Youth Unemployment – a crisis we cannot afford
Deloitte, London
February 9th, 2012
ACEVO COMMISSION ON YOUTH UNEMPLOYMENT – REPORT LAUNCH
DAVID MILIBAND, OPENING REMARKS
6TH FEBRUARY 2012
Welcome everyone and thanks very much for coming. I want to start by thanking the commissioners who have put a lot of time and thought into this report for the last four months. It has been a challenging and broadening experience for all of us.
I am here for three reasons.
First, because I see in my own constituency how long term youth unemployment is again haunting a generation of young people. More young people are doing better at school and college, but more are long term claimants. In South Shields, there has been a 210 per cent increase last year, bringing the total number of those out of work for six months or more to 485. I want to make a difference for them.
Second, my first job was working in the voluntary sector – I think the voluntary sector has the expertise and idealism that the country needs – so I was delighted when ACEVO asked me to help them address this pressing problem.
Third, youth unemployment is a big problem but it is not an insoluble problem. We are not doomed to fail a million young people. We know from our own country and from abroad what can make a difference. So the message today is about commitment and innovation not just alarm.
But there is a crisis. 250 000 young people have currently been out of work for over a year. 200 000 more have been out of work for over six months. That is the centrepiece of today’s report. It is a crisis – one that we cannot afford.
Our report includes a range of measurements, claimant counts and surveys, but here are the top line figures from the ONS Labour Force Survey:
We know that the recession had a major impact, but there was also a pre-recession rise in the problem that started in 2004.
We know that unemployment hits the poorest the hardest and the commission has identified concentrated hot-spots of disadvantage across the country. In all of these 600 wards the claimant count is twice national average, and the NEET rate is at least one in four. They cover 152 local authority areas and are the areas of unemployment emergency.
As well as the social cost, there is the financial cost. The current levels of youth unemployment are a timebomb under the nation’s finances. Research for the Commission shows us that youth unemployment doesn’t just cost money now – the long-term youth unemployed work less and earn less in the future, to the tune of 2 months a year or £1800-£3300 a year, after they are 25.
Our research has shown that the benefits bill will be over £4bn this year, with over £10bn lost economic output. The problem also has enormous future costs: nearly £5bn a year in benefits and lost taxes and £3bn a year in lost economic output. So the overall net present value of direct costs over the next 10 years is a staggering £28bn. The Future costs are £2.9 billion per annum to the Treasury and £6.3 billion per annum to the economy
There are two sides to the problem: cyclical and structural.
There is no question that weak economic growth is hitting the young the hardest. So there is a short term challenge to prevent these people becoming part of the structural problem.
But the structural problem is real too. In boom times there were still between 800 000 to 900 000 NEETs, and half of them were long term NEET.
The commission took seriously the potential impact of benefit rates, immigration and the minimum wage. But they do not show up in our microeconomic studies as substantial reasons for the rise in youth unemployment.
Instead we have looked to the preparation and motivation of young people; the clarity and quality of options for non university bound; and the weakness and lateness of welfare state interventions.
We also note the drop in demand in retail, wholesale, motor trade, hospitality after 2004 – industries that disproportionately employ young people.
The Government have set an ambitious goal. The Deputy Prime Minister has said he wants to abolish long term unemployment. This is a good goal. And we welcome it. But we are not currently on track to meet it. For example, the Work Programme covers about one in ten of the young unemployed population.
So that is what our report is designed to remedy. We need young people, employers, voluntary sector and government to up our game.
Here are our recommendations.
1. Job opportunities now.
The Government has proposed 50 000 wage subsidies for 2012. But the OBR predicts falling unemployment by 2014. We therefore propose bringing forward 50 000 wage subsidies, worth over £2000 per year – from 2014 to 2012.
We think the public sector can do much better on apprenticeships, and we suggest a UCAS style national system for advertising and accessing apprenticeships.
We also highlight the issue of transport, where young people are priced out of interviews, and where local deals need to be struck to cut fares for the young unemployed and low waged.
2. The transition to work for the forgotten half of the population not going to university.
We propose a Job Ready scheme for at risk teenagers, to be run through contracts with the voluntary sector, where there is real experience of diverting young people from the route to unemployment and into employment.
We think high quality work experience is valuable, and so call for compulsory work experience for 14-16 year olds to be kept in place, contrary to government plans.
We believe that the incentives for schools and colleges to focus on all young people, including those most likely to become NEET, could be sharpened, through the Ofsted inspection framework and the implementation of the pupil premium.
We think that local authorities can do more to help young people who leave their care, who become carers, or who transition from child to adult social services. At the moment they are let down as employment hardly seems to figure in their planning.
We want public sector procurement to be used much more clearly to change the incentives for employers. For example there are local authorities which require a given number of apprenticeships for every million pounds of spend; we want to see more of this.
We also want to use the energy and example of young people, and suggest a system where every young person in work for over a year is automatically registered to mentor a young person out of work for a year.
