Memorandum submitted by CIPD




1. The CIPD's primary purpose is to improve the standard of people management and development across the economy and help our individual members do a better job for themselves and their organisations. The Public Policy Team at the CIPD promotes an agenda for productive workplaces to boost economic performance and improve the quality of working life.


2. As Europe's leading professional body for those involved in the management and development of people, we are ideally placed to contribute to the development of public policy across the spectrum of workplace and employment issues.


3. We are able to draw on the experience and knowledge of our 135,000 members and our wide range of research to provide a pragmatic stance on public policy that is based on solid evidence and the real world.


4. Our membership base is wide, with 60% of our members working in private sector services and manufacturing, 33% working in the public sector and 7% in the not-for-profit sector. In addition, 76% of the FTSE 100 companies have CIPD members at director level.




General comments

5. The CIPD has consistently been ahead of the curve in predicting who would be hardest hit by the recession, and how long and deep the slump in the labour market would be. A year ago, many commentators predicted that this would be a 'middle-class recession', hitting professionals in the south-east of England hardest. However, Professor John Philpott, the CIPD's Chief Economic Adviser, predicted that young people (those aged 16-24) would be hardest hit.


6. One of the key reasons for this is that even before the recession, the number of those not in education, employment or training (NEETs) was at record levels. The CIPD strongly feels that this is not just an issue that has been caused by the recession, but is a deep-seated problem that is firmly embedded into the UK education system and labour market.


7. CIPD research has for some time shown that young people leaving compulsory education do not have the employability skills that employers are looking for. Our members feel that the employability of young people is decreasing, even though the numbers of those achieving qualifications, and the total number of qualifications achieved overall, is increasing.


8. Indeed, our 2009 Learning and Development survey report found that only 8% of employers believe school-leavers lack the appropriate qualifications, while our summer 2009 Labour Market Outlook found that it is a lack of experience (72%) that prevents employers from taking on young people.


9. Even with this being the case, the Government's approach has been focused towards creating the appropriate qualifications to tackle young people's lack of employability. Although the CIPD generally welcomes the arrival of the diploma and the establishment of Train to Gain, we feel that there needs to be a much wider strategy to ensure that throughout the compulsory and post-compulsory education systems, young people are given high-quality work placements and the opportunity to develop key employability skills, alongside their education. This would ensure that they are well prepared to enter the ever more competitive UK labour market.


Looking into the future

10. The CIPD believes that unemployment will slowly reach the 2.8 million mark and that recruitment will not return to pre-recession levels for many years to come. We have always felt that that young people will be the group most affected - our members regularly tell us that there are often better qualified candidates than the young people who apply for positions at their organisation, many of which are migrant workers.


11. In our summer 2009 Labour Market Outlook, we found the reasons cited by employers for not recruiting a young person were: lack of experience (72%), availability of more suitable candidates (65%) and a lack of soft skills and work ethic (both 31%). In addition, our 2009 Learning and Development survey report found that employers feel their young employees lack communication skills (60%) and a suitable work ethic (55%).


12. If we consider this, alongside the fact that there are now close to 1 million young people (16-24-year-olds) unemployed, it is difficult to be optimistic about the future prospects of this large social group. Added to this, the current state of the UK labour market shows us at the CIPD that this situation is not set to improve in the near future; in fact, it is likely to continue to get worse for some time before it gets better.


The effectiveness of the Government's NEETs strategy


13. The Government has invested heavily in the September and January Guarantees for 16- and 17-year-olds, which is welcome, as our Labour Market Outlook (summer 2009) found that employers are more likely to take on the long-term unemployed than a school-leaver. Having a young person in education or training is certainly better than staying at home claiming benefits. However, even though the guarantees are generally welcome, the CIPD has some issues with the initiatives.


