Youth Unemployment and the Youth Contract - Work and Pensions Committee Contents

1  Introduction


1. The number of young people who are unemployed or not in education, employment or training (NEET) has been the subject of much public debate and of numerous reviews and reports in recent years. There have been calls for more action to tackle the problem from a range of organisations including businesses, voluntary organisations and trades unions.

2. While some recent statistical trends require close scrutiny (see chapter 2), it is widely accepted, including by the Government, that youth unemployment, which began to grow in 2004-05, is at an unacceptably high level. This is a particular concern given the strong evidence that an extended period of unemployment during youth has a significant impact on the future employment prospects, wage levels and health of individuals in later life.[1] The then Minister for Employment recently referred to youth unemployment as "a social and economic timebomb".[2]

The Youth Contract

3. In response to the challenge of youth unemployment the Government announced its Youth Contract on 25 November 2011. Up to £1 billion has been allocated to the following range of existing and new measures over three years from 2012-13:

·  160,000 wage incentive payments to employers, worth up to £2,275 each, for those who recruit an unemployed 18-24 year-old from the Government's Work Programme;

·  An extra 250,000 work experience or Sector-based Work Academy places, taking the total to at least 100,000 a year;

·  Funding for at least 20,000 extra Apprenticeship Grants to Employers. These are incentive payments worth £1,500 each for small and medium sized employers to take on their first apprentice aged 16-24, taking the total to 40,000;

·  More flexible adviser support delivered through Jobcentre Plus for all 18-24 year-olds including the offer of a National Careers Service guidance session within the first three months of any 18-24 year-old registering for JSA; and

·  A payment-by-results initiative focusing on 16-17 year-old NEETs with no GCSEs at grades A*-C.

Wage incentives, additional Jobcentre Plus adviser support and additional work experience placements are being delivered across England, Scotland and Wales. Additional Sector-based Work Academy placements are available in England and Scotland only. Education, training and skills policies are devolved. The new scheme for 16-17 year-old NEETs, Apprenticeship Grants to Employers and National Careers Service guidance sessions will therefore apply in England only. Scotland, Wales and Northern Ireland will receive separate funding from HM Treasury and will decide how to allocate this additional funding.

4. The broad objective of the Youth Contract is to make young people more appealing to employers looking to recruit. The Government says that, in contrast to other recent attempts to address the problem, it is explicitly focused on "sustainable employment in the private sector" (see chapter 4). [3]

5. The Youth Contract was announced by the Deputy Prime Minister and responsibility for the measures ranges across three central government departments: the Department for Business, Innovation and Skills (BIS), the Department for Education (DfE) and the Department for Work and Pensions (DWP).

Our inquiry

6. We decided our inquiry should consider the likely effectiveness of the broad range of Youth Contract measures and whether they amount to a proportionate response to the youth unemployment problem. We felt it was important to consider how the Youth Contract will be coordinated across the various departments, agencies and other service providers involved. In order to consider the Youth Contract in context we also looked at closely-related policy areas, including: reform of vocational education; the Government's proposal to raise the education participation age in England to 18 by 2015; and changes to the way work-related learning and careers information, advice and guidance (IAG) are provided to young people by schools and colleges in England. We considered apprenticeships mainly in the context of whether they are likely to be an effective part of the Government's current response to youth unemployment, as we were aware that our colleagues on the Select Committee on Business, Information and Skills were conducting their own in-depth inquiry into the effectiveness of apprenticeships more generally.[4]

7. We received 36 written submissions and held five oral evidence sessions with: academics and experts; a small business owner, employers' organisations and the Trades Union Congress; government agencies responsible for funding and delivery of relevant services and the Local Government Association; Work Programme providers including the industry body, the Employment-Related Services Association, and the Recruitment and Employment Confederation; and Government Ministers and officials from BIS and DWP.[5] A full list of witnesses is set out at the end of the Report. We also visited the Prince's Trust Fairbridge Programme in Kennington, South London and Jobcentre Plus in Twickenham. We are grateful to all those who contributed to our inquiry, particularly the young people who took the time to tell us about their recent experiences of the education system and the job market.

Structure of this Report

8. The following chapter sets the issue in context by looking at trends in youth unemployment since the 1980s. Chapter 3 looks at the design of the new DfE-contracted scheme to help 16 and 17 year-olds who leave education without finding a job or training (NEETs) and the challenges it faces in re-engaging this group. We then consider the Youth Contract measures for which DWP is responsible: greater Jobcentre Plus support for young unemployed people in the early part of their out-of-work benefit claim (chapter 4) and wage incentives for longer-term young unemployed people (chapter 5). We evaluate the likely effectiveness of apprenticeships as a way of tackling youth unemployment in chapter 6. We then consider policy areas affecting young people's transition from education to work: school and college-leavers' skills; vocational education; raising the participation age; and work-related learning and careers information, advice and guidance (chapter 7). The difficulties involved in coordinating the wide range of policies and services, and options for organisational reform, are discussed in chapter 8. We set out our broad conclusions on the Youth Contract approach and related policy areas in Chapter 9.

1   DWP, Ev 120 para 8; TUC, Ev 151, para 3.1; P. Gregg and E. Tominey, The Wage Scar from Youth Unemployment, University of Bristol, 2004 Back

2   "Employers urged to do more to stem rising tide of youth unemployment", UKCES press release, 2 July 2012 Back

3   "£1 billion package to tackle youth unemployment", Office of the Deputy Prime Minister, press release, 25 November 2011 Back

4   For details of the BIS Committee's inquiry, see its website at Back

5   The Committee took evidence from Rt Hon Chris Grayling MP, Minister for Employment and John Hayes MP, Minister for Further Education, Skills and Lifelong Learning. Both Ministers moved to different ministerial posts in the September 2012 reshuffle.  Back

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Prepared 19 September 2012