3. Reform the welfare state so all roads lead to work.
We need to intervene earlier and more intensively for more young people once they are unemployed. This means:
· Closing the holes in the welfare to work net so that young people are engaged earlier by the Work Programme and referred to more intensive support before their unemployment increases their level of need.
· We also believe that Government plans for work experience need to include requirements on employers to offer interviews or training at the end of the work experience, to avoid them just becoming an alternative to paid work.
· After a year on the Work Programme young people need hope. We propose a part time work guarantee for every young person on the Work Programme for a year, with responsibilities for job search alongside the guarantee. We call this the First Step programme.
· And for those still on the Work Programme after two years, we need to learn from successful systems abroad, with a non time limited intermediate labour market scheme so that young people do not rotate off work placements back to unemployment.
4. Finally, implementation and affordability.
We need a new implementation mechanism. Central government is right to demand results, but local players need flexibility.
· We propose Youth Employment Zones of public, private and voluntary sectors, starting in the areas of unemployment emergency, to channel money, commission services, and engage employers and young people. The vision should be that set by Deputy Prime Minister of ending long term youth unemployment, and finding the mechanisms to do something about it.
· These partnerships could make sure additional investment, whether announced through the Youth Contract or through help for ‘problem families’, reaches young people, and also ensure far greater collaboration across the public sector.
· As a local MP I am delighted by the South Tyneside Youth Jobs Commission and with other councils that are already innovating that I hope we can discuss in the Q&A.
One obvious question is whether this is affordable. To that we do not only point to the high costs of the status quo, and the fact that the UK spends about half the OECD average on labour market interventions, but instead take on the chin the lack of new money and argue that we can use existing money far better.
· There is money in the system as the 24 agencies working on NEETS in Worcestershire in the Total Place pilot showed.
· There are resources not yet allocated, like the £150m in the Youth Contract.
· There are resources not earmarked for young people which could help them, like the approximately £700m for problem families.
· There are new government commitments on infrastructure, where young people should be beneficiaries.
· There is the possibility of help from the new European Fund discussed at last week’s summit.
· And then there are innovative ideas like Social Investment Bonds.
Conclusion
One of the submissions to the Commission talked about a “broken deal” with young people. And the truth is that aspirations are high but opportunities are not. That means a crisis of confidence in the younger generation about the ability of the political and business establishment to help change their lives.
There is a way to remedy it. The practical and necessary measures set out today. No one can say there is nothing to be done, locally or nationally.
Thanks very much and we will now open a panel discussion with the commissioners.
Deloitte, London
February 9th, 2012
ACEVO COMMISSION ON YOUTH UNEMPLOYMENT – REPORT LAUNCH
DAVID MILIBAND, OPENING REMARKS
6TH FEBRUARY 2012
Welcome everyone and thanks very much for coming. I want to start by thanking the commissioners who have put a lot of time and thought into this report for the last four months. It has been a challenging and broadening experience for all of us.
I am here for three reasons.
First, because I see in my own constituency how long term youth unemployment is again haunting a generation of young people. More young people are doing better at school and college, but more are long term claimants. In South Shields, there has been a 210 per cent increase last year, bringing the total number of those out of work for six months or more to 485. I want to make a difference for them.
Second, my first job was working in the voluntary sector – I think the voluntary sector has the expertise and idealism that the country needs – so I was delighted when ACEVO asked me to help them address this pressing problem.
Third, youth unemployment is a big problem but it is not an insoluble problem. We are not doomed to fail a million young people. We know from our own country and from abroad what can make a difference. So the message today is about commitment and innovation not just alarm.
But there is a crisis. 250 000 young people have currently been out of work for over a year. 200 000 more have been out of work for over six months. That is the centrepiece of today’s report. It is a crisis – one that we cannot afford.
Our report includes a range of measurements, claimant counts and surveys, but here are the top line figures from the ONS Labour Force Survey:
We know that the recession had a major impact, but there was also a pre-recession rise in the problem that started in 2004.
We know that unemployment hits the poorest the hardest and the commission has identified concentrated hot-spots of disadvantage across the country. In all of these 600 wards the claimant count is twice national average, and the NEET rate is at least one in four. They cover 152 local authority areas and are the areas of unemployment emergency.
As well as the social cost, there is the financial cost. The current levels of youth unemployment are a timebomb under the nation’s finances. Research for the Commission shows us that youth unemployment doesn’t just cost money now – the long-term youth unemployed work less and earn less in the future, to the tune of 2 months a year or £1800-£3300 a year, after they are 25.
Our research has shown that the benefits bill will be over £4bn this year, with over £10bn lost economic output. The problem also has enormous future costs: nearly £5bn a year in benefits and lost taxes and £3bn a year in lost economic output. So the overall net present value of direct costs over the next 10 years is a staggering £28bn. The Future costs are £2.9 billion per annum to the Treasury and £6.3 billion per annum to the economy
There are two sides to the problem: cyclical and structural.
