David Willetts is President of the Resolution Foundation. Lost in Transition is published today by The Resolution Foundation.
The number of young people not in education, employment or training, NEET, is hovering perilously close to a million, about 15 per cent of all 18-24 year olds.
This is bad for them and bad for the wider economy.
It need not be like this. The proportion of young people NEET fell for over a decade to a low of about 11 per cent before Universal Credit came in and Covid struck. There is a steady decline in the number of young mothers which is bringing down what has been an important element driving numbers of NEETs. Other advanced European countries do much better with young NEETs rates of 5 per cent in the Netherlands, and 10 per cent in Germany.
One factor is labour market regulation. In my column on NEETs a year ago I warned of the danger of raising the young person’s minimum wage, the increased cost of employer national insurance and employment rights legislation. That is a real problem but only part of the story. In a report today the Resolution Foundation looks at other factors too.
It does look as if the benefits system is part of the problem but not in the way that many people expect. There is a narrative that we just pay out too much in benefits to people who are out of work. The truth is that for many people who are not working, especially if they are young, their benefits are very low indeed. The big trend of the past decade or more has been to shift benefit spend away from young people and families towards pensioners. Working-age benefits increased by just one per cent annually between 2013-14 and 2015-16 with no increase at all between 2016-17 and 2019-20. Real increases in benefits have gone to pensioners not to younger people.
However, the benefits system does contribute to the problem. There are increasing numbers of young people receiving Universal Credit (Health) who have no requirement to engage with the jobs market. The shift on to UC Health is not scrutinised and policed as rigorously as it was because of legal judgements striking down some of the processes. Moreover under the old benefits system unemployed recipients of Jobseeker’s Allowance (JSA) who fell ill for periods of less than 13 weeks could remain on that benefit with work search requirements suspended until their health improved, rather than claiming the main incapacity benefit. Under Universal Credit the rules were made considerably tighter: temporary periods of sickness can last no more than 14 days after which there is a much greater risk of being referred earlier for a Work Capability Assessment and therefore flow onto UC Health with no work requirement. It is a warning that sometimes what looks like a tightening up can have perverse effects. The number of 18-24-year-old benefit recipients with no requirements to engage with DWP and be considered for work has increased from 160,000 to 300,000 since 2019. This is a much larger numbers of young people without requirements or support to engage with work than in most other European countries.
It also does look as if tightening up work conditions for non-disability benefits can lead to increases in claims for incapacity benefits. There was such an effect under the New Deal in the last Labour Government. We also saw it in the 1980s when the Thatcher Government strengthened requirements to be actively seeking work and saw more incapacity benefits claims – indeed Margaret Thatcher was wrongly accused of massaging the unemployment figures by deliberately trying to get people onto disability benefits.
Much of the recent increase in ill health is related to mental ill health. There does appear to be a genuine increase in mental health problems amongst young people – it is observable across other Western countries though worse than average in the UK. However this is not always an insuperable barrier to work. The more education someone has received the greater their chances of working even whilst report mental health issues. And indeed work can be an effective way of tackling some of these problems.
Our benefit system should be reformed so that there are broader expectations of some sort of engagement with the jobs market be it training, on search, or education.
This ties in with the other striking finding from the Resolution Foundation research. The low-NEET trio of the Netherlands, Denmark and Germany don’t have fewer NEETs because they have more young people working. They have fewer NEETs because they have more young people in education and training. Young people in the UK are more likely to leave education earlier than their continental peers, mainly because of poor provision of vocational education. Just 22 per cent of young people in the UK are in vocational education vs 35 per cent in the comparator trio. The English system starts going seriously wrong at age 16 with 30 per cent of young people failing to get good English and Maths GCSEs after which many are trapped in a cycle of resits and failure. We have many fewer people getting useful educational or vocational qualifications at age 18. There has to a better practical vocational offer for these young people.
NEETS don’t have a single neat solution. But a combination of practical and achievable measures really could make a difference. And there is a big prize to be gained. If we matched what is done in countries like the Netherlands we could halve the number of NEETs.