Tuesday, 15 May 2012

Young people want jobs stupid!

by Mark Corney

The unemployment figures will be published on Wednesday.

The broader measure of unemployment provides a rolling quarterly average of the number of people who have looked for work in the past four weeks and ready to work in the next two.

The time frame is January to March which coincides with the start of the double dip recession when GDP fell by 0.2%.

Signs of further weakness in the youth labour market should show up on Wednesday although the fact that unemployment is a lagging indicator suggests the worst is yet to come.

From 18, when young people are entitled to claim JSA, either they enter full-time higher education or they have to find a job - preferably with an apprenticeship - but any will do.

In short, present policy assumes young people not on the full-time HE track just want jobs.

If this is the case both the Coalition Government and the Labour opposition have a monumental challenge on their hands.

Currently, some 2.7m 18 to 24 year olds are in employment and not in full-time education. Nearly 95% of them are in jobs - full time and part time - because self-employment makes up a tiny fraction of this age group.

Since the summer last year, however, there are 60,000 fewer 18 to 24 year olds in employment and not in full time education. There are 654,000 unemployed 18 to 24 year olds not in full time education and a further 595,000 who are inactive and not in full time education. Yet, the total number of vacancies in the entire economy is less than 500,000.

Even if every job vacancy was earmarked for 18 to 24 year olds, we would still have more than half a million unemployed or inactive.

Growth is the answer to youth unemployment. But there is a difference between short-term and long-term strategies for growth.

Short-term growth requires increasing demand in the economy. Long-term growth requires reforming the supply side of the economy.

If Chelsea winning the Champions League, England winning EURO 2012, Andy Murray winning Wimbeldon and Team GB winning medal after medal at the Olympics cannot persuade consumers to spend and businesses to invest, the Coalition will have to act to boost jobs in the Autumn Statement.

Indeed, two specific immediate measures should be on the agenda.

Firstly, the Coalition should expand capital spending on social housing coupled with recruitment of 18 to 24 year olds including apprentices. If this requires redirecting 24+ apprenticeship funding to 18 to 24 year olds then so be it.

Secondly, consideration should be given to a cut in employers' national insurance contributions to 18 to 24 year olds from 13.8% to 10.0% time limited for two years.

And although both of these measures could increase the deficit in the short-term the announcement that the reduction would be time limited should reassure the money markets.

Longer term, the Coalition Government does need to ensure young people are competitive in a labour market where adults are having to work longer.

It should ask the Low Pay Commission to assess the impact of a minimum wage for 18 to 24 year olds set at below £6.19 per hour on employment prospects for this age group.

Less convincing is the proposal announced in the Queen's Speech to make hiring and firing easier for employers. The result might be to add to labour market insecurity and cause less demand in the economy as young workers 'save what that can' for fear of being given the push.

And yet, the choice offered to young people must be wider than 'full-time higher education for the best' and  'job for the rest'.

The reality of this choice is that there are two few jobs around, fewer still with apprenticeships and a work-first regime directed at getting young people off JSA into any old job however temporary or low paid.

For some young people who are not on the royal route of GCSEs, A levels and full-time HE, the opportunity to study full-time in FE - with appropriate maintenance support - is preferable to weekly trips to the job centre and the prospects of short-term, low paid, low skilled part-time jobs.

Mark Corney is policy adviser to CfL. He writes in a personal capacity.

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