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

List of Recommendations

Youth Unemployment trends

1.  It is clear that youth employment has been adversely and disproportionately affected by the economic downturn since 2008. This in itself is unremarkable and accords with trends following the recessions of the 1980s and 1990s. Substantial recovery in youth employment rates will to a large extent depend on a return to economic growth and resultant increase in the number of jobs available. However, we welcome active Government intervention in the youth labour market now to try to ease the labour market disadvantage currently faced by a significant proportion of young people. (Paragraph 41)

2.  Not all of the increase in youth unemployment can be explained by the economic downturn; youth unemployment was rising prior to the 2008/09 recession. Government policies will therefore also need to address disadvantages experienced by young people as a result of structural changes in the economy in recent decades. These conditions are forecast to continue and we believe that it will therefore be vital for the Government to focus on preparing young people for the types of vacancies likely to be available in the economy and on encouraging small businesses to recruit younger workers. (Paragraph 42)

3.  Government policies will need to recognise and address regional and sub-regional variations in youth unemployment by focusing the available resources on areas where it is most difficult for young people to find work. We also believe action is required to address disproportionately high youth unemployment rates amongst some minority ethnic groups, in particular young black men. (Paragraph 43)

The Youth Contract: helping young people who become NEET

Target group and policy objectives

4.  Low educational attainment is an important indicator of the risk of becoming NEET. However, using it as the sole criterion for establishing eligibility for the Youth Contract NEET scheme is likely to exclude a number of very disadvantaged young people. We agree with the Government that it is important to focus the available support on those who need it most. To achieve this aim, we recommend that young people are assessed according to a broader set of criteria to better reflect their level of need. (Paragraph 56)

5.  We are concerned about the potential gap in provision for 16-17 year-olds, the large majority of whom have no contact with Jobcentre Plus. Funding for the new NEETs scheme will be sufficient to offer support to 54,000 16-17 year-olds over the next three years. Our concern is that no single agency or body will take responsibility for those 16-17 year-olds who do not qualify for the Youth Contract scheme. The EFA, its Youth Contract partners and local authorities must work together with the aim of ensuring that all 16-17 year-old NEETs are referred to appropriate local provision. It is vital that young people are not left without support until they are 18, at which point they may have been NEET for two years and may have become much more difficult to help. (Paragraph 57)

Level of funding per NEET

6.  Delivering the new NEETs scheme through a prime contractor model and on a payment by results basis creates a risk that insufficient funds will flow to the organisations delivering services on the ground. We believe that the financial risks of the scheme should be shared by prime contractors and not simply passed down to subcontractors, whose role will be to deliver the often intensive interventions required. As part of its contract-management role, the EFA must take proactive steps to ensure that supply chains operate fairly and in a way that ensures the best possible service for young people. (Paragraph 66)

7.  We share the concern that the maximum payment under the scheme of £2,200 per NEET may be too low to enable delivery of the intensive interventions often required by the most disadvantaged NEETs. The EFA must monitor this carefully. We recommend that the Government takes a flexible approach to allocating funds within the overall £1 billion Youth Contract budget and considers increasing the funding for the new NEETs initiative should this prove to be necessary, either because of the level of demand or if it becomes apparent that the payment structure is preventing the delivery of the necessary interventions. We would also find it helpful to know, in response to this Report, the extent to which the Government expects NEET scheme providers to make available in-depth support to tackle personal and social issues, within the contractually agreed "unit price" per young person. (Paragraph 67)

Finding and engaging NEETs

8.  Our main concern about the Youth Contract NEET scheme is that it will not reach its intended volumes unless local authorities engage fully with it. Local authorities have a statutory duty to support young people's participation in education. We therefore expect local authorities to engage with Youth Contract providers and assist them in finding and engaging NEETs. (Paragraph 76)

9.  Local commissioning of the Youth Contract NEET scheme in three areas provides an opportunity to compare the effectiveness of the local approach with the EFA-contracted provision in the rest of the country. We recommend that the Government conducts research to ensure it properly understands the advantages and drawbacks in each approach and makes any necessary changes to the scheme in response to the evidence on relative effectiveness. (Paragraph 77)

The Youth Contract: the role of Jobcentre Plus (JCP)

The JCP Work Experience Scheme

10.  The JCP Work Experience scheme has the potential to help many young unemployed people move into work. Evidence suggests that its impact can be maximised by focusing carefully on quality placements for those who stand to benefit most: those with no or little previous work experience. Without careful monitoring by JCP, unpaid work experience may be counter-productive for people who already have experience and therefore have relatively good employment prospects. (Paragraph 98)

11.  We believe the focus should be on the quality of placements rather than the quantity. The Youth Contract target of 250,000 extra placements over three years may be over-ambitious. In this context we recommend that the Government continues to work with employers and human resources experts to ensure that work experience opportunities provided under the Youth Contract offer genuine opportunities for young people to increase their employability. (Paragraph 99)

