Part of the government’s £500m recruitment subsidy fund to help the unemployed should be redirected to help fund new apprenticeships, the CBI said today (Monday), as it warned that youth unemployment is reaching unacceptable levels.
The proposal is part of a five-point plan set out by the business group to help tackle the problem, and is announced ahead of GCSE results on Thursday.
Under the CBI’s apprenticeship proposal, £125m of the £500m recruitment subsidy fund to help the unemployed would be used to subsidise 50,000 new apprenticeships. Firms would receive a subsidy of £2,500 on average towards the cost of training each extra apprentice. Firms that have not taken on apprentices previously should be particularly encouraged to do so.
In addition the CBI recommends creating a separate new £25m fund that would be used to encourage firms to train more apprentices than they actually need to improve their prospects elsewhere in the sector. This would replace a previous £11m fund that did this successfully. Other proposed measures include companies providing more internships and work experience for young people.
Richard Lambert, CBI Director-General, said:
“Young people leaving education this summer face the toughest job market in a generation. We know from previous recessions that a lack of employment after leaving education can damage young peoples’ long-term prospects at a critical point as they move from education to the world of work.
“Young people are being hardest hit by unemployment, and the government must increase the opportunities available to limit its scarring effects.
“Business also needs to support young people by offering more apprenticeships, internships, work experience and mentoring opportunities.”
The CBI’s five-point plan is set out below:
1. Help employers to offer more apprenticeships
· a subsidy of £2,500 for firms that offer additional apprenticeships to young people, or employ an apprentice for the first time. This money would not subsidise existing apprenticeship places
· a £25m fund for employers who train more apprentices than they need for the benefit of their sector
2. Ensure that employing young people is attractive
· the employment prospects for young people with low skills are very sensitive to wage levels. Youth minimum wages and apprentice rates need to be set with this in mind
3. Practical help for young people to get a job
· more universities should offer additional practical sessions (sometimes called “boot camps”) to help students get a job or start a business. Those that do this have a big impact
· companies and careers services should encourage unemployed graduates to apply for internships, volunteer, continue their studies or use their gap year constructively to help develop employability skills
· tailored support should be given to the most disadvantaged including interview technique and confidence-building sessions
4. Offer more young people work experience
· firms should offer internships and encourage schemes for staff to mentor young people
· public and private-sector employers should open up work experience schemes to young people who are not in education, employment or training (NEET)
5. Ensure the education system teaches basic skills
· in today’s labour market young people must have basic literacy and numeracy skills. The UK’s performance here is still too patchy
· schools and colleges should emphasise the need to develop ‘employability skills’ such as communication skills and self-management
Mr Lambert added:
“We know that the experience of unemployment tends to affect young people more adversely than most other age groups, and we must learn from the 1980s when too many were left out of work for too long.”
Background
How youth unemployment is rising
· In the past year, youth unemployment has leapt from 714,000 to 928,000, or 19% of 16 to 24-year-olds
· In the three months to June, 722,000 young people aged 18-24 were unemployed, up 46,000 on the previous quarter. This represents 17.2% of the age group – much higher than the unemployment rate for the general population which is 7.8%
· 38% of firms are freezing their graduate recruitment and a further 10% are cutting the number of graduates they take on
· Vacancies have fallen a third in the last year – down by 26,000 to 427,000 in the 3 months to June and down 203,000 on a year ago
Why youth unemployment matters
- The economic cost of youth unemployment has been put at £4.7 billion per year, or £90 million every week, according to a study by the Prince's Trust
- Each young person not in employment, education or training (NEET) is thought to cost the public £97,000 on average over their lifetime in resource and public finance costs, according to research for the Department for Children, Schools and Families
- 3 in 10 men and 1 in 12 women who had been NEET between 16 and 18 are involved in crime before they are 30 – three times the general population rate
Why youth wages matter
- As the OECD said in its Economic Survey of the UK published in July: “Young inexperienced workers’ chances in the labour market are particularly sensitive to wages, as implicitly acknowledged in providing a lower rate for younger workers. Setting the rate too high could damage work prospects... [so] the minimum wage should be increased at or below the rate of increase in the median wage.”