There is no question that weak economic growth is hitting the young the hardest. So there is a short term challenge to prevent these people becoming part of the structural problem.
But the structural problem is real too. In boom times there were still between 800 000 to 900 000 NEETs, and half of them were long term NEET.
The commission took seriously the potential impact of benefit rates, immigration and the minimum wage. But they do not show up in our microeconomic studies as substantial reasons for the rise in youth unemployment.
Instead we have looked to the preparation and motivation of young people; the clarity and quality of options for non university bound; and the weakness and lateness of welfare state interventions.
We also note the drop in demand in retail, wholesale, motor trade, hospitality after 2004 – industries that disproportionately employ young people.
The Government have set an ambitious goal. The Deputy Prime Minister has said he wants to abolish long term unemployment. This is a good goal. And we welcome it. But we are not currently on track to meet it. For example, the Work Programme covers about one in ten of the young unemployed population.
So that is what our report is designed to remedy. We need young people, employers, voluntary sector and government to up our game.
Here are our recommendations.
1. Job opportunities now.
The Government has proposed 50 000 wage subsidies for 2012. But the OBR predicts falling unemployment by 2014. We therefore propose bringing forward 50 000 wage subsidies, worth over £2000 per year – from 2014 to 2012.
We think the public sector can do much better on apprenticeships, and we suggest a UCAS style national system for advertising and accessing apprenticeships.
We also highlight the issue of transport, where young people are priced out of interviews, and where local deals need to be struck to cut fares for the young unemployed and low waged.
2. The transition to work for the forgotten half of the population not going to university.
We propose a Job Ready scheme for at risk teenagers, to be run through contracts with the voluntary sector, where there is real experience of diverting young people from the route to unemployment and into employment.
We think high quality work experience is valuable, and so call for compulsory work experience for 14-16 year olds to be kept in place, contrary to government plans.
We believe that the incentives for schools and colleges to focus on all young people, including those most likely to become NEET, could be sharpened, through the Ofsted inspection framework and the implementation of the pupil premium.
We think that local authorities can do more to help young people who leave their care, who become carers, or who transition from child to adult social services. At the moment they are let down as employment hardly seems to figure in their planning.
We want public sector procurement to be used much more clearly to change the incentives for employers. For example there are local authorities which require a given number of apprenticeships for every million pounds of spend; we want to see more of this.
We also want to use the energy and example of young people, and suggest a system where every young person in work for over a year is automatically registered to mentor a young person out of work for a year.
3. Reform the welfare state so all roads lead to work.
We need to intervene earlier and more intensively for more young people once they are unemployed. This means:
· Closing the holes in the welfare to work net so that young people are engaged earlier by the Work Programme and referred to more intensive support before their unemployment increases their level of need.
· We also believe that Government plans for work experience need to include requirements on employers to offer interviews or training at the end of the work experience, to avoid them just becoming an alternative to paid work.
· After a year on the Work Programme young people need hope. We propose a part time work guarantee for every young person on the Work Programme for a year, with responsibilities for job search alongside the guarantee. We call this the First Step programme.
· And for those still on the Work Programme after two years, we need to learn from successful systems abroad, with a non time limited intermediate labour market scheme so that young people do not rotate off work placements back to unemployment.
4. Finally, implementation and affordability.
We need a new implementation mechanism. Central government is right to demand results, but local players need flexibility.
· We propose Youth Employment Zones of public, private and voluntary sectors, starting in the areas of unemployment emergency, to channel money, commission services, and engage employers and young people. The vision should be that set by Deputy Prime Minister of ending long term youth unemployment, and finding the mechanisms to do something about it.
· These partnerships could make sure additional investment, whether announced through the Youth Contract or through help for ‘problem families’, reaches young people, and also ensure far greater collaboration across the public sector.
· As a local MP I am delighted by the South Tyneside Youth Jobs Commission and with other councils that are already innovating that I hope we can discuss in the Q&A.
One obvious question is whether this is affordable. To that we do not only point to the high costs of the status quo, and the fact that the UK spends about half the OECD average on labour market interventions, but instead take on the chin the lack of new money and argue that we can use existing money far better.
· There is money in the system as the 24 agencies working on NEETS in Worcestershire in the Total Place pilot showed.
· There are resources not yet allocated, like the £150m in the Youth Contract.
· There are resources not earmarked for young people which could help them, like the approximately £700m for problem families.
· There are new government commitments on infrastructure, where young people should be beneficiaries.
· There is the possibility of help from the new European Fund discussed at last week’s summit.
· And then there are innovative ideas like Social Investment Bonds.
Conclusion
One of the submissions to the Commission talked about a “broken deal” with young people. And the truth is that aspirations are high but opportunities are not. That means a crisis of confidence in the younger generation about the ability of the political and business establishment to help change their lives.
There is a way to remedy it. The practical and necessary measures set out today. No one can say there is nothing to be done, locally or nationally.
Thanks very much and we will now open a panel discussion with the commissioners.
No comments:
Post a Comment