Youth employment challenges in a post COVID-19 recession - is education the best protection?

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7 Apr 2020

Becci Newton

Becci Newton, Deputy Director, Public Policy Research

Follow @beccinewton13

We live in strange times - a pandemic and lockdown, our world turned upside down as we fight this virus. The UK policy response has resulted in a ‘forced recession’ to stop the spread of COVID-19. But the time will come when we need to move out of lockdown - should we be planning for a ‘forced recovery’? Certainly, employment policy will need to act rapidly to avoid long-lasting scarring. And unarguably it is already too late for some, such as self-employed business owners.

Commentators are pointing to some key risk groups; to be young and low skilled is the highest risk combination, though evidence from previous recessions shows that all young people and all low skilled people face particular hazards. Previous advice was to lock people into education. The question is does this still stand?

The latest figures show the UK was seeing low NEET (not in employment, education and training) rates overall - fewer than five per cent of all 16-17s; although higher – as it always has been – for 18-24s at 13 per cent, but still considerably lower than the 2010 recessionary peak of 18.5 per cent.

Considering the 18-24s further, other statistics show take-up of higher education exceeded 50 per cent and comfortably overcame the dip seen when fees were first introduced. Increasingly, those with the necessary combination of qualifications, interest and capability are choosing university. Participation in apprenticeships also matters, though the position is all too clear – there has not been an expansion and 40 per cent of opportunities are taken by over 25s.

The NET figures (not in education or training – but in employment) are telling for the group most at risk; 6.6 per cent of 16-17s were NET though there has been a systematic fall in their NET rates since the last recession. But 54.4 per cent of 18-24s were NET, with a persistence of NET across time at this age. This tells us that a large number of young people were already experiencing jobs without training - an indicator of the low quality of work young people now experience and a subject that our research for the Health Foundation amply demonstrated should be a concern.

So what should policy do, and what should young people do?

For young people, the arguments remain for gaining the highest qualifications possible. Higher level qualifications (up to Degree level) generate superior returns in the labour market – even if these returns are more delayed than once seen. Despite examinations not being sat in 2020, Ofqual has provided the means for young people to progress to HE. However, the proposed cap on student numbers – to avoid the costs if HEIs expand UK-domicile numbers to overcome the impact of COVID-19 on international student numbers – could have the unintended consequence of pushing young people out to the labour market, rather than locking them safely in education for a few years while the economy recovers. Policymakers need to provide reassurance that places will exist for all those with offers, and those who were heading for the clearing system, for the new academic year.

For young people who are not headed to university, gaining the best possible level of education will still be a protective factor. Again, policy could intervene. In terms of full-time study, Industry Placements are integral to the new T Levels rolling out in 2020 and employers are needed to supply these. Our research demonstrates that employers are concerned about the additional supervisory and other costs of placements; in the post-COVID-19 context, as they seek to recover their businesses, they are going to need incentives to be involved. The impact of COVID-19 on SMEs, who are crucial to delivering at the scale in particular industries, may also mean it is necessary to relax the requirement that the majority of the 315 placement hours take place externally with industry employers – at least in the short term.

However, possessing good qualifications does not protect young people from the experience of poor quality work including poor terms and conditions, such as agency work, not simply work without training. Providing businesses with support and incentives to create higher quality roles – at a time where they cannot afford to do so, may be a necessary, if expensive, strategy. This could include cash incentives to create apprenticeships for 16-24s (bringing back the apprenticeship grant for employers), instead of the preferential fee rates for particular groups that are not as obvious as a business benefit. Providing opportunities for employers to aggregate apprenticeship supply within industries – such as Group Training Associations or those that allow a training agency to bear the employment costs (Apprenticeship Training Agencies) – may also be beneficial. In parallel, policy will need to protect the provider market – where, while high quality training is critical, capacity is being lost with independent training providers going out of business.

The final piece of the puzzle is how best we support young people NEET and NET. Local authorities look after the needs of 16-18s and have responsibility to provide the support and guidance they need to re-enter education or take-up training. However, those NEET at this age often face multiple interlocking disadvantages, so holistic programmes of support – such as the Activity Agreement Pilots or Youth Contract for 16-17s – should be a priority. A return of a Future Jobs Fund type initiative could be supportive. Apprenticeships for young people NET – but not at the year 1 pay rate - should be the key solution.

Those who are 18+ are the responsibility of the Department for Work and Pensions. They need active labour market policies that improve their skills and employability but classroom-based learning won’t be the solution. It is also not the time to trial new ideas that cannot be taken forward under current legislation, as the 18-21 Work Skills Pilot proved. Preparing this group for the opportunities that emerge in the recovery, using interventions that are already known to work is crucial. This will include giving them the specific skills required by particular industries and creating chances – such as the sector-based work academies model once did. Colleagues here at IES will have a paper out later this week setting out detailed proposals for active labour market policies for the unemployed.

These suggestions all come at a cost, and as it is funding the recession – through loans, and grants and furlough arrangements it may be just as necessary for the government to fund the recovery. Doing so will avoid the costs of long-term unemployment and inactivity that would otherwise result, while building opportunities for people to be productive will bring economic and social returns.

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Any views expressed are those of the author and not necessarily those of the Institute as a whole.