Youth Unemployment and the Future Jobs Fund - Work and Pensions Committee Contents


4  Effectiveness and value for money

Cost comparison with other recent programmes

43.  The Department for Work and Pensions explained that the Government decided to end the Future Jobs Fund to reduce expenditure in light of the public spending deficit and on the grounds that they believed it was not cost-effective:

Faced with the largest public spending deficit in the UK's history, it was imperative that the Coalition Government identified areas to reduce expenditure. The Future Jobs Fund was identified as an area where savings could be made, whilst maintaining the support available to young people. Closing the Future Jobs Fund to new bids is justified because the programme is an expensive, short-term response to the recession and the Government is confident that similar results can be achieved through better value for money interventions.[44]

44.  The DWP's written evidence stated that, at £6,500 per participant, the scheme is expensive relative to the other elements of the Young Person's Guarantee as shown below:

Young Person's Guarantee Unit Costs[45]
Future Jobs Fund£6,500
Routes into Work£1,200
Work Focussed Training £2,310
Community Task Force[46] £1,200
Care First Careers £1,500

The Department argues that the Future Jobs Fund "does not compare favourably with programme costs of other employment programmes", noting that the average cost for finding an individual work under the New Deal For Young People was £3,480.[47]

45.  In his oral evidence, the Minister used early DWP analysis of the FJF to press further the case that the programme did not represent value for money (although this analysis was not available when Ministers made the decision to terminate the programme). It showed that, of the participants starting FJF posts in the first two months of the programme, 50% were in receipt of working age benefit payments six months later.[48] On the basis that the maximum government contribution to each FJF post was £6,500, the Minister concluded that, if 50% of participants ended up in permanent employment, this could represent a cost to the taxpayer of up to £13,000 per permanent employment outcome.[49]

46.  Some qualification of these figures is necessary. Firstly, there are significant limitations to the reliability of the early DWP analysis, as explored in Chapter 2 and highlighted in the analysis itself. Secondly, FJF posts are funded at a maximum of £6,500, but not all FJF posts will have cost this amount; some providers may not have claimed the full amount as some participants would have left their FJF posts early (as indicated in paragraph 18). DWP has not provided a figure for the average cost of an FJF job. Also, to assess the cost-effectiveness of the FJF and how it compares to other programmes requires an estimate of its impact—something that is currently unavailable.

47.  Participants in the Future Jobs Fund do not receive Jobseeker's Allowance for the duration of their FJF post, whereas participants on the other programmes may still be in receipt of a range of benefits. Groundwork UK stated that these could amount to a "minimum of £1,800" for a young person on the programme.[50] Deducting the amount that the Government no longer paid on working age benefits from the £6,500 figure would have offered a fairer representation of the true cost of the Future Jobs Fund. The Coalition Government has already accepted this concept in principle by stating that the Work Programme model will reflect the fact that initial investment delivers savings through lower benefit expenditure.[51]

48.  A robust evaluation of the FJF has yet to be undertaken. While we accept the Government's need to make savings to address the public spending deficit, it is our view that insufficient information was available to allow the Department to make a decision to terminate the FJF if this decision was based on its relative cost-effectiveness. It is important that DWP carries out cost comparisons for welfare-to-work programmes on a like-for-like basis. In particular, statistics should clearly show what payments, including benefit payments, individuals on each programme are receiving, to reflect the full cost to government.

The cost of reaching those most at risk of long-term unemployment

49.  The Future Jobs Fund may appear relatively expensive in relation to other programmes, even when the figures are adjusted to reflect savings in benefit payments. However, this higher cost may be warranted for individuals who face the most severe obstacles to finding employment. Tony Hawkhead of Groundwork UK accepted that a programme such as the FJF would not be cost-effective for all unemployed persons, but argued that it was more appropriate for people needing more intensive support:

I think that the fund is most successful in working with the kind of people we [...] specialise in, which is those who are very far from the labour market and would otherwise have no hope of getting any form of work experience, and therefore no access to a job.[52]

The National Skills Academy for Sport and Active Leisure described the particular need for intensive support for young unemployed people:

Getting a young person into sustained permanent employment is an involved process that does not end when someone first starts work. A flexible approach is needed, with tailored mentoring support provided before, during and after a person successfully gets a job in order to keep them on track.[53]

50.  The Future Jobs Fund was designed as a programme to support primarily those young people who were at significant risk of long-term unemployment and for whom lighter-touch methods of support, such as support with searching for jobs, had not been successful. These people would generally be those without employment experience or qualifications. However, it is important to note that in many areas the FJF programme was used to support more qualified young people such as graduates, who arguably did not face significant personal barriers to employment. Evidence from some witnesses showed that university graduates were placed in Future Jobs Fund opportunities across the programme.[54] Some members of the Association of Learning Providers even noted that in the early stages of the programme, "many of the jobs on offer tended to be 'swept up' by unemployed graduates, although over time this tendency was replaced by more success for more disadvantaged and/or under-qualified groups".[55] Birmingham City Council suggested that around 20% of their FJF participants were educated to first degree level.[56]

51.  The extensive inclusion of graduates in the Future Jobs Fund was not necessarily the programme's intention at the outset, particularly as the Government also introduced a separate Graduate Guarantee in 2009 offering all new graduates still unemployed at six months access to an internship, training or help to become self-employed.[57]

52.  While many graduates gained valuable experience through participating in the Future Jobs Fund, it is not clear to us that such an intervention is as cost-effective for this client group as it might be for those facing significant personal barriers to finding work.

