Subsidies most cost-effective method of solving youth job crisis, report warns
Targeted subsidies rather than expensive tax breaks are the most cost-effective way to support employers putting young people into work, a new report finds.
The Resolution Foundation has warned that the number of young people not in employment, education or training (NEET) – currently more than one million – risks “undermining the living standards of a generation”.
The think tank said there was a gap in the cost-effectiveness of the range of solutions proposed to encourage firms to hire more young people.
The analysis estimates that the youth jobs grant, which offers firms £3,000 to employ an 18 to 24-year-old who has been on Universal Credit for six months or more, would create 2,800 additional jobs at a cost of around £36,700 each.
The job guarantee, which funds six months of part-time employment for those unemployed for at least 18 months, costs around £38,000 per additional job, making it three-and-a-half times cheaper than cutting the employer’s National Insurance contributions, the report said.
But the foundation said the programs were too small to significantly reduce Britain’s NEET rate and argued that increasing youth job grants to 80,000 a year could create an additional 11,200 jobs a year.
The foundation also recommends extending youth job guarantees with universal credit for 12 months or more to reach more young people.
It was estimated that expanding these two programs could help an additional 37,000 young people enter employment.
Solutions Foundation research director Lindsay Judge said it made no sense to resort to employer tax breaks to solve the problem.
“Instead, the Government should scale up its most cost-effective programs – more youth jobs grants, a wider jobs guarantee and reform the growth and skills levy to support the young people who will benefit most.”
The youth unemployment crisis is costing Britain £125bn a year, a bombshell review previously warned; because the number of young people who are not working or not in education has exceeded 1 million for the first time since 2013.
The eye-watering figure, which is more than the country spends on education and almost twice its defense budget, is one of a series of striking figures included in a report by former Labor health secretary Alan Milburn, who warned that Britain was in danger of creating a “lost generation” unless serious action was taken to tackle the problem.
Mr Milburn warned that unless urgent action is taken the number of young people who are NEET will rise from one in eight to one in six by 2031, affecting 1.25 million young people.
