A leading think tank has urged the government to prioritise targeted financial support for youth employment, arguing that reversing recent tax hikes will not effectively alleviate the challenges faced by young job seekers. The Resolution Foundation’s latest report advocates for increased funding for apprenticeships and more youth support grants as essential measures to combat rising levels of young people not in employment, education, or training (NEET).
Employment Tax Reversals: A Misguided Approach
The Resolution Foundation’s comprehensive analysis suggests that calls from business groups to reverse increases in national insurance contributions (NICs) and lower the minimum wage for under-21s would yield negligible benefits for young job seekers. In fact, the think tank asserts that such measures would not significantly enhance employment opportunities for this demographic.
The report highlights that the majority of under-21s are not subject to employer NICs, indicating that repealing these tax increases would likely have little impact on youth employment figures. “Scrapping employer NICs for under-25s entirely would be very expensive – costing £5.1 billion and creating just 38,000 additional jobs for young people – at a wasteful ratio of £132,000 per job,” the report states.
The Current Landscape for Young Workers
As of this year, more than one million young individuals have become NEET, a statistic that the Resolution Foundation describes as a concerning milestone. Former Health Secretary Alan Milburn is currently compiling a government-commissioned report on the increasing prevalence of NEETs among 16 to 24-year-olds, which is expected to incorporate findings from the Resolution Foundation’s research.
Business groups have voiced their frustrations regarding the financial burdens associated with recent tax increases implemented by Chancellor Rachel Reeves. The Confederation of British Industry (CBI) has specifically pointed to the minimum wage as a factor contributing to youth unemployment, suggesting it deters employers from hiring younger workers at the outset of their careers.
Alternative Solutions for Youth Employment
In contrast to the calls for tax cuts, the Resolution Foundation advocates for expanding existing support programmes. It suggests that increasing the youth jobs grant, which currently offers employers £3,000 for hiring 18- to 24-year-olds on universal credit for six months or longer, could generate 2,800 new jobs at a cost of approximately £36,700 each. The think tank proposes raising the annual places available under this scheme from 20,000 to 80,000, projecting an additional 11,200 jobs each year.
Moreover, the report calls for an extension of the jobs guarantee to encompass young individuals who have been searching for employment for 12 months or longer. It also recommends limiting the apprenticeship levy to support workers under 25, reinforcing the argument that targeted funding for apprenticeships yields greater returns. “Apprenticeships generate £13-£15 of public benefit per £1 spent for workers aged 19-24, compared with just £7 for those aged 24 and over,” the report notes.
A Sobering Reality for Young People
Lindsay Judge, the Resolution Foundation’s research director, emphasised the urgency of the situation, stating, “The increase in NEETs to more than 1 million is a sobering milestone.” She cautioned against relying on employer tax cuts as a solution, stressing the need for the government to enhance its most effective programmes: “Instead, the government should scale up their most cost-effective programmes: more youth jobs grants, a broader jobs guarantee, and reforming the growth and skills levy so that it supports young people who would benefit from it the most.”
Why it Matters
As the youth unemployment crisis deepens, the implications for both individuals and the wider economy are profound. With over a million young people currently disengaged from work or education, the stakes are high. The Resolution Foundation’s recommendations could represent a pivotal shift towards a more sustainable and effective approach in addressing youth employment. By focusing on targeted interventions and support, the government may not only combat the rising NEET figures but also invest in the future workforce, ensuring a more resilient economy for generations to come.
