The Coalition Government’s £1 billion scheme to offer employers wage subsidies to hire young people has met with a lukewarm reception.
From next April, the aim of the so-called ‘Youth Contract’ is to create up to 400,000 work and training placements for 18-to-24 year olds by paying employers wage incentives equivalent to half of the youth National Minimum Wage.
Employers will also be encouraged to take up incentive payments for creating an additional 20,000 apprenticeships for 16 to 24 year olds, while a £50 million programme will be introduced to try and get the 25,000 most disadvantaged 16 and 17 year olds in England either into work or onto an apprenticeship scheme.
A further 250,000 people who have been looking for work for three months or more will likewise be offered a work experience placement lasting up to eight weeks.
There will be penalties attached for failing to stick the course, however. For example, if participants drop out of a work experience placement or subsidised job, they will lose their benefits.
The news came only a day after official statistics revealed that the number of 16 to 24 year olds classed as not in education, employment or training soared by 137,000 or 12% to hit 1.2 million – or one in five – in the third quarter. These figures, in turn, emerged only a week after Government data revealed that more under 24s were now looking for work than at any time since records began in the early 1990s.
Deputy Prime Minister Nick Clegg told the BBC that young people were “rightly” demoralised at the lack of opportunities and having to “sit at home sending out job applications day in and day out and not getting an answer”.
The scheme which, he attested, would be backed with new money rather than existing funds, would provide a “step-change” in assistance for under 24s and was part of the Government’s commitment to ensure that the next generation did not “pay the price” of economic troubles not of their making, he added.
Tinkering round the edges
But the announcement was met with only cautious approval by the business community. David Morel, founder of UK firm, Tiger Recruitment, warned that the depth of the current economic crisis meant that the Government was merely “tinkering around the edges”.
“Only when the economy is growing can sustainable jobs be created. And with the economy showing such anaemic and weak progress, the scheme’s long-term prospects are limited,” he said.
Adam Marshall, director of policy at the British Chambers of Commerce, was slightly more upbeat, however. He welcomed the package of measures, saying that it would provide a “much-needed jobs boost for the young”.
But he added that the Government really needed to focus on the long-term. The problem was that only 29% of the employers polled in a survey of 6,000 felt either ‘very’ or ‘fairly’ confident in recruiting school leavers with A-levels or equivalent as they felt that they were ill-equipped for the workplace.
As a result, action had to be taken to ensure that the “education system can match the needs of business and so, the supply of vacancies available to young people”, Marshall said.
Katerina Ruediger, skills policy adviser at the Chartered Institute of Personnel and Development, on the other hand, said that the organisation’s research showed that employers tended to be reluctant to hire young people mainly because of their lack of experience, which resulted in a catch-22 situation.
As a result, even short-term measures could make a difference and, as such, today’s announcement should be welcomed.
But the biggest problems with it would be ensuring that “deadweight costs” – or employers taking subsidies to fill vacancies with young people that they would have hired anyway – were minimised; that there was a sufficient supply of “real jobs” and that employers did not become reliant on hand-outs into the long-term.
“Creating the real jobs to which these subsidies might apply will be the most intractable problem, at a time when the economy is flat-lining and the labour market is struggling. And the real success of this scheme will, to a large degree, depend on the success or otherwise of the Chancellor, in his Autumn Statement next week, in building real demand in the economy,” Ruediger said.
