The ongoing problem of youth unemployment and what to do about it

Britain’s youth are better educated than any generation before them, and they’re desperate to work. In spite of this, young people all over Europe have borne the brunt of this recession, not only in terms of their job prospects, but with young people’s wages falling to as low as levels last seen in 1998 in the UK, also in relation to their pay packets.

The widespread problem of youth employment stems primarily from a lack of jobs. Although in the UK we are enjoying a mini-jobs boom – employment is up by over 1 million in the last two years – youth remain at the margins of the labour market. For example, just 12% of the increase in employment goes to the young, despite them being 40% of the unemployed. Consequently, with unemployment generally falling, the critical position of young people is perhaps the most under-appreciated factor of our labour market today. Here, then, the problem is policy failure: we’re maintaining a system that is not set up to meet young peoples’ needs, rather than a jobs shortage or an unwillingness to work. With scarring effects on future jobs prospects and earnings – which will cost the exchequer years into the future – this policy failure is costing us all dear.

Not all that the government has done has failed though, 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.

In spite of all this, the current system around the school to work transition has three deep-seated flaws. First, from next year our system will prioritise staying in education until the age of 18 and then switch entirely to emphasising the importance of searching for a job. But, this is in a climate where there’s tight restrictions on combining education and training with on-going efforts to find work. This is troubling because although the number of young people leaving school lacking qualifications is falling, poor educational attainment and a lack of good quality vocational skills among those who don’t go to university is a long-standing problem, closely linked to our failure to build a better quality labour market. In particular, the Wolf Review showed that five out of ten young people reach 18 without good English and Maths; one of our priorities must be to put that right. But the social security system also needs to play its part for those who fall through the cracks in the system. For too long, we’ve tolerated a situation where young people who don’t have the skills they need for work are dissuaded from addressing this gap at the start of their careers.

Second, except for apprentices, our system leaves young people lacking any work experience. 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.

Third, no government agency has 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 for or capable of marketing the programme to employers or of helping to address the bureaucracy that came with it. Once upon a time, this was the role of Job Centre Plus but now it is only concerned with monitoring and supporting claimants in their job search. Instead, recruitment has gone on-line and employer engagement has disappeared. Work Programme providers and other bespoke private organisations are building such links but they are designed for single purpose functions and they are not open for government to engage employers over any new policy drive.

Last week, after Ed Miliband’s speech, the media primarily focussed on the mean testing of unemployment benefits. But at its heart the proposals offered by the Labour leader 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 (EMA), 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. While 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.

These proposals have two important elements for improving the current model. To begin with, it outlines a phased move away from education to focus exclusively on job search. For those with poor qualifications, little training and no work experience, these proposals redress these shortcomings, while enabling claimants to maintain the job search. Plus, the proposals give work experience a central role.

Yet, the third element remains to clearly addressed: how do we 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.

Paul Gregg is Professor of Social Policy at the University of Bath