Are the new youth contracts up to the job?

The coalition government today responded to calls to address the rising issue of youth unemployment with the announcement of a ‘youth contract’ scheme.

The ‘youth contract’ is a £1bn initiative seeking to generate 160,000 six-month job opportunities for 18 to 24 year olds, over the next three years. It will provide wage subsides of over £2,200 for private sector employers to encourage them to recruit young people. Opportunities will be offered to young people who are most in need after three months on Jobseeker’s Allowance (JSA) and then all claimants after nine months – via the Work Programme providers.

My initial response to the ‘youth contract’ was that it represents a reinvention of the Labour government’s Future Jobs Fund (FJF), and is therefore major U-turn for the coalition government. In many respects it is, but there are some key differences.

The ‘youth contract’ is specifically focused on private sector jobs, an area of limited success for FJF primarily due to its focus on jobs with a community benefit. It also comes with less generous wage subsidies than those provided by FJF (£2,200 compared to £6,000).

I welcome the government’s response to the youth unemployment problem but believe action should have been taken earlier. The coalition government scrapped FJF in June 2010, while the ‘youth contract’ will not begin until April 2012, a gap of almost two years. To date, this gap in support has coincided with stagnant economic conditions and worsening employment prospects for young people. This has led to a 21% increase in 18-24 year old JSA claims in the 17 months since FJF was scrapped.

Details are still emerging about the ‘youth contract’, including how it will be funded, so a number of questions remain unanswered:

• Will private sector firms be willing to invest in youth unemployment? Employers are required to fund half of a young person’s wages and may be reluctant to invest at a time of limited jobs growth and employer confidence.
• What mechanism will be put in place to ensure the ‘youth contract’ is not misused by employers? The anticipated private sector employment growth has failed to materialise and so there is a real danger the ‘youth contract’ could be used to substitute existing jobs – particularly those that temporary in nature – due to the wage subsidies available.
• Will ongoing employability support be provided during the six-month placements? This was a central element of FJF and is much needed by young people if they are to have a better chance of finding or sustaining employment after the placement
• What is the government’s strategy for jobs growth to stimulate opportunities for young people? Subsidised six month vacancies for young people are clearly welcome but the government also needs a strategy to stimulate growth so opportunities exist for young people after their ‘youth contract’ has finished.
• What is local government’s role within the ‘youth contract’? It appears the contract is bypassing local government and being administered by Work Programme providers. Councils are place stewards, meaning they should be central to this scheme, utilising their experience of FJF and facilitating apprenticeships through their procurement spend.

The investment made by the coalition government to tackle deep-rooted social issues should be welcomed. However, this response is long overdue and a more rounded approach would have been more appropriate, one that focuses on the private, public and voluntary sector working together to provide opportunities for young people and make local economies more resilient.