Targeted government schemes to help employers recruit young people would deliver better value than cutting employer taxes or reversing recent minimum wage increases, according to new analysis published on Monday.
With the number of young people not in employment, education or training (NEET) exceeding one million earlier this year, the report argues that expanding existing hiring programmes could help tens of thousands more young people into work while avoiding the high cost of broad tax breaks.
The report, Take a chance on me, from independent think tank the Resolution Foundation, found that scrapping employer National Insurance contributions for under-25s would cost £5.1 billion while creating just 38,000 additional jobs, equating to around £132,000 for each extra job.
By comparison, the government’s Youth Jobs Grant, which offers employers £3,000 to recruit an 18 to 24-year-old who has been claiming Universal Credit for at least six months, would create additional jobs at a cost of around £36,700 each. The Jobs Guarantee scheme was estimated to cost about £38,000 per additional job.
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Existing schemes ‘should be expanded’
The Resolution Foundation said expanding the Youth Jobs Grant to 80,000 places each year and widening eligibility for the Jobs Guarantee could help an additional 37,000 young people into work.
The report also rejected calls to reverse the recent convergence of youth minimum wage rates with the National Living Wage. It estimated that doing so would increase youth employment by only 15,000 people while reducing pay for around 230,000 young workers by a combined £379 million each year.
However, it recommended pausing further convergence until youth unemployment begins to fall.
The think tank also called for the Growth and Skills Levy to be ringfenced for workers aged 24 and under, arguing this would allow more funding to support young apprentices entering the labour market.
Lindsay Judge, Research Director at the Resolution Foundation, said: “One million young people outside of work, education or training is a sobering milestone – the highest figure for 13 years, and a reality that risks lasting damage to the life chances of a generation.
“But reaching for employer tax cuts to resolve this doesn’t add up. Scrapping National Insurance Contributions for under-25s would cost £132,000 for every additional young person put into work. The government’s own Jobs Guarantee scheme costs only £38,000 per additional job created – three-and-a-half times cheaper. Cutting Employer NICs is not the answer.”
Judge added that the government should instead “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”.
Employers urge caution over costs
Responding to the report, the Recruitment and Employment Confederation (REC) said in a statement provided to HRreview that ministers should be cautious about further increases to employment costs while the youth labour market remains weak.
“We agree with the Resolution Foundation report that policymakers must take their foot off the gas on raising the national minimum wage while the job market for young people remains fragile,” Shazia Ejaz, director of campaigns at the REC, said.
Higher pay is vital, but rapid increases are adding to sustained cost pressures, with labour costs crucially rising faster than demand and productivity. That squeeze is already limiting hiring, investment and training, particularly in retail and hospitality, which have long offered a foot on the ladder to work for young people leaving school or university.”
She also said a review of apprenticeship funding was needed to better support younger workers.
“We support a fresh look at the apprenticeship levy to ensure it serves people with a wide range of educational backgrounds. There is a strong case for directing more funding towards younger apprentices aged 16-24, while also recognising the valuable role that higher-level apprenticeships can play in certain sectors. The levy system needs a better balance to allow more non university graduates to train given the pressures on limited funds.”
William Furney is a Managing Editor at Black and White Trading Ltd based in Kingston upon Hull, UK. He is a prolific author and contributor at Workplace Wellbeing Professional, with over 127 published posts covering HR, employee engagement, and workplace wellbeing topics. His writing focuses on contemporary employment issues including pension schemes, employee health, financial struggles affecting workers, and broader workplace trends.
- William Furney
- William Furney
- William Furney
- William Furney
