Youth unemployment: another misguided case of ‘leave it to the market’

Alice Roosevelt Longworth once joked that “the secret of eternal youth is arrested development”.

That certainly resonates with me but if Teddy Roosevelt’s eldest daughter was right, today’s school leavers should remain young for a very long time. Those hoping to develop into employees face the toughest job market since most of them were born.

The TUC’s February Labour Market Report shows youth unemployment approaching one million. A quarter of these are considered long-term unemployed having been without work for longer than a year, the highest level for seventeen years.

According to the TUC’s blog, one of the first things the government did when coming into power was to cut the Future Jobs Fund introduced by Labour and replace it with nothing. Is this another case of mistaken reliance on markets?

The FJF was originally designed to get young unemployed people without skills into steady work by subsidising a 6 month placement at a sympathetic employer who would leave them with a reference, skills, confidence and the motivation to enter the long-term workforce. It was like a cross between a youth centre and a temp agency, offering something constructive to do to fill the void after full time education at a time when there is precious little else.

It didn’t work for everyone. One FJF worker, Becky Jarvis, wrote in a blog comment that she received no training on her placement and failed to find a job afterwards, despite writing 100+ applications. She said her employer used her as free labour and when she complained refused to give her a reference. She felt she would have been better off without the scheme.

That's hard to know. What's clear is that half of those who did an FJF placement claimed benefits the month after they finished, a statistic that David Cameron used to justify binning the Labour scheme.

This seems rash when you consider that the other half appear to have found work in less than a month – a big win by any standards – and no one had waited to see how the other half fared in the longer-term. Unfortunately, the coalition canned the entire scheme before longer term data had been collected. The Department for Work and Pensions stats only go up to month 7, ie the month immediately following the end of a 6 month placement.

Statistics aside, Becky Jarvis’s experience contains an insight into how the scheme should not be run. Having a subsidised quasi-job is bound to be depressing if your employer treats you as charity and refuses to give the training and respect that a regulator staffer would receive. There is clearly room for improvement.

But should FJF have been scrapped when it was?

According to the TUC, the scheme was abandoned before its longer-term effects were known, before initial feedback could be used to improve outcomes (such as requiring employers to provide training), and nearly 18 months before a replacement scheme could be implemented. Meanwhile, the economy is still shaky and youth unemployment rising. The answer is clearly no, it should not have been scrapped without a decent replacement.

The government’s new welfare reforms involve a Universal Credit designed to close the benefit trap that discourages people from working part-time. This might end up replacing publicly-funded FJF placements with real part-time jobs, which would cost less and encourage self-reliance; overall a great idea.

As an alternative to FJF, however, it is not enough. It assumes there will be jobs. Even where there are, it will push people towards unskilled work rather than the training opportunities they might have got under a properly run FJF. And it will do nothing to help tough cases such as those lacking the ability or confidence to hold down even part-time work.

Rather than scrapping the scheme, why not use the early results to improve it in imaginative ways? It could have been expanded into a wider apprenticeship scheme with incentives for employers to make FJF positions permanent or to provide training and skills; it could have been linked to the voluntary sector and even the Big Society.

But the coalition has opted for a market-based remedy again. As with the NHS and public service reforms, it is easier to abdicate responsibility for problems - such as what to do with unskilled people when there are no new jobs - than to fix them.

The premature cancellation of FJF seems more callous now in light of the unemployment figures. With no replacement scheme, weak economic growth and an acute shortage of commercial apprenticeships, today’s school leavers must be looking forward to casting their first vote.