Monday, 24 March 2014

The employment half of 18-24 ‘earn or learn’

 by Mark Corney

Three hours before the Chancellor delivered Budget 2014, official figures showed that 1,137,000 young people aged 18-24 were unemployed or inactive and not in full-time education. This is group of 18-24 year olds policy makers should be most acutely worried about.

Some 578,000 young people aged 18-24 are unemployed - having looked for work in the past four weeks – but are not in full time education, down 26,000 on the previous quarterly average.

Meanwhile, 559,000 young people aged 18-24 were inactive – having not looked for work in the past four weeks – but are not in full-time education, down 4,000 on the previous quarterly average.

There are two main strategies to reduce the 1.1 million or so 18-24 year olds who are unemployed or inactive but not in full time education.

The first strategy is to increase the number in full-time education.

The Coalition is primarily seeking to do this by removing the cap on the number of students in full-time higher education, with most of the extra 60,000 students expected to be 18-24 year olds. There is, however, no specific policy to expand participation in full-time further education by this age group.

The second strategy is to increase the number of 18-24 year olds in employment with or without apprenticeships and part-time further and higher education.

Essentially, the 18-24 employment strategy has two parts - measures to reduce the cost of employing young people and measures to reduce to cost of employing and training young people.

In the last Autumn Statement, the Coalition announced the abolition of employers’ national insurance contributions for young people under 21 earning below the higher rate of income tax. This measure comes into effect from April 2015.

And in the run up to Budget 2014, the government confirmed increases of between 2-3% in minimum wage rates, with the rate for 18-20 year olds increasing to £5.12 per hour and the main rate for 21 year olds and over increasing to £6.50 per hour from October this year.

In terms of bearing down on the cost of employing and training 18-24 year olds, however, the Coalition has maintained lower wage rates for apprentices and protected funding for apprenticeship training.

The minimum pay rate for apprentices in the first year of training will rise by 2% to £2.68 per hour from October.

Spending on the cost of training for 19+ apprenticeships was protected for inflation in Budget 2013. The Skills Funding Agency has stated that the priority for spending on adult apprenticeships should be 19-24 year olds and depending upon employer demand, the entire £2bn grant-funded adult skills budget could therefore in principle be allocated to adult apprenticeships.

Budget 2014 specifically announced £20m over two years for the development of degree and master’s degree level apprenticeships.

The Apprenticeship Grant scheme for new employers becoming involved in the programme will also be extended to 2015/16 at a cost of £100m per year.

Indeed, neither a budget nor an autumn statement now goes by without additional small pots of funding for apprenticeships.

Missing from Budget 2014, however, was a comprehensive ‘earn or learn’ strategy for 18-24 year olds.

Perhaps, however, this should not be a surprise.

The number of 18-24 year olds who are unemployed or inactive but not in full-time education is worrying large, but in fact falling.

The improving labour market is creating jobs for 18-24 year olds.

Measures to expand employment and full-time education opportunities are in the pipeline.

With more positive news on the young generation, the Coalition judged it could craft a ’silver’ budget rather than a ‘youth’ budget.

But from a policy making point of view, Autumn Statements in December rather than Budgets in March have been the hook for new policies for 18-24 year olds.

The Autumn Statement 2014 this December is therefore the time when we can expect further measures on ‘earn or learn’ for 18-24 year olds.

Mark Corney is a policy consultant and adviser to CfL.

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