Not as good as it sounds, but a lot better than nothing

It is entirely welcome that the Government has announced the ‘Youth Contract’ to tackle unemployment among 16-24 year olds. The scheme may look a bit like an amended version of the scrapped Future Jobs Fund, along with a further attempt to replace abolished Educational Maintenance Allowances (there is £50 million a year for 16-17 year olds NEETS), but who cares? We must all hope it succeeds. Indeed, I want to suggest the possibility of a benign manipulation of the scheme that could increase its social benefit.

First, however, some slight reservations:

I agree with Gavin Kelly that there are better places to find the money for the scheme than the rumoured further cuts in working tax credits. I am sure this is not the intention, but were the rumours true it could start to look as if the Government was pursuing a strategy of social engineering, reducing work incentives for family second earners (mainly mothers) in order to increase them for the young.     

I wish the Government had resisted the temptation to copy a bad habit established under Gordon Brown of rolling up several years spending into a rather misleading top line number. The broadcast news this morning featured three numbers: £1 billion pounds, 400,000 job opportunities and £2,000 for employers. In fact, as far as I can work out, it is £330 million a year and, as part of the overall package, there will actually be just over 50,000 six month paid job options per annum which is 25,000 at any given moment, or roughly 3% of the number out of work. The public finds it hard enough to understand Government figures without deliberate obfuscation.

As long as the economy continue to flat line, will employers lacking market demand want to take on young workers, even if they only cost half the minimum wage? Given the on-costs of employing someone – desk, uniform, supervision etc. – there must be a danger of low take up or substitution for existing employees.   

This final concern brings me to my benign wheeze. As the Government is insistent the new jobs be in the private sector, it looks like there will be limited scope to follow the suggestion I made with my bond for hope and help fill some of the gaps left by receding and cash strapped publicly funded services.

But for businesses that want to help but don’t want the hassle of making work when there is little or no customer demand, how about expanding their philanthropic work in the community? For example, a supermarket might set up a community scheme, employ a couple of ‘Youth Contract’ workers and then donate their time to a local charity. The supermarket would cover the admin costs of the scheme while the community group would meet other in-work costs and ensure the youngster got supervision and support. This way employers who didn’t really have any need for extra staff in their core business could be seen to make a substantial contribution to community life at the relatively modest cost of half the minimum wage.

The case against this suggestion – like that against the Future Jobs Fund – is that there is no ‘real economy’ job being created, but as long as demand stays flat this is a risk with any subsidised job placement. Presumably, if the trainees worked well in the community and a starter level job in the sponsor business came up, they would be well placed to apply for it.

As for my own ‘bond for hope’ idea, apparently the economics behind it are hopelessly flawed. Just because businesses and individuals buy the bonds on low interest with a long payback time, it still counts as Government borrowing and so is like any other of the numerous suggestions that George Osborne softens his commitment to austerity. On the upside, a couple of organisations tell me they are exploring whether - instead of Government - financial institutions or cash rich corporations might underwrite the bonds.

It would be good if something could be done with the proposal. I got a lot of positive feedback from the original post about the idea of ordinary members of the public being able to do their bit to help tackle the national emergency of youth unemployment. Sadly, this dimension seems completely absent from today’s announcement.