12.  Since we completed our evidence, another work experience scheme has been announced for young people, initially as a pilot in the London area. It is unclear how this will inter-relate with existing provision or how it will impact on the voluntary organisations and social enterprises which are to be the focus for providing placements. We expect the Government to fully evaluate the scheme before it is rolled out more widely. (Paragraph 100)

Sector-based Work Academies

13.  We support Sector-based Work Academies which combine a period of unpaid work experience with relevant training and the guarantee of a job interview. We therefore recommend that JCP prioritises this approach. To be effective SBWAs will need to be established in growth sectors within local economies. We recommend that some of the extra resources allocated in the Youth Contract go towards strengthening JCP's ability to make a proper assessment of the requirements of the local labour market so that SBWA placements can be properly targeted and offer realistic long-term employment prospects. (Paragraph 107)

Use of additional JCP resources

14.  We welcome the additional resources allocated to Jobcentre Plus as part of the Youth Contract. However, to ensure effective use of resources the 4,000 new staff will need to be deployed carefully, to the districts that most need them. We support extra adviser time for young claimants, which has been shown to have a beneficial impact on employability. However, JCP staff will need to be properly trained to ensure that those providing advice have an up-to-date knowledge of the employment and training options available to young people, and that they recognise the importance for young people of acquiring skills and customise the support to the individual accordingly. While we understand the imperative to get young people off benefits and into work, an equal focus on increasing skills of value in the local economy is likely to produce more sustainable outcomes. (Paragraph 109)

The Youth Contract: wage incentives and the Work Programme

Concerns about take up

15.  The Government's target of 160,000 wage incentives over the next three years will significantly exceed anything achieved by comparable schemes in the past. We note the relative simplicity of the Youth Contract scheme and hope that this will encourage employers to take part. We accept that a national marketing campaign would be an expensive option; however, the Government should consider targeted regional media campaigns should take-up be low in areas which would stand to derive particular benefit from the scheme. (Paragraph 128)

Delivering wage incentives via the Work Programme

16.  Delivering wage incentives through the Work Programme has some advantages. It ensures that support will be focused on longer-term young benefit claimants who are more likely to have significant barriers to work and therefore require more intensive help. The Work Programme payment structure is also designed to encourage sustainable outcomes. If large numbers of young unemployed people are recruited through this delivery method it will bring significant benefits to the Exchequer through increased tax revenue and reduced welfare spending. (Paragraph 136)

17.  However, delivering wage incentives via the Work Programme has value for money implications which will require careful monitoring by DWP. The Government will need to assess, during the first year of the scheme, whether young people placed in wage-incentivised jobs are receiving ongoing support from Work Programme providers at a level which justifies sustainability payments. If it proves to be the case that employers themselves offer all the support that the young employee needs, this would call into question the cost-effectiveness of the approach. The Government would then need to review the value of using Work Programme providers to implement the scheme over the remaining two years—or at least whether continuing to make sustainability payments for wage-incentivised jobs can be justified. (Paragraph 137)

Supporting the most disadvantaged

18.  The Youth Contract wage incentive is designed to "level the playing field" between young inexperienced people and experienced people competing for the same jobs in the mainstream employment market. Unlike previous programmes, it will not guarantee subsidised employment to long-term young unemployed people. It may be less likely therefore to help those who are furthest from the labour market, such as young people with disabilities. We welcome the Government's decision to include Work Choice participants in the Youth Contract scheme. However, we note concerns that the wage incentive level of £2,275 may be insufficient; more may be necessary to encourage employers to recruit young disabled people. DWP should include a review of the effectiveness of wage incentives for young disabled people as part of its evaluation strategy. (Paragraph 145)

19.  The Youth Contract as originally announced lacked focus on unemployment "hotspots". The decision to offer wage incentives earlier and directly to employers in areas of high youth unemployment is welcome. This approach will allow direct comparison with the efficacy and cost-effectiveness of wage incentives delivered via the Work Programme. We recommend DWP conducts a comparative study of the two approaches to establish which produces the most cost-effective and sustainable outcomes. We recommend it undertakes and publishes this study by the end of July 2013, one year after the introduction of the JCP scheme. It should act quickly to roll-out JCP delivery of wage incentives if this proves to be the most cost-effective delivery method. (Paragraph 151)

20.  If the Youth Contract is to succeed, the money available for wage incentives needs to be spent in areas of greatest need. Further measures may be necessary to encourage take-up in areas of high youth unemployment and to minimise deadweight spending where youth employment is relatively buoyant. Regional caps calculated on the basis of the proportion of young people on JSA may be required. DWP should also consider increasing the level of incentive payment available to employers if take-up is low where youth employment is most depressed. We recommend that DWP reviews the need for regional caps and differential regional incentive payments in April 2013, a year from when the Youth Contract was introduced. (Paragraph 152)

