Could the Government be doing more to address the potential impacts of youth unemployment?

Spring has well and truly sprung, as people have been revelling in their first trip to the pub since restrictions eased recently. The vaccine rollout is steaming ahead. Meanwhile, online job vacancies are approaching pre-pandemic levels as businesses are gearing up to hire more staff. After months of COVID-induced misery, it really does seem that the worst is now behind us.

But we shouldn’t get too carried away with this optimism. Even though the economy is inching back towards where it was in 2020, a year of widespread unemployment will leave its mark. This is particularly the case among young people, who accounted for over 60% of the fall in payrolled employees seen since February 2020 and saw some of the sharpest levels of pay deterioration.

Many of these jobs will, of course, return as sectors such as hospitality and retail reopen. But the economic bruising young people have endured over the past year is unlikely to clear up that easily. Young people are overrepresented in sectors that are forecast to undergo a slower recovery, and underrepresented in sectors where there is likely to be strong jobs growth. Sluggish jobs recovery among the young should worry us: not only is the pay scarring, or effect on the lifetime earnings of young people, expected to be to the tune of £14.4 billion over the next seven years, but the economic cost of persistent youth unemployment is set to be £5.9 billion – and that’s just for 2021.

Happily, the Government has taken action to curtail the impact of COVID on youth unemployment. In particular, the Kickstart scheme – which provides funding to employers to create placements for 16-24 year olds on Universal Credit – is a sensible approach that targets those young people most in need of support and also provides them with genuine experience that will offer a crucial springboard for their careers.

But it is clear that the scheme so far has proven not to match the challenge facing young people in the labour market. As of late April, just 16,500 young people have been placed into Kickstart roles. This is against a backdrop of 437,000 people under 25 losing employment. In some areas, the scheme has fared particularly poorly: only 490 people have started on Kickstart placements in the north-east of England.

Evidently, the Kickstart scheme needs reforming: given the urgency of getting young people back into work, the introduction of the scheme has simply been too slow. Indeed, full rollout of the scheme would take 22 years at the current rate, according to Labour.

Amid the looming threat of persistent youth unemployment, it is time for the Government to think more creatively about other policy levers that could be used to help young people, both now and in the aftermath of COVID-19.

The Lifetime Skills Guarantee (LSG) is, like the Kickstart scheme, a well-targeted policy with a great deal of potential. The LSG offers free qualifications to any adult who has not already achieved a level three qualification, which is equivalent to A-Levels. But, like the Kickstart scheme, it falls short of its potential to mitigate the impacts of COVID-19. A number of large sectors, including hospitality, media, retail and teaching are not included in the policy. Taken together, the sectors excluded from the Lifetime Skills Guarantee account for over 9.4 million jobs. Considering that many of the excluded sectors are among those hardest hit by the pandemic, this surely limits the effectiveness of the scheme in supporting the post-pandemic jobs recovery.

The scheme has another Achilles heel. While it is badged as a ‘lifetime’ skills guarantee aimed at helping workers to reskill, the scheme is only open to those without a level three qualification. Those young people who have such a qualification, but are looking to reskill after the pandemic, are short of support.

Admittedly, the Government has already outlined a pragmatic approach to ensuring everybody – with or without level three qualifications – is able to access support to reskill. The Lifelong Loan Entitlement, set out in the ‘Skills for jobs’ White Paper last year, will provide individuals with a loan entitlement, equivalent to four years of post-18 education, to use over their lifetime. The problem is that it will not be offered until 2025, when many thousands of people up and down the country are struggling right now to adjust to the enormous economic upheaval of the past year. Ensuring flexible reskilling support must be an urgent priority, as a generation of graduates and school leavers struggle to establish themselves in the labour market.

Whether through bolstering the Kickstart scheme, expanding the Lifetime Skills Guarantee, or bringing forward planned schemes such as the Lifelong Loan Entitlement, there is plenty of scope for the UK Government to be more ambitious in its response to youth unemployment. If we want to get young people back to work quickly in the aftermath of COVID-19, there is a lot of work still to do.

Sam Robinson is a Senior Researcher at Bright Blue, a liberal conservative think tank.