Richard Derecki: Will the government’s Kickstart scheme halt the rise in youth unemployment in London?

Richard Derecki: Will the government’s Kickstart scheme halt the rise in youth unemployment in London?

So just how bad will it get? At this point we cannot say. But the signs are that London is likely to see a significant and sustained rise in youth unemployment as the economy struggles to adjust to a new dynamic, and the extent of support from the furlough system falls away.

While there are some very modest indicators that a rebound in economic activity took place in August, the latest analysis of the labour market by GLA Economics shows the first uptick in unemployment, with the rate at 5% in the three months to July – a small increase on the previous quarter’s figure. Comparisons of London’s unemployment rate by age show that the largest increase was in the 16-24 age group, which was up by 1.2 percentage points.

Looking at the claimant count data for London, which show claims for Jobseeker’s Allowance and claimants on Universal Credit “searching for work”, there was a very big increase of 161% (298,340 claimants) since March 2020 to reach a total of 483,480 claims. Comparing the latest available data, workers across all age groups in London experienced a larger proportional increase than their UK counterparts, with workers aged 25-29 seeing the biggest increase in claims (up by 247%) while those aged 16-24 saw a rise of close to 200%.

For a variety of technical issues, largely to do with the roll out of Universal Credit, the claimant count does not, however, provide a clear read across to levels of unemployment. In particular, people on low incomes but still in work can be eligible for a variety of benefits and would be included in these statistics. Nevertheless, estimates by the Resolution Foundation indicate that perhaps around 40% of new claimants nationally are likely to be newly unemployed – this would include a not insignificant number of new Londoners looking for work.

For those young people just out of school, college or university, the job landscape is deeply troubling. Nationally, apprenticeship starts were down by roughly a half in the year to 6 August 2020 compared with the same period the year before, with those offered to under 19-year-olds disproportionately affected. Published vacancies for apprenticeships are also dramatically lower. Vacancies in the months after coronavirus restrictions were implemented (on 23 March) saw a large fall compared to the previous year – down by over 80% in April and May and by two-thirds in June. July 2020 vacancies were 22% lower than in July 2019.

The latest national vacancy data from the Office for National Statistics, covering June-August across all economic sectors, indicates an uptick in job availability, in line with the glass-half-full view of the economy of Andy Haldane, the Bank of England’s ebullient chief economist. However, in those sectors that play key roles in the London economy and would ordinarily offer a first opportunity for young people, the picture remains bleak. Vacancies in retail are down by nearly 60% on the same period a year ago. In arts, entertainment and recreation there has been a staggering fall of 82%.

As part of its economic recovery strategy, the government’s Kickstart programme is specifically targeted at out-of-work young people who will be offered six-month placements to help them gain experience and skills. Anyone between the age of 16 and 24 who is out-of-work and claiming Universal Credit may be eligible, with Jobcentre staff tasked with identifying people at risk of long-term unemployment to refer to the scheme.

Crucially for those young people on the margins of the labour market, Jobcentre work coaches will need to support candidates before and after their placement in order to ensure a positive experience for the young person and the employer. The government will fund each Kickstart job – paying 100% of the age-relevant National Minimum Wage, National Insurance and pension contributions for 25 hours a week. In addition, it is offering employers £1,500 to set up support and training for those taking part, or other set-up costs, such as buying uniforms.

The government has put a hefty £2 billion price tag on the programme, which it says could fund over 250,000 placements. But what do employers in London think about it? In a recent survey of over 500 business leaders, the London Chamber of Commerce and Industry (LCCI) found that only 16% of firms surveyed would be looking to take up the Kickstart scheme. There was even less enthusiasm for other government initiatives, such as a £2,000 grant to support taking on an apprentice. Only 12% of firms surveyed said they would try this and only 11% said they might take the £1,000 grant to support trainees gaining valuable work experience.

Furthermore, the Kickstart scheme may struggle to gain traction among London’s more than one million small and medium-sized businesses. The government’s required commitment to offer at least 30 Kickstart placements is a big ask, even for the large firms. Some local chambers of commerce have registered as intermediaries to help bring together local firms, albeit this adds a further layer of administration to getting the scheme up and running.

Commenting on the LCCI survey results, chief executive Richard Burge said: “For many businesses-leaders in London their sole focus is saving their enterprise and keeping current staff in employment. Many are also preparing for the significant changes that will come into force on 1 January with our exit from the EU. So we are not surprised that our research shows low levels of interest in the Kickstart scheme at this stage. The government clearly needs to push the merits of the scheme directly to business as best as possible, and to secure the support of chambers of commerce across London in doing so. I encourage London businesses to give it full and positive consideration.”

Richard Derecki is an economist and governance expert who has worked for the 10 Downing Street strategy unit and the Greater London Authority. Follow Richard on Twitter.

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