differences by gender. If we look separately at males and females, we see that males in selective systems at the top of the earnings distribution do significantly better than their non-selective counterparts (£2.25  an hour) while there is no difference for those at the bottom of the earnings distribution.

For females, the picture is the opposite. Females growing up in selective systems who do well look very similar to successful females from non-selective systems but those who do badly earn significantly less (87p an hour) than their comprehensive system counterparts. We think this could be because males were outperforming girls at school for the cohorts we consider and so more males attended grammars and more females attended secondary moderns within selective systems, although we cannot observe this directly.

What lies behind these differences? Inequality in earnings comes from inequality in qualifications and these in turn might derive from differences in peer effects and teacher effectiveness between the systems. We speculate that in the 1970s and 1980s more able teachers might have been more effectively sorted in a selective system into schools with high attaining pupils. The evidence on peer effects in the UK is mixed but the evidence on teacher effectiveness points to this as a possible key mechanism.

Whatever might be driving this phenomenon, our research shows that inequality is increased by selective schooling systems. If this is combined with evidence <> that sorting within selective systems is actually more about where you are from rather than your ability, then selective systems may not be the drivers of social mobility that some claim. The pros and cons of a system which creates greater inequality will doubtless continue to be passionately debated. What we cannot ignore is that there are losers as well as winners in this story.