Tuesday, 8 October 2013

Earn or learn: choices for 18-24 year olds

by Mark Corney

Way back in December 2011, the Coalition Government published a report entitled Building Engagement, Building Futures: Our Strategy to Maximise the Participation of 16-24 Year Olds in Education, Training and Work. A mouthful, perhaps, but the report analyses the participation question in an extremely helpful way.

The starting point is participation up to age 16. Then the focus is on full participation by 16 and 17 year olds, taking into account the increase in the participation age to the 18th birthday from September 2015. And then participation by 18-24 year olds is discussed quite separately.

 During the summer, the Coalition announced that the Cabinet Office would be undertaking an internal review of education and employment opportunities for 16-24 year olds. The review would report to both the Prime Minister and the Deputy Prime Minister by the autumn and would be published at the time of the Autumn Statement during the first week of December. Importantly, the decisions taken on the future funding of post-16 apprenticeships* in England would have to feed into the wider Cabinet Office review of opportunities for 16-24 year olds.

We now know that the Cabinet Secretary, Sir Jeremy Heywood, is leading the 16-24 review. And the signs are that the review will differentiate between participation by 16-17 year olds and 18-24 year olds: before the 18th birthday, young people will be expected to participate in education and training and are unable to claim JSA, whilst after the 18th birthday they at present do not have to participate in education and training and can claim JSA.

An interesting issue the Cabinet Secretary will need to reflect on is whether mandatory employer cash contributions will apply to apprenticeship starts before the 18th birthday.

Only late in the day during the apprenticeship funding consultation period did the Skills Minister, Matthew Hancock, confirm that DfE and BIS were indeed consulting on mandatory cash contributions to 16-17 apprenticeships, thereby ending the principle of fully funded learning and training for this age group.

There is widespread agreement that mandatory cash contributions for 16-17 year old apprenticeships will reduce employer places from an already low base. Apprenticeship training, however, counts as participation under the RPA. The implication, therefore, is that mandatory employer cash contributions for 16-17 apprenticeships will make it harder for the Coalition Government to achieve full participation for this age group.

But the central focus of the Cabinet Office report will almost certainly be the 1 million 18-24 year olds who are unemployed and inactive but not in full-time education, and the choice they now face between earning,learning or losing benefits.

At present, there are 3.87m young people aged 18-24 in employment outside of full-time education, although the total has fallen by 50,000 in recent months. Within the employed category, around 250,000 have started apprenticeships in England although there has been a slight dip in recent months.

Young people in jobs with or without apprenticeships earn a wage. They are also entitled to housing benefit if they live in a single room away from home.

In addition, there are 1.88m young people aged 18-24 in full-time education. Full-time students cannot claim JSA or housing benefit.  Most full-time students aged 18-24 are in higher education because there is a national system of maintenance loans and means-tested maintenance grants. By contrast, there is no national system of maintenance support for full-time FE students aged 18-24. Indeed, most are employed – thereby earning a wage – and study full-time FE courses.

This leaves 1.17m young people aged 18-24 who are unemployed or economically inactive and not in full-time education. They can currently claim JSA, disability benefits, income support and housing benefit.

Around 620,000 young people aged 18-24 are unemployed with 366,000 claiming JSA. 18-24 year olds on JSA cannot claim and study for more than 16 hours per week at college or university. Furthermore, unemployed 18-24 year olds joining the new Traineeship programme are entitled to JSA but the rules are extremely complex. And part-time FE students and trainees can claim Housing Benefit.

Another 550,000 young adults are economically inactive with 130,000 claiming disability benefits. Some 250,000 young adults also claim Income Support, most of whom are lone parents. 

To complete this complex picture, about 385,000 young people aged 18-24 claim Housing Benefit. But the claims are not for long: most cease after six months. About 25% of Housing Benefit claimants are employed and more than 40% are lone parents.

One half of the exam question for the Cabinet Office review is increasing opportunities for 18-24 year olds.

On the earning side, it is important that 18-24 year olds get their fair share of the new jobs being created overall in the economy. Removing housing benefit from 18-24 year olds in work looks likely to create rather than reduce youth unemployment. Mandatory cash contributions from employers for 18-24 apprenticeships are also likely exacerbate rather than ease youth unemployment.

On the learning side, the Coalition Government needs to widen access to full-time further education and traineeships for 18-24 year olds. But the stumbling block is not the cost of provision but the interplay between the adult education and welfare systems, and between BIS and DWP.

The Times newspaper has reported that as well as recommending tighter benefit sanctions, the Cabinet Secretary is poised to recommend a ‘new payment’ to remove current disincentives young people face.  Replacing JSA with a new 18-24 learning grant so that young people can live and study full-time at FE colleges and join Traineeships would be a welcome reform, and so too would a maintenance loan for those living at home and learning or training full-time, in line with that available to full-time HE students.

But 35 hours of job search a week in return for a new allowance is not the right intervention for this age group. And there is a significant difference between abolishing Housing Benefit for unemployed 18-24 year olds and making access to it conditional on taking jobs that are available.

Mark Corney is policy adviser to the Campaign for Learning.

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