Earn or Learn: the case for a British Youth Allowance

The UK faces a daunting challenge in tackling youth unemployment and re-engaging a potentially ‘lost generation’ of young people with employment, training and education.

Unfortunately, the Coalition Government’s policies so far have proven fragmented or ineffective and have included short-sighted service cuts, such as the abolition of the Connexions Service. At his Party Conference the Prime Minister committed the Government to develop an ‘earn or learn’ strategy but suffocated any positive intent by prioritising a proposal to abolish Housing Benefit for under-25 year olds. This proposal is to be included in the 2015 Conservative Manifesto and, whatever its merits, has so far framed the debate within the continuing controversy about deep and long term cuts to welfare. Labour’s alternative so far consists of a re-run of Gordon Brown’s New Deal in the form of a temporary minimum-wage ‘job guarantee’ that will, at best, cover only the minority of young people claiming Jobseekers Allowance for six months.

High levels of youth unemployment and disengagement are driven by complex economic and social factors, many of which predate the recession. Tackling these problems requires a long term comprehensive strategy. This includes a need for strong leadership and a coherent institutional framework for engaging with young people and employers. It requires also that we mend Britain’s broken and incoherent income support system for young people. Current benefit arrangements are complex and expensive to administer; there is little support for less qualified low income young people to study or train; and the requirements of Jobseekers Allowance create incentives for young people to choose job search over education or training. Bizarrely, Universal Credit reforms do nothing to change this.

In this context the IPPR last week outlined a coherent and cost-neutral strategy for radically increasing the proportion of young people learning or earning. This would comprise a youth guarantee that offers young people access to further education and training plus intensive support to find employment or an apprenticeship. This would be underpinned by a more coherent school-to-work transition system and a distinct work, training and benefits system to support 18 to 25 year olds. National objectives and priorities would be set but delivered through a decentralised but strongly governed network of city leaders, employers and commissioned providers.

The component of the strategy, which has attracted most attention, is for a common youth allowance that would replace existing out-of-work benefits for 18-24 year olds. This is not the crude abolition of all benefits for young people, as presented in the media. The reform proposals are crafted on the basis of detailed research which would remove current perverse incentives, require that young people engage in skills acquisition and job search, and continue to provide the safety-net of financial support for those who need it. There would be losers as well as winners under the proposals, especially as parents in all intact families would be expected to support their children until aged 21, with exceptions only for those in employment, with a disability, or with a child. Contrary to media coverage those young workers who qualify for Jobseekers Allowance through their employment record would continue to be entitled to that support.

As the IPPR points out, in most of those other OECD countries where young people are eligible for means-tested benefits – in many they are not – they are kept outside of the adult welfare system and directed and supported to complete their education, improve their skills and/or seek employment. Such arrangements typify the support frameworks that exist in European countries with much lower levels of youth unemployment. In Australia, where a similar youth allowance was introduced in 1987, research found that it increased participation and reduced costs and complexity. More recently it comprised the financial support system on which Kevin Rudd constructed the previous Labor Government’s ‘earn and learn’ policy.

British politicians would do well to learn from the institutional frameworks and financial support systems which underpin more successful systems in other countries. The IPPR report is a good place to start.

Dan Finn is Professor of Social Inclusion at the University of Portsmouth