14. The CIPD has consistently argued that a significant element of the funding for the two guarantees could be switched towards a work placement subsidy to allow 16- and 17-year-olds to gain the work experience our members say they need. The subsidy would allow young people to gain skills employers say they are lacking, such as communication, teamworking and project management, as well as their work ethic and business acumen.


15. As the CIPD has called for incentives for employers to recruit 16- and 17-year-olds, we welcome the proposals for a 2,500 'golden hello' for employers taking on a 16- or 17-year-old as an apprentice. With only a quarter of employers (24%) planning to hire from this age group and almost two-thirds of employers (63%) hiring from the 19-24 age category, the CIPD welcomes this focus on 16- and 17-year-olds.


16. Even so, apprenticeships are often seen as the silver bullet, but our members' feedback suggests that many employers are not in a position yet to offer apprenticeships, even with a cash incentive. A work placement would give young people key employability skills even if a formal apprenticeship place is not available.


17. However, it is imperative that these initiatives do not just become a method to prevent young people from claiming JSA and to keep youth unemployment numbers down, and that they actually do contribute to the skills and employability of young people. The courses offered must reflect market reality and give young people the qualifications and skills that employers demand.


18. It is equally important that these initiatives are sustained until the labour market improves. There is a sense that many of these are temporary, even though our research shows that the labour market is still 'flat on its back' and we are set for a 'jobs-light' recovery.



19. Recent academic research echoes the above concerns about using initiatives simply to keep youth unemployment numbers down. It has been shown that badly designed back-to-work schemes, particularly those aimed at college and university leavers, can be extremely detrimental to young people's long-term job prospects.


20. Work trials, work experience or subsidised employment all have a potential role to play in addressing youth unemployment, but unless several key issues - such as providing continued assistance with job searches and skills development - are incorporated into these schemes, it is entirely possible that a young person's career might be harmed rather than bolstered as a result of removing them from the labour market - even for a relatively short period.


Internships for graduates

21. The CIPD feels that the Government's 50% target has created a generation of graduates who feel that just by having a degree, their future is secured. Our 2006 report Graduates in the Workplace: Does a degree add value? found that a quarter of recent graduates felt there was nothing holding them back in their careers.


22. With employers suffering because of the downturn, and graduates suffering too, internships offer a fantastic middle ground for both parties. The CIPD strongly endorses the Government's initiatives on internships for this reason. We believe that internships offer young people a great way to develop professionally as they are a suitable transition from education to employment because they allow young people to gain the employability skills they need to succeed in the labour market.


23. We think that the Government is moving in the right direction regarding this. We have recently been in contact with the Department for Business, Innovation and Skills regarding plans for a kitemark scheme for internships, which we support. The CIPD identified the importance of internships fairly early, as we co-launched the Graduate Talent Pool website with the then Secretary of State for Innovation, Universities and Skills, Rt Hon John Denham MP. We see the website as an excellent way to open up access to internships and get employers on board.



The CIPD's work on internships

24. We also largely support the Government's 'Graduate Guarantee', offering an internship for graduates who have been unemployed for six months. Although we agree with the sentiment of the proposals, we stress the importance of the quality of schemes being offered and feel the drive to increase the quantity of internships should be matched with a drive to improve the quality of them also.


25. To ensure that employers provide quality internships, the CIPD has recently developed a free and fully comprehensive guide for employers, Internships that Work. This is aimed at not only our members, but other employers that perhaps have never taken on an intern before or want to improve the schemes they offer. We stress that an effective internship scheme can be good not just for the intern, but also contribute to business performance as well as offering a more flexible way to recruit young people.


26. Internships that Work is based on our Internship Charter, a voluntary code of practice and policy document on internships that offers guidance on how best to approach internships; it calls for the establishment of a nationally recognised kitemark scheme. We would be happy to share both the Charter and our new guide with the Committee.

27. Until very recently, internships have very much worked within an informal economy, whereby internships were offered to young people who were a daughter/son of a friend in the business. The CIPD feels that, due to the informal nature and the lack of pay for some internships, this may cut off a valuable development tool for young people.


