Government package not enough on its own, say MPs

• Report: Youth unemployment and the youth contract
• Inquiry: Youth Unemployment and the Youth Contract
• Work and Pensions Committee

The report comments positively on some aspects of the design of the Youth Contract. It builds on the types of interventions which have been shown to have a positive impact: increased Jobcentre Plus (JCP) adviser support; work experience placements; and apprenticeships.

The Committee welcomes the inclusion of a new scheme for 16–17 year-olds, the large majority of whom do not receive support from JCP as they are ineligible for Jobseekers Allowance (JSA).

The Committee acknowledges that the Government has sensibly focused wage incentives - the key new element of the Youth Contract - on longer term young unemployed claimants and there is an attempt to achieve sustainable job outcomes by linking wage incentives to the Work Programme payment structure, in which providers are financially incentivised to keep participants in work and off benefits in the longer term.

Commenting on the Youth Contract approach, Committee Chair Dame Anne Begg MP, said:

"The Youth Contract is welcome but on its own it will not be enough to address the current unacceptably high level of youth unemployment. 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."

Dame Anne Begg MP said:

"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. In particular, past experience shows that 160,000 wage incentives is a very ambitious target in the current economic climate. And 250,000 additional work experience placements for young people may also be unrealistic."

Areas on concern

The report highlights a number of other areas of concern about specific Youth Contract measures (Quotes from the Chair of the Work and Pensions Committee, Dame Anne Begg MP in quotation marks):

1. On the new scheme for 16–17 year-old NEETs

• Eligibility for the scheme is limited to 16 and 17 year-old NEETs with no GCSEs at grades A*–C. This risks excluding many disadvantaged NEETs: a broader set of eligibility criteria would better focus support on those who need it most.
• It is not clear that the maximum funding of £2,200 per young person will be sufficient to allow for the intensive interventions often required to provide effective support for the most disadvantaged NEETs.

"We welcome the Youth Contract scheme for 16 and 17 year-old NEETs, many of whom currently receive little support from government because they are not eligible for Jobseekers Allowance and therefore do not have any contact with Jobcentre Plus or other public bodies. But the NEETs scheme faces a number of significant challenges, particularly in identifying and engaging the young people who most need help. The Government will need to work hard, in partnership with the scheme providers and local authorities, to ensure this happens. 

We also believe that eligibility for the scheme is too restricted and that it needs to be widened. The current criteria mean that a very disadvantaged 16 or 17 year-old who happened to have one GCSE would not be eligible for help.  These young people should not be left without support until they are 18 — by this time they may have become much more difficult to help and may have dropped out of the system completely."

2. On wage incentives

Wage incentives are unlikely to be sufficient to encourage employers to create jobs. 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 target of 160,000 wage incentives would substantially exceed anything achieved by comparable schemes in the past. The Government may need to consider targeted regional marketing campaigns where take-up is low.
• While delivering wage incentives via the Work Programme has advantages, it also raises questions of value for money which require careful monitoring. In particular, the Government should keep under review the cost-effectiveness of sustainability payments to Work Programme providers. It may prove to be more effective and better value for money to deliver wage incentives direct to employers, through JCP.
• The Government should also keep under review the flat wage incentive rate of £2,275: more may be necessary to encourage recruitment of disabled people and in areas where youth employment is particularly depressed.
• Unemployment rates amongst some black and minority ethnic groups are disproportionately high. Around 50% of young black men are unemployed, for example. The Government’s approach is to "mainstream" support for BME groups but further, targeted measures may prove to be necessary. 

"The wage incentive scheme may help to 'level the playing field' for young people competing for jobs in the mainstream labour market. But it provides no guarantee of a job placement for young long-term unemployed people. As currently designed, we are concerned that it will be less effective than some previous schemes in helping the young people who face the biggest barriers to finding a job. In particular, the Government may need to change the design of the Youth Contract to encourage employers to take on young disabled people and young black men."

3. On the Jobcentre Plus Work Experience scheme

• JCP should focus on the quality of work experience placements as much as the quantity to ensure that the experience on offer is valuable and increases young people’s employability. It should also ensure that work experience placements are targeted on young people with little or no previous experience, as they are likely to benefit most from the scheme. Without careful monitoring, unpaid work experience may be counter-productive for people who already have experience and therefore have relatively good employment prospects.
  

"We share the concern expressed by witnesses that a rapid increase in the number of JCP Work Experience placements could compromise quality. The Government must continue to work with employers and human resources experts to ensure that placements offer genuine opportunities for unemployed young people who have no previous work experience to improve their prospects of getting a job."

4.  The report also comments on closely-related policy areas, including:

• The quality of vocational education and the proposal to raise the education participation age in England to 18 by 2015

Improving the transition from education to work is a vital element in tackling the labour market disadvantages which young people often face.  Professor Alison Wolf’s review of vocational education in England found that many young people "churn" between educational courses and unemployment as they try to find good quality courses or a permanent job and find neither. The report argues this situation must be addressed, particularly if Government raises the participation age to 18.

"The Government needs to implement the recommendations in the 2011 Wolf Report on vocational educational as a matter of urgency to ensure that young people are not wasting time on what Professor Wolf described as 'courses of little or no labour market value'."

• Ensuring proper coordination of the Youth Contract and youth employment and skills policy. The report notes the division of responsibilities across at least five central government departments and the involvement of a growing number of public, voluntary and private sector organisations.  It concludes that the proliferation of schemes and agencies is not cost-effective and creates complexity and confusion about where to find appropriate support and advice. It calls for the urgent introduction of a dedicated telephone helpline for employers wishing to offer job, training or work experience opportunities to young people.

"There is no shortage of youth employment services but they are poorly coordinated and neither employers nor young people know where to go to find quick and useful information. The Government needs to streamline delivery of employment, training and skills opportunities for young people. It should start by establishing and publicising a dedicated telephone helpline and online service where employers can go if they want to offer a job, work experience or training opportunity to a young person. Young people themselves need a similar efficient information service."

Further Information 

• About Parliament: Select Committees
• Topics: Unemployment