England & Wales Covid-19, Economy and regeneration

In the firing line

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Long after the GDP and the overall unemployment rate have returned to ‘normal’, young people will be feeling the effects of the Covid-19 pandemic lockdown and subsequent recession. LGIU Associate Mark Upton looks at what should be done to shield them from the worst of what is to come.

While most recessions affect most workers, their impact is disproportionately felt by the young. Young people are more likely to move into and out of work, more affected by slowdowns in hiring, and face increased competition from those with more experience and job specific skills. The negative impact on their employment, pay and career prospects will last for years after the economic impact of Covid-19 has abated.

The claims for unemployment-related benefits among the young double, with the youth unemployment rate expected to rocket from 10.5% to 27% this year. It could be worse. The most affected sectors of the economy (so far) traditionally attract a large proportion of young people – in particular non-graduates and young women: non-food retail, hospitality, travel, and the arts and entertainment sectors.

The Government’s initial response to supporting economic recovery is the “decade of investment” to be announced on 30 June. Any robust response must involve stimulating the demand-side of the labour market. Previous recessions have continued to produce jobs, but the sudden drop in employment and vacancies means the labour market needs stimulating. Cutting employer National Insurance (NI) contributions or increasing the employment allowance is an option but employers already do not pay NI for employees under-21, and we do not know if this has an impact.

The Prime Minister may follow Robert Halfon’s (Chair of the Education Select Committee) advice and introduce an ‘apprenticeship guarantee’ for young people. To tempt employers to take on apprentices and help to keep existing ones will require the Government to pick up a considerable proportion (if not all) of both their training and pay costs. Some kind of wage subsidy scheme will be required and while there are other options, one that invests both in jobs and skills in tandem should produce the greatest returns for individuals and the economy.

Reintroducing the Future Jobs Fund is possible. In the last recession this sought to create temporary jobs within the public and charitable sectors in return for government wage subsidies. The earlier job guarantee model – as part of the New Deal for Young People – which primarily operated within the private sector appears to have been successful in producing more sustainable jobs, and may provide a better guide to what should be done now, perhaps operating alongside an apprenticeship guarantee, focused on graduates.

It is likely that the Government will want to do what it can to bring unemployment down quickly. This may lead to a ‘cream and park’ approach, focusing on those ‘closest’ to the labour market to get young people into any job, however unsuitable, because ‘work pays’, while ‘parking’ those furthest away from the labour market. That risks entrenching existing inequalities and trapping those who appear initially lucky to get into ‘any job’ in low paid occupations, with lasting detrimental effects on their pay and careers.

Support needs to be put in place quickly. This points to using existing delivery mechanisms notwithstanding their current weaknesses. The national network of Jobcentre Plus work coaches and the Flexible Support Fund, and the mandated Youth Obligation programme exist, but this will not cover the 40% of 18-24 year olds who do not claim benefits, or the 16-17 year-olds who do not qualify. Mandated programmes in return for benefits do not necessarily produce sustainable results. Such programmes can lead to young people getting stuck in low paid and unsuitable jobs, or dropping out of the system altogether, leading to more social and economic problems down the line. The lessons from the last recession are:

  • Employment support programmes need to be more than tick box exercises and should provide comprehensive, holistic and personalised interventions to support both young people and employers.
  • There needs to be dedicated support – different from mainstream support – for those whose background suggests the transition to employment is challenging: those leaving care, young carers and those with special educational needs and disabilities, BAME groups etc.
  • Government funding and support needs to bring the supply and demand for labour together, co-creating with employers the skilled labour force that the economy needs.
  • Stronger signals, including financial, are required to redirect young people towards sectors, professions and occupations that are likely to have a long-term demand in our economy.
  • On-going careers support is required to ensure that those young people who do get stuck in low-paid occupations are lifted out of them and redirected elsewhere.

Keeping young people in education and training can be an effective way of shielding young people from the long-term damaging effects of unemployment. Again this should not just be used as a ‘holding pattern’, but as an opportunity to train young people in the jobs of tomorrow. That will require additional funding for the further education sector. The evidence of what works suggest a central role for ‘Career Academies’ involving academic and occupational training specific to a particular business sector / profession combined with relevant and high quality work experience.

There are outstanding policy decisions within Whitehall which are now urgent and could have a considerable bearing on economic recovery and youth employment in particular. Notably the replacement of the European Structural Funds with a UK Shared Prosperity Fund (which at least £500 million is promised for employment support); the £3 billion new National Skills Fund trailed in the 2019 Conservative Party manifesto; the Treasury-led review of the apprenticeship levy; the response to the Augar Review on post-18 education; a White Paper on Further Education; and the postponed departmental comprehensive spending review which is likely to come this autumn.

Now is time for the Government to put its trust in the mayoral combined authorities, which cover over a third (36%) of England’s population, to come up with their own local solutions to build on their responsibilities for commissioning 19-plus further education. In non-devolved areas there should be strengthened ties between Jobcentre Plus and the Education and Skills Funding Agency and the Local Enterprise Partnerships (which bring together business, local authorities and the FE and HE sectors in Employment and Skills Panels) to align and co-invest funding in job creation, skills and employment support. Local authorities need to work actively with their local employers and further education sectors to fulfil their duties for 16 and 17-year olds who are not in education or employment (NEET) and for older young people starting off in life.

This will require significant extra funding over and above the additional skills funding pledged at the last election in the Conservative Party manifesto. Programmes must be seen as invest-to-save not only in terms of economic recovery in the short term, but also in boosting social mobility and improved productivity over the longer term.

This blogs draws from the LGIU briefing prepared by Mark Upton – Youth employment after Covid-19, which is available free to LGIU followers and members.

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