28. As with the guarantees for school-leavers, we feel that quality of the schemes is crucial. The CIPD has been in the minority by focusing on the quality of internship schemes, as many organisations and journalists focus on interns' pay. This is not to say that pay is not important, as interns should be paid a wage that reflects their contribution to an organisation and comply with minimum wage legislation. However, with employers not looking to recruit, and many graduates stuck at home claiming JSA, we think that an unpaid internship (expenses should always be paid) is the lesser of two evils.


National Minimum Wage (NMW) and young people

29. Pay freezes and cuts will remain widespread throughout the private sector in 2010-11, helping to support employment growth during the recovery. Alongside a public sector pay bill freeze, the Government should put jobs before pay rises and freeze the real value of the National Minimum Wage (NMW) for one year only.


30. Any nominal increase in the NMW in 2010 should apply only to the 'adult' rate (for those 22 and over) and should be pegged to the level of Retail Prices Index (RPI) inflation in March 2010 (the most likely date for any announced up-rating). This approach would maintain the real value of pay for workers on the NMW but reduce the impact on employment in low-paid sectors of the economy.


31. The NMW rate for younger workers (those aged 16-17 and 18-21), however, should be frozen in absolute terms in 2010. In a recession it is vital that the preservation and creation of jobs takes priority over pay increases. The current downturn is having a far bigger impact on young people than other age groups and it is important to avoid any change that makes this group less attractive to employers, particularly SMEs.



32. Over the past few years, the expectations and demands placed on the new diplomas has been considerable. As a new set of qualifications, it is essential that they should be given time to settle and demonstrate their value to employers and young people, but the Select Committee will be aware of the concerns expressed in the past at the sheer speed at which the diplomas have been rolled out.


33. The diplomas still have a long way to go before they are seen as a high-quality option within the 14-19 agenda. Once fully operational, and assuming that employers are given the necessary space to shape the qualifications, diplomas have enormous potential to tackle issues such as poor employability skills among young people and a lack of engagement in learning. Even so, it would be extremely unwise to use diplomas as a key mechanism for tackling youth unemployment for two reasons: first, teachers, parents, young people and employers have had insufficient time to judge them and familiarise themselves with them; and second, the education system is simply unprepared for a large expansion of such a complicated and novel programme.



34. Apprenticeships have been a key part of the Government's attempt to reduce youth unemployment, as evident in their spending announcements and policies. There are, however, a number of concerns surrounding the apprenticeship programme that have not been dealt with.


35. As mentioned earlier, it can be extremely damaging for a young person's career if they are removed from the labour market and placed into a scheme that does not match their individual needs and goals. High-quality apprenticeships are very valuable for the UK economy, but maintaining such high standards while simultaneously forcing through a rapid expansion of apprenticeships, particularly at Level 2, threatens to undermine the Government's efforts in the long run.


36. Furthermore, the Government is keen to expand apprenticeships at a time when employers may be increasingly hesitant to get involved in the scheme, given the extra costs - in terms of time, energy and wages - that apprenticeships demand. Although announcing more funding for apprenticeships is a commendable step, the infrastructure must be ready to deliver additional high-quality placements on the back of these funding increases. Raising employer demand for skills and apprenticeships in general is challenging at the best of times - even more so during a recession.


37. There is also a danger of mismatched objectives with apprenticeships. The Government is understandably keen to avoid large numbers of young people falling into unemployment, yet this does not necessarily sit well with the strategy outlined in the recent Skills White Paper (November 2009), which explicitly committed the Government to focusing on driving up participation and skills in certain 'priority' sectors. If apprenticeships are used as a catch-all for young people who are struggling to find work, regardless of which apprenticeship framework they end up completing, there is a serious risk that young people could end up in inappropriate training courses that give them skills and qualifications that are unlikely to benefit them over the course of their career.


December 2009