Parliament returns on Tuesday, 1 September. By then, 500,000 18- to 24-year-olds who left college and university this year will be eligible to claim Universal Credit. Many of the 600,000 18- to 24-year-olds with furloughed non-student jobs will also know if they have been kept on. And any unemployment will be in addition to the half a million unemployed 18- to 24-year-olds already claiming Universal Credit.

According to the Office for Budgetary Responsibility, unemployment could hit 12 per cent by Christmas, remain at 11 per cent until June, and stay at 10 per cent next September. The government knows 18- to 24-year-olds suffer disproportionately from recessions. Banking on a “V”-shaped recovery in the “youth” labour market next March is optimistic.

Coronavirus: The impact on youth employment

Bearing in mind that, at the start of the pandemic, 2.4 million 18- to 24-year-olds were employees and 125,000 were self-employed, the Job Retention Scheme has played a more important role than the Self Employed Income Support Scheme in protecting employment opportunities.

From 1 August, however, employers must contribute more to the wages of furloughed workers and the JRS scheme ceases on 31 October. Employers are also taking decisions now over potential redundancies.

To be successful, the Plan for Jobs must avert persistent mass youth unemployment and it must prevent a cycle of on-off, on-off participation in short-term schemes.

News: Youth unemployment could hit 1m, warns IPPR

More: What the chancellor’s plans mean for FE and skills

Background: Colleges should set up temporary job centres

From 1 November, a Job Retention Bonus worth £1,000 will be paid to employers who retain furloughed workers. Average median earnings of furloughed workers are about £16,000. The £1,000 payment is equivalent to employers’ national insurance contributions for 12 months. Nevertheless, there is no extra payment for furloughed 18- to 24-year-old employees.

From day one to week 13 of becoming unemployed and claiming Universal Credit, all 18- to 24-year-olds come within the Department for Work and Pensions’  “structured youth offer”. Young adults will be offered job search support, careers advice, short training courses, traineeships lasting six months and apprenticeships.

The cost to the Department for Education of 45,000 traineeship places for provision and employer grants for work placements of £1,000 is £111 million. 

Assuming, however, that each trainee is eligible for Universal Credit and claims it for six months, the cost in Universal Credit to the DWP is £93 million. If traineeships are so successful, it is unclear why the number of places is limited to 45,000. Maybe the DWP judges that there are other options which will get young people into jobs more quickly than six months, thus reducing the Universal Credit bill.

Little employer demand for apprenticeships

An ideal outcome for unemployed 18- to 24-year-olds by week 13 of claiming Univeral Credit is an apprenticeship job. Between August and January, employers will be paid grants to employ 100,000 apprentices, with £3,000 for 18-year olds, £2,000 for 19- to 24-year-olds and £1,500 for 25-year-olds and over.

Average median earnings for 16- to 18-year olds on level 2 and 3 apprenticeship is £9,400, and it is £15,000 for 19- to 24-year-olds. At 30 per cent of wage costs, the incentive for 18-year-olds is significant, but at 13 per cent for 19- to 24-year-olds, the incentive seems marginal. However, if employers are in firing mode they might not be in a position to employ apprentices.

Under the Kickstart Job scheme, employers will receive between £4,000 and £6,300 in wage subsidies to employ for six months 300,000 under-25s claiming Universal Credit. A critical point is whether eligibility for Kickstart Jobs starts after the 13-week DWP “youth offer”. College and university leavers this summer cannot claim Universal Credit until September. If they have to wait 13 weeks, it will be Christmas before they get a Kickstart job.

Bearing in mind the depressing outlook for the youth labour market, too many of the places set out in the Plan for Jobs last six months or less. Starting a six-month placement this September means possible unemployment again next March if no permanent job can be found.

Similarly, too many of the 12-month opportunities available in the Plan for Jobs are dependent on uncertain employer demand - for instance, 100,000 apprenticeship incentives - relative to student demand - namely the 24,000 18- to 19-year-olds able to stay on in FE to study level 2 and 3 Stem courses.

Interestingly, the option to allow 18- to 19-year-olds to stay on for a year in FE does not form part of the DWP “youth offer”. The parents of 18-year-olds can claim child benefit and child allowances within Universal Credit. And 18-year-olds themselves can apply for a bursary grant, the budget for which will increase.

But 19-year-olds will also need something to live off. If they claim Universal Credit and the course lasts 16 hours or more per week, presumably DWP job coaches will suspend their benefit. If the course is less than 16 hours, presumably DWP job coaches will insist that they actively seek work and take any reasonable jobs that become available.

Eighteen-year-olds awaiting their level 3 results wishing to enter full-time higher education this September have no such worries. They have access to maintenance loans. And although the Treasury might be optimistic about the youth labour market, 18-year-olds awaiting their level 3 results are less so. Over 40 per cent, a record, have applied to enter full-time higher education from October. As a consequence, youth unemployment will be reduced.

To avert persistent mass youth unemployment in the years ahead, the government should introduce an extended plan rebalanced towards 12-month, full-time education and training. Every 18- to 24-year-old should be able to study full-time level 2 and 3 Stem courses if they wish to. The challenge is for the Treasury to develop a “new deal” over the role of maintenance loans and grants, and flexible access to Universal Credit for 18- to 24-year-old FE students.

Mark Corney is a policy consultant