53.  We accept that interventions like the FJF represent a more expensive option, even when adjusted to take account of the fact that Jobseeker's Allowance is not paid to FJF workers. However, despite the relatively high cost, programmes such as the FJF may still be a cost-effective option for young unemployed people who are furthest from the labour market, and who are less likely to benefit from other less intensive approaches.

Comparison with wider programmes to tackle youth unemployment

54.  Professor Gregg considered that Intermediate Labour Market programmes that most closely resemble unsupported employment, such as the Future Jobs Fund, were more likely to bring positive outcomes than unpaid work experience or programmes that require individuals to undertake unpaid community work.[58] Witnesses such as the Wales Council for Voluntary Action also emphasised that one of the benefits of the Future Jobs Fund was that it offered real paid work and gave participants the sense that they were doing a real job.[59]

55.  Professor Gregg also highlighted how providing support for young people in searching for jobs ("job search") can be the cheapest and most effective method. However, he noted that support with job search does not work for everyone, particular the long term unemployed.[60] He pointed out that the experience of New Deal for Young People (NDYP) provided a useful insight into the effectiveness of policies to tackle youth unemployment. NDYP began in April 1998, and aimed to help young people to find lasting jobs and to increase their long-term employability. Unemployed young people were provided with an intensive support process to find a job, known as the "Gateway", which was intended to continue for up to four months. If they remained in the programme beyond this period they were then required to enter one of four options:

  • Employment Option, offering subsidised employment
  • Full-time Education and Training
  • Voluntary Sector Option
  • Environment Task Force Option[61]

56.  An evaluation of the NDYP showed that those taking the Employment Option outperformed those taking other options. Overall, those taking the Employment Option spent longer in employment than those who took up any of the other options.[62] A separate evaluation of the NDYP showed the impact on "employability". The Employment Option performed strongly in this regard, and was most effective in terms of "access to training, attachment to the labour market and self-efficacy". Unpaid work placements in the voluntary sector also performed well on the employability measures, although less highly than the employment option in terms of self-efficacy and willingness to move area in search of work. The Full-time Education and Training Option performed poorly in relation to work-based training outcomes but its participants gained the highest level of qualifications.[63]

57.  Direct comparisons between the Employment Option in the NDYP and the Future Jobs Fund must however be treated with caution as the programmes differ in some respects. While the Employment Option represented a similar six-month paid post, these posts were created through a wage subsidy to employers, principally in the private sector, to recruit unemployed young people. Unlike the Future Jobs Fund, they were not being recruited into temporary jobs specifically created for the purpose of the programme, and young people arguably had a greater chance of being employed on a regular basis by the employer. Also, the FJF was set up in a period of major economic downturn, whereas the labour market was more buoyant when the NDYP was established.

58.  Another point of comparison is the StepUP programme, piloted in 2002, which provided subsidies to private, public or voluntary employers taking on people who were still unemployed six months after completing their New Deal option. There were positive impacts for some people, but no significant benefits for those under the age of 25.[64] However, it should be noted that that the young people entering StepUp had been out of work for close to two years despite previous New Deal attempts to help. Such cases, by definition, constitute a significantly hard-to-help group who may have faced even more obstacles to employment than FJF participants.

59.  Comparing the effectiveness of welfare-to-work programmes is complex, given the differences in approach, funding, labour market circumstances and the characteristics of previous programmes. The evidence is limited and does not offer a clear consensus. We expect the Government to use the findings from the Future Jobs Fund evaluation to contribute to the wider evidence base used to assess which types of programmes are most effective in tackling youth unemployment.


44   Ev 49 Back

45   Ev 49 Back

46   Average cost, including cost of those failing to complete Young Person's Guarantee options making up the remainder of time on the Community Task Force. Back

47   Ev 49 Back

48   Department for Work and Pensions, Early analysis of Future Jobs Fund participant outcomes, November 2010 Back

49   Q 106 Back

50   Q 35 Back

51   HM Government, The Coalition: our programme for Government, 2010, p 23 Back

52   Q 15 Back

53   Ev w193 Back

54   For example, Scottish Council for Voluntary Organisations, Ev w44; Oxfordshire County Council, Ev w56; Portsmouth City Council, Ev w73, and Barnsley Metropolitan Borough Council, Ev w107 Back

55   Ev w182 Back

56   Ev 42 Back

57   HM Government, Building Britain's Recovery: Achieving Full Employment, Cm 7751, December 2009 Back

58   Q 62 and Q 63 Back

59   Ev w13 Back

60   Q 71 Back

61   Michael White and Rebecca Riley, Findings from the macro evaluation of the New Deal for Young People, 2002, Department for Work and Pensions research report 168  Back

62   Ian Beale, Claire Bloss and Andrew Thomas, The Longer Term Impact Of The New Deal for Young People, 2008, Department for Work and Pensions Working Paper No 23  Back

63   Bonjour, D., Dorsett, R., Knight, G., Lissenburgh, S., Mukherjee, A., Payne, J., Range, M., Urwin, P., & White, M., New Deal for Young People: National Survey of Participants: Stage 2, 2001, Employment Service Research and Development Report ESR67, Employment Service, Sheffield, UK. Executive Summary.  Back

64   Paul Bivand, Bee Brooke, Sarah Jenkins and Dave Simmonds, Evaluation of StepUp pilot: final report, 2006, Department of Work and Pensions research report 337  Back


 
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Prepared 21 December 2010