As Andy Burnham prepares for a potential future in government, his proposed solutions for the UK's significant youth unemployment challenge are facing critical examination. With over a million young people currently classified as NEETs (Not in Education, Employment, or Training), the economic and social implications are substantial, with the government facing a reported cost of £125 billion. This figure highlights the urgency of finding effective strategies to integrate young people into the workforce.
The UK's struggle with NEET numbers is particularly acute when compared to its European counterparts. Following the 2008 financial crisis, many European nations experienced economic stagnation, but the UK's share of NEETs is notably high, with only Romania reporting a greater proportion within the European Union. This comparison underscores a deeper structural issue within the British labour market that goes beyond general economic downturns.
Burnham has previously outlined a vision that includes a "guarantee of a work placement" for young people and a shift towards a "preventative state" that invests in supporting individuals into employment, moving away from what he terms "crude cuts." However, this emphasis on increased spending and targeted interventions is being questioned by some, who argue it risks falling into the very short-term policymaking he aims to avoid.
Mani Basharzad, a junior research associate at the IEA, suggests that paying firms to hire young people through subsidies is a short-sighted approach. He argues that such policies merely incentivise businesses to choose one group of employees over another, rather than fostering genuine job creation. This perspective views targeted subsidies as a "zero-sum game," redistributing existing opportunities instead of expanding the overall economic pie. The Resolution Foundation has previously advocated for such "targeted subsidies" over tax cuts, suggesting a divergence in economic thought on the most effective path forward.
Instead, Basharzad advocates for a radical shift towards deregulation, asserting that the real solution lies in making work more financially appealing than welfare and simplifying the process for businesses to hire and dismiss employees. He cites the potential impact of extending the National Insurance contribution exemption to 21-24-year-olds who have been NEET for the previous year, which Policy Engine estimates would cost approximately £0.77 billion. This, alongside addressing labour market regulations and the perceived disincentive of generous long-term sickness benefits, is presented as a more fundamental approach to stimulating job growth and encouraging young people into employment.