Youth contract not enough to tackle unemployment, say MPs

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The Government’s flagship scheme to reduce youth unemployment isn’t going far enough to tackle the problem, according to a group of MPs.

The Work and Pensions Select Committee said that the “youth contract” was a good start, but added that it alone would not be enough “to address the current unacceptably high level of youth unemployment”.

The £1 billion funded youth contract established a number of schemes aimed at reducing unemployment among 16- to 24-year-olds by 160,000 over the next three years.

Among the measures are: subsidised work and training placements; incentive payments for employers taking on apprentices; a £50 million programme aimed at 16- and 17-year-olds not in employment, education or training (NEETs); and additional job-centre support for young people.

However, according to the select committee, these measures are not sufficient to address the scale of youth unemployment in the UK.

Chair of the select committee, Dame Anne Begg MP, said: “The youth contract is welcome but on its own it will not be enough… Young people need effective support from government to counteract the disadvantage they have long suffered in the labour market, but they also need a return to economic growth and a substantial increase in the number of new jobs.

“Some of the measures in the youth contract have been shown to be effective but they will only make a significant impact if all the targets are met. Our concern is that there is a real risk that the Government will fall short of its more eye-catching targets.”

The select committee’s report on the youth contract highlighted a number of aspects of the youth contract that require improvement:

  • On the NEETs scheme, it questioned whether or not the maximum funding of £2,200 per applicant would be sufficient to provide effective support for the most disadvantage NEETs.
  • It questioned whether or not wage incentives offer sufficient encouragement for employers to create jobs, adding that “they are likely to have a positive impact only at the margins: bringing forward employers’ recruitment decisions and incentivising them to consider taking on young unemployed people where they may not have done previously”.
  • The report also advised that the quality of placements on the work experience scheme are as important as the quantity, adding that placements should be targeted at those with little or no previous experience, as they are likely to benefit most from the scheme.

Katja Hall, chief policy director at the CBI, agreed that the youth contract would not be able to tackle youth unemployment on its own. She said: “To provide jobs for our young people long term, we need fundamental reforms of the welfare and education systems, alongside economic growth.

“In England alone, there are 47 initiatives aimed at incentivising firms to hire and train young unemployed people, but firms tell us the sheer complexity of the system is off-putting. Rather than more new initiatives, what businesses need is a streamlined system that is easy to access.”

Hall spoke as the CBI launched an employer forum alongside the Department for Work and Pensions, chaired by Hall and minister for employment Mark Hoban MP.

Meanwhile, manufacturers’ organisation EEF pointed out that there was a lack of awareness among its members of the scheme and a fear that the absence of basic skills among young jobseekers is deterring employers from taking advantage of some of the scheme’s incentives.

A survey of almost 200 companies by EEF found only one company that said it was both aware of the scheme and involved. Almost half the respondents said that they were aware but not involved or considering it, while 11% said they were not aware and would not get involved.

Steve Radley, director of policy at EEF, said: “Addressing the problem of long-term youth unemployment is critical for the economy and business has a vital role to play. But, as well as a worrying lack of awareness for such a flagship scheme, taking on someone from the Work Programme is seen as a significant risk for manufacturers at a time of huge economic uncertainty.”

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