11th October 2015

The Youth Contract Gradcore Reaction

In last month’s blog I asked the question ‘has the government forgotten about graduates?’ This was prompted by rising unemployment figures and an apparent unwillingness to take action from the Government. Since then the Deputy Prime Minister has announced that the Youth Contract will provide nearly £1billion to tackle youth unemployment over the next three years. http://www.dwp.gov.uk/newsroom...

Further detail on how the £1billion would be spent emerged on the 15th December with the publication of the cross-government NEET strategy entitled: 'Building Engagement, Building Futures'. http://media.education.gov.uk/...

So what do these announcements tell us about how the government is supporting graduates to find work? The offer is in four main parts:

(1) Continuing its push on Apprenticeships, the Youth Contract offers incentive payments of £1,500 to small businesses to take on their first apprentice. Employers would often rather recruit an older worker who is better prepared for work than a 16-24 year old. This incentive aims to encourage employers to think about training up a young person instead. The focus on small businesses for first apprenticeships is to try to create new apprenticeships and avoid paying for apprenticeships that would have happened anyway. If this works to create new job opportunities then that boost to the economy is good for us all. However the risk is that it merely substitutes an older worker for a younger one in an existing vacancy. In part this is the point because it lowers youth unemployment but it does little to solve the unemployment problem more widely.

For graduates the apprenticeship incentive also disadvantages them directly compared to a younger person with fewer qualifications. If employers are given a monetary incentive to recruit a non-graduate with fewer technical skills but who can be paid less and can be trained for free as an apprentice, this acts as a direct disincentive to employ a graduate.

(2) The Youth Contract also offers ‘more intensive Jobcentre Plus support to disadvantaged 16-17 year olds and for 18-24’s, who will be asked to sign on for Jobseeker’s Allowance (JSA) weekly rather than fortnightly. As anyone who has been into a Jobcentre will know, regular visits act a powerful incentive to get work, if only to avoid going there again. More frequent signing is therefore an effective way of reducing youth claims to JSA.

On the other hand regular engagement with an employment adviser maintains motivation and job search. However additional customer interviews create further strain on already stretched Jobcentre Plus resources and it's likely that as a result they won't be very good quality. For graduates claiming Jobseeker’s Allowance more intensive job search won’t really solve the problem that, however much they look, there aren't many jobs. It may also contribute to under-employment as graduates take any job to avoid having to go into the Jobcentre every week. This is demotivating for the individual and a waste of taxpayers’ investment in Higher Education.

(3) More funding will also be pumped into the existing Work Experience programme. This is more funding but not necessarily more placements, as the programme relies on employer willingness to be involved. To create placements, the government is encouraging all Whitehall departments to offer work experience placements. Having criticised the Future Jobs Fund for its over-emphasis on public sector roles which lack ‘transferability’ to the private sector, it remains to be seen how successfully these placements translate to permanent employment.

Placements are eight weeks long which the government argues is long enough to add value but is shorter than a traditional graduate internship. The current indicative conversion rate to permanent employment is reported to be 55%. This is a great outcome but similar to that of the Future Jobs Fund and potentially a lower quality opportunity for the participant – although cheaper for the taxpayer.

We are told that individuals who refuse a work experience placement will be ‘sanctioned’, i.e. have their benefit payments cut. So there is a risk for a graduate that if are offered a work experience placement in a non-graduate role they will have their money reduced if they don't take it. There have already been examples in the press of this occurring. Again this is demotivating for the graduate and a waste of taxpayers’ money.

(4) Finally, the Youth Contract aims to avoid the damage which can be caused by long periods spent unemployment at a young age by incentivising employers to hire the long-term youth unemployed. There will be a £2,275 wage subsidy for employers taking on someone aged 18-24 who has been on JSA for over nine months i.e. on the Work Programme. This is only a relatively small sum but may be attractive to smaller employers for whom hiring costs can be significant.

If this works to make employers more willing to employ young people this will be a boost to graduates’ ability to compete with older workers. However, wage subsidies are often subject to low take up as employers would always rather take on the right person than the person with a cheque for £2,275 attached. It is also essential that there is minimal administrative effort involved for the employer.

The Gradcore experience is that asking the employer to pay the wage themselves actually increases the conversion rate to permanent employment, as it encourages a stronger bond of responsibility and minimises the risk of unemployment when the subsidy runs out. It remains to be seen how many young people retain their jobs once these new subsidies come to an end.

In the NEET strategy document itself there is very little about helping graduates to find work. Over the longer-term, the government is reaffirming existing commitments to widen participation in Higher Education and to require universities to publish performance data. We can also expect to see universities encouraged to work more closely with employers to co-design and 'kite-mark' degree courses. The aim of this is to make future graduates more directly employable but what about those who have already graduated and are looking for work now? What support is available to them?

The section of the strategy entitled ‘Graduates’ is two paragraphs long and says only that the government is asking more employers to work with universities to plan courses, to sponsor students and to provide relevant work placements. There is specific mention of the Graduate Talent Pool which as I have said before is unregulated so advertises a lot of unpaid vacancies. The whole statement is a bit wishy-washy and lacking in real conviction.

I’d like to see the Government making a New Year’s Resolution to realise the investment that we, the taxpayers, have already made in funding higher education by making it a serious priority to get graduates in work.

Rowan Foster, Research Manager