Policy Watch – Getting to grips with youth unemployment. Economic commentators may be falling out over who is to blame and whether it’s worse now for young people than it was in the 1990s but from whatever angle it’s viewed, the job market for young people looks pretty bleak at the moment.

Just how bleak can be seen in the figures published by the Office for National Statistics this week; they cover the final quarter of last year. Provisional figures were published last month but these latest stats confirm earlier concerns. Total unemployment rose by 44,000 to 2.49m but for young people, the 16-24 age group, those in other words seeking to capitalise on their education and training and move into employment for the first time, the figure rose 66,000 to 965,000. In the words of the FT, ‘this is a record high and could exceed 1m in the next few months.’

A critical barometer

Youth unemployment is one of those critical barometers that are often applied to Governments and one which as a result they treat very seriously, generally with a rash of initiatives and targeted schemes. The youth opportunity programmes in the ‘80s, new training schemes in the ‘90s and the various NEET strategies under the last Government are examples of this and there are many more. This Government, however, faces some particular constraints.

Some difficult constraints

Arguably there are three.

First, and most obviously, is the fact that it hasn’t got much money to play with. There had been hopes that the Chancellor might be able to find a bit of extra money to sweeten up his forthcoming Budget. The signs looked hopeful when the Schools Minister was able to announce an extra £91m for 16-19 provision on 19th January and a week later when the Employment Minister announced a new initiative enabling 18-21 year olds to undertake longer periods of work experience without losing benefits. It seemed as if the chances of a ‘growth’ Budget were getting stronger and indeed the Institute of Directors, as part of the build-up to the Budget, even put together a ‘Freebie Growth Plan,’ a plan that would cost very little but if acted on would ‘improve the outlook for output, employment and investment at minimal or no cost.’

Talk of a ‘growth’ Budget might however be premature. This week the Chancellor told the House that he needed to find an extra £8.2bn to plug various gaps, caused it appears by a combination of “worse than predicted unemployment, a cold winter and the emergency loan to the Irish Republic.” The chances of many sweeteners in the Budget therefore look pretty remote.

Second, not only are immediate prospects a bit grim but those for the future don’t seem much better either; coming out of recession looks like being a long haul, three years according to some commentators. “Growth in 2011 will be lacklustre,” argued the National Institute for Economic and Social Research earlier this month predicting that the economy will grow by only 1.5% this year and 1.8% the year after. This flat line was endorsed by the CBI who, in their latest economic forecast published this month, downgraded their 2011 forecasts for growth a second time, this time from 2% to 1.8%.

It all provides a pretty grim backcloth for the employment market where predictions here haven’t been much more optimistic either. The Office for Budget responsibility, CBI and OECD have all suggested unemployment will remain high for much of this year, perhaps rising to 2.6m by the autumn, and not start to fall much before 2012. Last month’s High Fliers’ report on the Graduate Market for 2011, which covered over a hundred leading employers, offered a few straws for the graduate market at least, “the UK’s leading employers are expecting to increase their graduate recruitment by 9.4% in 2011” but for those already out of work and with few qualifications, there are few such hopeful signs.

17 February 2011 2011/8

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Youth unemployment 2011

Third, that if it is to fit in with its four-year economic reform programme and decentralisation of public services, the Government may have move quickly to re-design systems. Obvious examples here include the introduction of an alternative learner discretionary fund to take the place of the Education Maintenance Allowance scheme, the introduction of the Work Programme in place of New Deal and the transition of the careers service into a universal, procured model. Rebuilding systems at a time of economic difficulty makes for a very difficult set of circumstances Building a new system So how is the Government going about this?

A number of Papers have been released over recent months all touching on growth, skills and employment in some way. They include: the National Infrastructure Plan, the Local Growth White Paper, the Growth plan and of course last autumn’s Skills Investment Strategy. There have also been a number of significant speeches. The Prime Minister’s speech to the CBI last October and his economic growth speech at the start of this year are good examples while just two weeks ago, the Deputy Prime Minister set out the Government’s vision. It was built around “four prongs:” switching from deficit-fuelled growth to investment-fuelled growth; strengthening the country’s infrastructure to enable growth; developing a skilled workforce for the future; and re-balancing economic growth so that it is less dependent on individual sectors and individual regions.

It’s clear in other words that there’s a lot going on but of course it’s immediate practicalities that young people are looking for. The development of enterprise zones, the provision of a National Insurance holiday for the first ten new recruits taken on by small companies, the piloting of a New Enterprise Allowance and the creation of a new Regional Growth are all now in place and may help but for young people, they may appear remote instruments.

Practicalities

In terms of practicalities, hopes perhaps rest in three areas.

First, a flourishing apprenticeship programme. The Government has made an enhanced apprenticeship system the centre piece of its strategy for developing “a new generation of skilled workers.” A week on from National Apprenticeship Week, it’s useful to remind ourselves of how important this strategy is. The Government is setting aside over £1,400 for apprenticeship training in 2011/12, £799m for 16-18 year olds and £605m for those aged 19 and above. It’s also increasing the expected number of starts for young people, up from 131,200 to 133,500. Provisional figures show there were 119,800 apprenticeship starts across all age groups in the first quarter of the 2010/11 year. On top of that big companies like BT, Morrisons, Jaguar Land Rover and British Gas are all doing their bit to offer places.

Second, the new £3bn Work Programme for which contracts have recently been awarded and which will bring together work schemes and welfare to work support and provision into one single scheme through a new framework of preferred providers. Much has been made of the fact that it will operate payment by results system based on getting people into work but the key issue may be the number of places available.

Third, the freeing up of schools, colleges and training providers to be able to provide the sorts of support and training that young people need. In many ways, this may be the most important bit because it is through places like these that dreams are ultimately reset.

Steve Besley

Head of Policy (UK and International)

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