Young People are Getting Smarter, Smaller and Weaker

The Secretary of State for Work and Pensions, Pat McFadden MP, was on TV last weekend, setting out the latest Government proposals to tackle the crisis of unemployment amongst 16 to 24 year-olds. It’s well worth watching his interview with the BBC’s Laura Kuenssberg, and her subsequent discussion with a panel of experts.

Young people have slowly but steadily become smarter, but at the same time smaller and weaker. Smarter, because with most in education until at least 18, and over a third of them going on to get a degree, we now have a far more educationally qualified youth population than ever before. Smaller, because as birth rates decline and far more people are now living into old age, they are becoming a dwindling proportion of the population, very much a minority in terms of the voting population. Weaker, because they are taking much longer on average to achieve any kind of financial self-sufficiency, partly as a result of entering the labour market several years later than previous generations, but mainly because they are growing up in an economy where wages have stagnated while the cost of living has soared. There are now a shocking 946,000 16-24 year-olds not in education, employment or training (NEET) - one in eight of the age group. If their numbers continue to swell, the fabric of UK society will begin to fray.

The Government is facing a difficult dilemma. They have opted to prioritise taxpayer support for the young, investing £800m in the Youth Guarantee to provide different levels of intervention – advice, guidance, training, subsidised jobs and work experience – to try and get them economically active again. But as the panellists on Kuenssberg’s show pointed out, the underlying problem affecting the young is the UK’s feeble economic growth and flatlining productivity. In the words of Lawrence Newport, Director of Looking for Growth, “we’re simply not sorting the foundational problems of this country”. James Reed, CEO of our leading recruitment agency, highlighted one of the effects of our economic woes, a continuing “jobs drought” which means that even highly educated jobseekers are struggling to find opportunities. Unless action is taken on the economy, the danger is that the DWP’s Youth Guarantee initiatives will do no more than stick temporary plasters over a wound that won’t heal. But in the tight fiscal situation that is another symptom of our economic malaise, where are they going to find the money to boost the skills needed for economic growth?

Economists agree that improving workforce skills is an essential ingredient of raising productivity. Logically, investing in this would have a far bigger impact than any amount of back-to-work funding, for the simple reason that the vast majority of UK citizens – over 39 million - are already in the labour market, far greater than the 1.8 million unemployed or even the 9 million who are not economically active. Raising the workplace skills of the already employed is much more likely to have direct impact on economic prosperity.

The Government can point to a range of initiatives designed to stimulate skills for growth, from the sectoral packages linked to the new Industrial Strategy, to the extra funding for FE, the Lifelong Learning Entitlement, and the raising of the HE tuition fee cap. But welcome as this is, it’s not enough to do the heavy lifting needed to upskill our businesses across the board, so all eyes are turning to the Growth & Skills Levy, now part of Pat McFadden’s beefed-up remit for skills. The problem here is that this is a finite funding pot, already almost at its limit because of growth in higher and degree apprenticeships. The de-funding of Level 7 apprenticeships to free up money for lower-level training is the most obvious sign of the challenge ahead.

With any further tax rises on individuals or employers ruled out, the effort to repair our leaky and disjointed skills pipeline looks set to be another patch and repair job, able to support only a limited range of the shorter, more flexible types of training employers are clamouring for. The only tangible prospect so far mentioned is the idea of apprenticeship units, whatever they may be. To fund a more comprehensive strategy, some fresh thinking will be needed.

One cost-free step would be to re-label NEETs – a depressingly negative label for aspiring young people – and call them young skill seekers instead, or those Seeking Employment, Education and Development: SEEDs. This would have the psychological benefit of seeing this group as a sub-set of the wider skill-seeking population, not a separate (and defective) cohort.

But providing direct financial incentives for workforce training is the most pressing challenge. Just as decades ago the idea of income-contingent loans opened up a whole new method of funding higher education, we need a similar innovation to radically expand workplace training. One possibility would be to reintroduce a new version of the Individual Learning Account abandoned in 2001, something the LEI has proposed in detail in our paper: “Making Lifelong Education Work: Skills Accounts for Bite-Size Learning”. We could look at using a form of the Premium Bonds system to offer “training prizes” to working adults. All these ideas may have drawbacks, but we urgently need new mechanisms to motivate more people - and more employers - to engage in developing workplace skills for improved productivity and growth.

In short, we need to repair both the social fabric and the economic fabric of our country in tandem, not separately. Ideas welcome.