Deputy Prime Minister Nick Clegg has unveiled a £1 billion package aimed at tackling youth unemployment through the creation of 400,000 work and training placements.
The "youth contract" initiative will offer subsidies of £2,275 to employers in England, Scotland and Wales that take on workers aged between 18 and 24 for six months. The Government says that this amounts to half of the minimum wage that employers would pay those workers over that period.
The programme is set to commence in April 2012. The Government says that it will take 160,000 young people out of unemployment over the next three years. It aims to recruit these young people into sectors including retail, construction and the green economy.
It has been reported that the scheme will be administered by private-sector providers via the Government's Work Programme, and any young person taken on will have to complete the placement or be refused benefits. Anyone rejecting a subsidised job offer will be required to undertake four weeks' compulsory "work activity".
Alongside the 400,000 work and training placements, a number of other measures have been announced. They include:
- 250,000 eight-week work experience placements available to 18- to 24-year-olds who have been seeking work for three months or more.
- A £50 million programme for the 25,000 16-and 17-year-olds not in employment, education or training (NEETs) in England, to get them into work or an apprenticeship.
- At least 20,000 additional incentive payments for firms in England to create apprenticeships for 16- to 24-year-olds.
- Increased support for young people at job-centres.
Youth unemployment has been a key economic and political issue, and its significance intensified last week with the announcement that the number of unemployed young people had reached the one million mark. A steady stream of commentators have called on the Government to focus its efforts on reducing youth unemployment in order to avoid the risk of a lost generation of young talent.
Today's announcement was welcomed by CBI director-general John Cridland, who said: "This is good news for young people up and down the country. We're pleased that the Government has developed our idea to incentivise businesses to take on the young unemployed.
"It will encourage firms to take a gamble on a young inexperienced person and help tackle the scourge of youth unemployment."
Dr Adam Marshall, director of policy at the British Chambers of Commerce, said: "Youth unemployment is a huge challenge, and this package aimed at tackling the problem of record levels of young people out of work is welcome.
"The Government has to make it easier for businesses to hire young people. Employers often spend a large amount of time and money training up those young people not in education, employment or training (NEETs). The proposal to pay employers half of the minimum wage payment for the first six months will help businesses offset this cost."
The measures were also welcomed by the Chartered Institute of Personnel and Development (CIPD), although the institute warned of the potential "deadweight" costs that might arise from it, relating to the likelihood that at least some of the wage subsidy will be taken up by employers filling vacancies with young people they would have hired anyway.
Katerina Rüdiger, skills policy adviser at the CIPD, said: "Our research consistently shows the biggest obstacle to employers hiring young people is a perceived lack of experience. This becomes an unbreakable cycle for too many young people - with no experience meaning no job, meaning no experience. On that basis, today's announcement of a substantial package of measures to support employers and young people in breaking that cycle is welcome news.
"The biggest challenges will be ensuring deadweight costs are minimised, ensuring a sufficient supply of real jobs, and avoiding employers becoming reliant on such subsidies in the long term.
"By reserving wage subsidies for all young people unemployed for nine months or more, and for those deemed in greatest need of support and who have been unemployed for three to nine months, we think the Government has gone a long way to minimising deadweight costs. Nonetheless, ministers will need to keep a close eye on any signs that the system is being manipulated at taxpayers' undue expense."
Rüdiger added: "As the scheme progresses, government will also need to be careful to ensure that the end of the scheme doesn't lead to a 'cliff-edge' for the next generation of school leavers as the subsidy is withdrawn. However, all the evidence suggests a big difference in employer attitudes to young people between those who have actually employed them, against those who are relying on perceptions and prejudice.
"On that basis, if the youth contract is successful in widening the pool of employers who have recent experience of employing young workers, we're confident that they'll get hooked on the potential to grow their own workforces, and future young people will benefit from the positive contributions made by this short-term subsidised cohort of young people. By giving young people the opportunity to experience the world of work, and the world of work the opportunity to experience young people, there's the potential to benefit everyone".
The Government has yet to explain in detail how the scheme will be funded, saying only that it will be covered by new funds, not through a reallocation of spending.