Targeted subsidies, rather than expensive tax breaks, are the most cost-effective way of supporting employers to get young people into work, a new report suggests.
The Resolution Foundation warned that the number of young people not in employment, education or training (NEET) – now more than one million – risked “scarring the living standards of a generation.”
The think tank said there was a gulf in the cost-effectiveness of the range of solutions proposed to encourage firms to hire more young people.
Its analysis estimated that the youth jobs grant, which offers firms £3,000 to hire an 18 to 24-year-old who has been on Universal Credit for six months or more, will create 2,800 additional jobs at a cost of around £36,700 each.
The jobs guarantee, which funds six months’ part-time employment for those out of work for at least 18 months, comes in at roughly £38,000 per additional job, making it three-and-a-half times cheaper than scrapping employer National Insurance contributions, the report stated.
However, the foundation said the schemes were too small to significantly reduce Britain’s NEET rate, arguing that quadrupling the youth jobs grant to 80,000 annual places could create 11,200 additional jobs a year.
The foundation also recommends extending the jobs guarantee to young people on universal credit for 12 months or more, to reach more young people.
Expanding these two schemes could help an additional 37,000 young people into work, it was estimated.
Lindsay Judge, research director at the Resolution Foundation, said reaching for employer tax cuts to resolve the issue did not add up.
“Instead, the Government should 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.”
The youth unemployment crisis is costing Britain £125bn a year, a bombshell review previously warned, as the number of young people not in work or education reached more than 1 million for the first time since 2013.
The eye-watering figure, which is more than the country spends on education and almost double the defence budget, is one of a number of stark revelations in the report by Alan Milburn, the former Labour health secretary, who warned that Britain is in danger of creating a “lost generation” unless it takes serious action to tackle the issue.
Mr Milburn warned that without urgent action, the number of young people who are NEET will rise by 2031 from one in eight to one in six, affecting 1.25 million young people.