21.  Unemployment rates amongst some ethnic minority groups are disproportionately high, particularly amongst young black men. Further, targeted measures may prove necessary to tackle this. As part of the Youth Contract evaluation strategy DWP must monitor its impact on the employment rates of different ethnic groups. We recommend that DWP assesses the Youth Contract's effectiveness in tackling high youth unemployment amongst minority ethnic groups after it has been operating for 12 months and responds quickly to introduce additional measures if this is shown to be needed. (Paragraph 155)

The Youth Contract: Apprenticeship Grant for Employers

22.  Apprenticeships form a small part of the Youth Contract offer. We welcome the attempt by the Government, through the Apprenticeship Grant for Employers, to increase the number of young people taken on as apprentices. However, we remain concerned that apprenticeships may not offer the right support for young people furthest from the labour market, who may have no qualifications or experience and come from difficult backgrounds. We therefore welcome the steps the Government has taken to date to increase pre-apprenticeship provision; this is a useful starting-point on which it needs to build. (Paragraph 171)

Related policy areas: education and skills

Raising the participation age

23.  We believe that reform of vocational education is required to avoid young people wasting time on courses of little or no labour market value, particularly as the education participation age in England rises to 18 by 2015. The Government has recognised the need to take action in its response to the Wolf Report. Steps to implement its recommendations now need to be taken as a matter of urgency. We request that the Government sets out, in its response to this Report, how it intends to proceed with these reforms, including the timetable for implementation in preparation for the change to the participation age in 2015. (Paragraph 188)

Reform of schools work experience and work-related learning

24.  Business organisations appear ready to play an increased role in the provision of work-related learning and careers information, advice and guidance. We welcome and support the current examples of innovative measures which link schools with local employers and help young people to understand and engage with local labour markets. We recommend that the Government plays an active role in facilitating a national infrastructure which allows such initiatives to flourish. (Paragraph 200)

25.  We support giving schools flexibility in how they provide work-related learning. We acknowledge concerns, highlighted in the Wolf Report and echoed by witnesses to our inquiry, about the practical difficulties and sometimes disproportionate cost of the traditional one or two week work experience placement at age 14-16. We also acknowledge the rationale behind prioritising work-related learning for older students—a decreasing proportion of young people in England will enter employment at age 16 as the education participation age rises to 18. However, we believe school-arranged work experience placements should continue for pupils whom schools believe will benefit most from the experience. (Paragraph 201)

26.  It would be regrettable if schools chose not to provide work-related learning for younger age groups as a result of the recent removal of the statutory duty at Key Stage 4. As well as arranging work experience placements where appropriate, we believe schools, in co-operation with local employers, should incorporate work-related learning into lessons at Key Stage 4 and for younger school students. We are concerned that the removal of a broadly defined statutory duty will send the message to schools that work-related learning is something they need not do. We request that, in response to this Report, the Government sets out how it envisages its new approach will enable schools to deliver effective work-related learning, including work experience where appropriate, for all school students. (Paragraph 202)

Careers information, advice and guidance

27.  We did not get a clear sense from Ministers of how the Government expects schools to provide good quality "independent and impartial" careers information, advice and guidance to students without additional funding to enable them to deliver this. We do not consider the National Careers Service's offer of online and telephone advice to younger students to be an adequate alternative to face-to-face careers guidance. We request, in response to this Report, a clear statement of the practical steps the Government wishes to see schools take to ensure their pupils have a good understanding of the jobs markets and the skills and qualifications required to pursue their chosen careers. (Paragraph 209)

Coordinating the Youth Contract and youth employment and skills policy

28.  There is a plethora of services and funding streams aimed at increasing young people's participation in education and employment. We do not doubt that it is all well-intentioned and some of it works well. However, we are not convinced that public money is being used in the most cost-effective way and the scale of duplication must be contributing to waste as well as complexity and confusion for young people and employers. The Government seemed reluctant to tackle this by appointing a single Minister or delivery agency and we have some sympathy with this reluctance to introduce machinery of government changes which would not necessarily resolve the problem. Nevertheless, we believe that there is a very strong case for consolidation of funding streams and delivery bodies and improved cross-departmental working. We recommend that, in response to this Report, the Government sets out how it plans to deliver a more stream-lined and cost-efficient system for providing youth employment and skills services both in the short and longer-term. (Paragraph 217)

29.  We identified one specific current weakness which needs to be addressed if the Youth Contract is to succeed. There is currently no single information and support service, either locally or nationally, for employers who wish to offer opportunities to young people or to find out about government employment and training schemes. We recommend that DWP sets up a dedicated telephone helpline for employers looking to offer young people employment, training and work experience opportunities. The helpline should be staffed by trained employees with a full knowledge of the Youth Contract offer and all related schemes. A parallel single online information service should also be established. (Paragraph 218)

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Prepared 19 September 2012