Expensive job creation schemes are not the answer to rising youth unemployment

Len Shackleton

April 15, 2021

Resolution Foundation researchers have produced a useful new analysis showing that young people, especially young black people, have been especially hit by rising unemployment in the pandemic.

There is nothing unexpected about their findings, sadly. The poorly-handled lockdowns, with their endless stops and starts, trashed many businesses and put others off investing. This was always going to destroy many thousands of employment opportunities in sectors such as hospitality and leisure where many young people had chosen to work in increasing numbers before the pandemic came along.

Measures such as increasing minimum wages in an economic downturn – and extending the National Living Wage to younger workers – also won’t have helped, and nor will the government’s acquiescence in court judgments, such as those in the recent Uber and Asda cases, which will almost certainly reduce employment opportunities.

There are some caveats to the Resolution Foundation’s analysis. Unemployment rates are calculated in relation to those who are economically active (in work or looking for work), and many of this age group are still in education. As black youngsters are markedly more likely to stay in school and progress to university than their white peers, direct comparisons between unemployment rates may marginally exaggerate their relative disadvantage.

Nevertheless, the disparity is real and worrying.

What to do, though? The government, having partially created this situation, has a particular responsibility to those groups of under-25s who have been the chief losers.

However this responsibility is not best pursued by setting up more expensive, and probably ineffective, ‘job creation’ programmes – such as the ‘Kickstart’ scheme which the Resolution Foundation seems to favour, despite its poor record so far.

Rishi Sunak’s youth employment scheme creates 13 jobs a day while 292 more young people are out of work daily. Such schemes in the past have done little for participants’ future job prospects unless very precisely targeted, which Kickstart isn’t.

Nor is it a good idea to subsidise firms to create employment in sectors where jobs have been lost; we probably won’t see a return to the pre-pandemic levels of demand for high street retailing, hotels, bars, restaurants and theatres for years, if ever.

There will be a temptation for those pushing the green agenda, or whizzy high-tech schemes, to bend government ears to support pet projects under the guise of creating extra jobs. However if these schemes cannot support themselves without government subsidy they are probably not worth doing, and any job creation may be illusory and temporary.

What would make it more likely that businesses across the economy take on young people is to make it easier and cheaper to employ them. This doesn’t mean cutting their wages. Scrapping employers’ national insurance contributions for all under the age of 25, and cutting regulation and employment mandates such as pension auto-enrolment (which is largely pointless for young people) and the apprenticeship levy (which acts as a payroll tax) would be a start.

If money is to be spent on training, it should take a form which empowers young people and offers them a choice. This might involve vouchers to spend with different training providers or to pay for postgraduate courses for those who have recently completed degrees. Or, perhaps, help to start their own businesses: many young people from ethnic minorities want to become entrepreneurs; meet 15 Black British Entrepreneurs making waves. We should not just attempt to recreate the failed top-down schemes of the past, but encourage young people to shape their own future.

None of this should detract from the fact that the most important thing the government can do is speed the removal of Covid-19 restrictions and allow businesses to start expanding again. A general recovery of the economy is still the best way of creating new jobs across all age and ethnic groups.

Author

  • Professor Len Shackleton is an editorial and research fellow at the Institute of Economic Affairs and professor of economics at the University of Buckingham.

Written by Len Shackleton

Professor Len Shackleton is an editorial and research fellow at the Institute of Economic Affairs and professor of economics at the University of Buckingham.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.


  • SHARE

Capitalism and freedom are under attack. If you support 1828’s work, help us champion freedom by donating here.


Keep Reading

SUBSCRIBE TO OUR

WEEKLY NEWS BRIEFING

Sign up today to receive exclusive insights