Bringing young people back to work
David Hough, October 30, 2020
It’s no secret that the coronavirus pandemic has had a negative impact on the jobs market, but it is young people aged 16-24 that have suffered the most.
ONS statistics in the three-month period to August showed an increase in unemployment of 220,000 for people of this age bracket. This compares with 24,000 for the over-65s out of work and a decrease in unemployment among other age groups.
The Job Support Scheme (JSS) will now see the government pay up to 61.67% of an individual's hours not worked, paying a maximum of £1,541.75 per month where the employer faces decreased demand.
On the face of it, although this is quite generous, it does require the employer to pay 25% of wages (for 20% of working hours) as well as national insurance and pension contributions. The cost is therefore not negligible for businesses really struggling and it is generally less expensive to let go of younger employees who, for example, will not be entitled to significant redundancy packages.
As well as needing money to cover living costs, young people not working creates the risk of a skills gap in future years when we’ll need those individuals to pay taxes and fund welfare, including the state pension. State intervention maybe required where young people, not in training now, lack the necessary skills in future to enter the jobs market.
The government should consider the option of temporarily, and on a means-tested basis, reducing the state pension age to allow some older employees the chance to retire early.
The state pension is approximately £760 per month (assuming full entitlement) so the cost to the taxpayer is not significant when compared to the cost of the JSS.
This can create further opportunities for young people, taking them off government support as well as reducing the future burden on the state to effectively fund a skills gap.
Further support is then needed to train young people. The National Skills Fund will provide access to college courses for those without A Levels but more is needed from the Apprenticeship Levy as well.
Apprenticeship schemes provide on-the-job training supplemented by technical training, as well as providing relief through national insurance contributions to the employer. In theory this is an excellent way to develop the skills of young people as well as provide employment and is funded by large companies paying 0.5% of gross salaries into an employer pot.
A large amount of the pot has been retained by the government because employers are struggling to spend it. There are strict rules which make accessing the fund difficult in certain industries – typically the need to receive 20% of hours on approved training.
This means that some sectors are not able to provide apprenticeships on a basis as favourable as other industries that find it easier to access the fund, e.g. professional services where trainees generally study towards a qualification.
Loosening the rules would allow more businesses to provide training schemes to young people, supporting the business as well due to the savings associated with national insurance.
The lifeblood of the future economy will be those most impacted by the employment shortfall caused by the pandemic. It is absolutely right to protect incomes through the JSS but we must also recognise the impact the rigidity of some schemes is having on the youngest parts of the workforce.
Young people need the opportunity to work and learn new skills to prevent a skills gap increasing pressure on the state in the years after the current crisis.
David Hough is partner at Blick Rothenberg