I just noticed today (because there was no publicity), that the DWP have published some data and research on the Government’s ‘Youth Contract’. This was the Government’s response to youth unemployment, launched to huge fanfare by Nick Clegg in early 2012. The program has been running for nearly two years now, so this latest from DWP gives us a good idea how it’s been working – not well.
The idea was to offer up to 160,000 wage incentives of up to £2,275 for employers taking on an 18-24 year old unemployed person. In addition, the Youth Contract was to provide for an additional 250,000 unpaid work experience places. The program runs until 2015. So what has been achieved to date?
This document gives the outputs for the first 18 months (up to Dec 2013). It says that there have been 65,000 ‘wage incentive job starts’ (remember the target was 160,000) since April 2012, but actual full subsidy payments made (i.e. a young person has worked for an employer for 6 months) only total 4,140 so far. That is horrendously bad. Why the 65,000 starts hasn’t been converted into more final payments isn’t clear.
They did a little better at getting people into unpaid work experience. 100,000 young people have been subjected to that since April 2012.
So those are the raw numbers, but how effective has the program been in terms of creating jobs and getting young people into work? The DWP published two pieces of research at the same time as the data above, one surveying employers involved in the wage incentive scheme, and one surveying participants on the work experience element of the Youth Contact.
The employers survey showed that just 19% of job vacancies were extra vacancies that wouldn’t have existed without the subsidy and another 15% were influenced in their choice of candidate (i.e. they hired a young unemployed person so they could claim the subsidy). This represents a huge ‘deadweight loss’. 81% of the job vacancies would have existed anyway without the Youth Contract, and employers probably would have hired a young unemployed person regardless in 85% of cases.
So we have a program that (on the wage subsidy element) has only paid full subsidy for 4,000 jobs (against a target of 160,000) and of those 4,000 jobs, only about 800 were brand new jobs that wouldn’t have existed but for the Youth Contract. Not very impressive Mr Clegg.
But why has the program been so unsuccessful? In contrast, the last Labour Government’s ‘Future Jobs Fund’ managed to create over 100,000 temporary jobs in about 18 months. These were overwhelmingly in the public and third sectors and the subsidy was over double the Youth Contract subsidy (about £6,000 from memory). So why hasn’t the Youth Contract achieved the same results? Is is because the subsidy wasn’t high enough to cover all the costs of employing a young person? Is it because the subsidy isn’t paid until the person has been working with an employer for 6 months? Is it just that employers won’t take someone on unless they really need someone, even at a reduced cost? I think the fact the Government have tried to do this on the cheap goes some way to explaining it, but why it’s failed so spectacularly, I’m not quite sure though.
These results should give the Labour Party pause for thought though. Their idea is for a compulsory job guarantee which would place long term unemployed people in paid employment in the private sector. The private sector hasn’t responded that positively to the Youth Contract, so why would it to Labour’s scheme? And most of the jobs created under the Youth Contract can not be called ‘new’ so is it really a good idea to subsidise private sector employers to do what they were already going to do anyway? At best you would get a small pack-shuffling effect, when what’s needed is an increase in the total number of jobs. Time for a rethink?