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.
This week’s unemployment numbers show a flat labour market. After a buoyant first six months of year, the latest data show flat unemployment and vacancies falling back. The poor unemployment picture is far worse when the numbers working part-time but want full-time work are considered. These people are often called the underemployed, not fully unemployed but working far fewer hours than they would want. The US has a tradition of including the underemployed alongside the fully unemployed to create a broader measure of unemployment but it seems sensible to weight them less because they are working. In addition those who are inactive, because they think there are no jobs to look for, often called discouraged workers, are also added to this broader measure. This broader measure of unemployment, giving the underemployed part-time workers a weight of a half, gives a figure of just over 3 million (3, 066,000), whilst the LFS unemployment measure is just under 2.5 million. Further, whilst the LFS measures showed a small fall in the latest data this broader measure showed a small rise of 16,000. The measure highlights how underemployment, part-time working by those who want to work full-time has help to keep the regular measure of unemployment down through this recession.
However, the bleakness of the current picture can be over-stated. Last Autumn, large numbers of young people stayed in post-16 education rather than look for work, far more than usual and far more than captured by the normal seasonal adjustment of the data would capture. Hence unemployment fell and inactivity (students are mostly counted as inactive) rather than employment rose. This Summer those on one year courses have returned to the labour market partially unwinding last years surge of studying. Hence inactivity has been falling recently and unemployment is flat despite decent jobs growth. This Autumn again we might expect a surge in studying although less marked than last year. This, combined with an expected surge in spending at Christmas ahead of the January rise in VAT, should lead to a more positive story on unemployment. However, this is likely to be short lived and the real jobs crunch will hit early next year with rising taxes and public spending cuts.