Guaranteeing an economic future for young people

The global economic crisis brought on by the global pandemic is looming, and with it, mass unemployment. Large-scale intervention is required if the UK and Scotland is to avoid a lost generation of young people.

A recent estimate from IPPR Scotland, based on Office for Budget Responsibility projections, puts the number of young people who could be out of work by Christmas at 100,000. That is one quarter of the young workforce.

Young people taking the hit in a recession is not a new phenomenon. They are typically the group hit hardest by any downturn in the economy. And evidence suggests this crisis is going to hit young people even harder. The Institute for Fiscal Studies calculated that under-25s were two and a half times more likely than older workers to be in sectors that were shut down.

Graeme Roy, director of the Fraser of Allander Institute, explained: “You’ve got the double hit of young people most exposed traditionally in any form of recession, and then the nature of this recession is concentrated on sectors which are really significant for young people. 

“The nature of the situation we’re in is that a large part of economic crisis hasn’t hit yet because of things like the furlough scheme and various support packages. We’re almost in a false situation. Only once these support mechanisms are eased off will the kind of major economic impacts in terms of unemployment and redundancy kick in.”

The impact is not just on those individuals left without work. It can have a serious effect on the wider economy.

For this reason, the Advisory Group on Economic Recovery, led by Benny Higgins, recommended the creation of a Scottish jobs guarantee. Ten weeks later, Sandy Begbie published the first report on implementing the Youth Guarantee and the Scottish Government backed it with £60m.

This is not about using educational institutions as a holding pen for young people before their careers can start.

It set out the ambition as thus: “We will guarantee every young person aged between 16 and 24 in Scotland the opportunity, based on their own personal circumstances and ambitions, to go to university or college, an apprenticeship programme, training, fair employment including work experience or participating in a formal volunteering programme.”

Responses to the plan have been positive. It reflects the recognition that government must intervene. But there are also serious concerns about its scale and resourcing.

Roy emphasised it must by rolled out at a scale that would “mop up the demand” for it to be successful. He said: “One of the unknowns with all of this is we genuinely don’t know the demand for these schemes. We’ve seen that with things like the furlough scheme, demand outstripped what anyone thought it was going to be, but then some of the loan mechanisms, demand hasn’t. 

“One of the things I would say is policy this time has to be flexible to respond. You can make an estimate about how much you think you would need, based on demand, but anything in the current time has got to be taken with a large confidence interval and margin of error. 

“They need to be able to flex up if there’s a bigger demand or then re-use the fund somewhere else or make the fund more generous if there’s less demand.”

The guarantee is not just about creating jobs. Education and training opportunities are also vital. This means colleges and universities will need to increase their intake, “to almost act as a bridge through until the economy starts to bounce back again,” Roy explained.

This is not about using educational institutions as a holding pen for young people before their careers can start, though. These learning opportunities should be about career progression. IPPR Scotland director Russell Gunson said: “Education can be a way for them still to progress their career – albeit outside of the labour market. 

“You can gain qualifications, you can gain experience in the classroom at least – hopefully combined over time as restrictions ease with experience in the workplace – that allows you to start your career maybe at a higher rung on the ladder than you otherwise would.”

He added: “The layer you could add to that is if we were clear as to where investment was happening in the economy from government, so which sectors were going to be expanded even with these restrictions for the next few years – for example, green sectors, environmental sectors, maybe some of the public sector and social care sector that clearly there’s going to be a higher demand for over the next few years – if you can point your skills system to some of those long-term, sustainable, fair jobs, you can bridge people from sectors that are contracting and shedding jobs into those expanding and taking people on.”

A standard, full-time, nine-to-five model will not suit everyone. Part-time options and flexible working patterns must be baked in.

Equally, it will be important to develop skills required for the changed workplace and the future. Skills Development Scotland is seeing an acceleration in the demand for digital technology and e-commerce skills and is also creating a climate emergency skills action plan for the much-vaunted green economy. 

But the skills agency also anticipates increased demand for ‘meta-skills’ – such as team working, communication and empathy. There is also skill in being able to recognise shifting career and learning options, otherwise known as career management skills.

Part of the issue is that many of these softer skills are not gained through formal education, but through experience. “One of the things that we’ve see with this crisis is that many of the real-world experiences that young people get that help support them to transition from education into the workplace have been removed from them,” explained Roy. 

“Things like part-time jobs, things like engaging with an employer or engaging with more experienced workers, those have gone in many ways and on-the-job training opportunities again have gone, because essentially the nature of this crisis means that everyone’s been away from the workplace and doing it remotely.”

Indeed, there has been a significant drop in the number of apprentices starting this year because they are reliant on work-based learning. Skills minister Jamie Hepburn admitted to Holyrood’s economy committee it was “unlikely” the 30,000 new start target would be met. 

Of the £60m set aside for the Youth Guarantee, £10m is specifically for apprenticeships, “but it remains to be seen whether that’s going to be enough compared to the huge headwind that employers and apprentices themselves will be facing from restrictions [and] from the economic context,” warned Gunson.

One of the recommendations from the first Youth Guarantee report was to have businesses share apprentices with other employers if taking someone on full time is not an option. 

This kind of flexibility is important if the guarantee is to meet the needs of a broad array of young people and employers. Likewise, a standard, full-time, nine-to-five model will not suit everyone. Part-time options and flexible working patterns must be baked in.

Gunson said: “If the opportunities are full time only, if they’re targeted at young people in general, if we’re not thinking about the geographical aspects or the inequalities and how some of that intersects, then the scheme may work for young people on the surface but it may leave quite a few pockets of young people behind – think women, think carers, think black and minority ethnic people. They may be young people, but they may not be able to access these schemes in the same numbers.”

Like young people, these marginalised groups are at high risk of unemployment and will face structural barriers to get back into work. It emphasises why the Youth Guarantee must not be the only intervention government makes. 

Gunson said: “If we’re only focusing on young people, we’re missing not only groups of the population within the young cohort, as mentioned, but also other groups that are likely to be shed out the labour market and find it very difficult to come back in.”

Worse than missing out these groups, the Fraser of Allander Institute has warned a scheme to support young people could crowd out opportunities, particularly for older workers. Roy explained there needs to be a mechanism to ensure the opportunities created by the Youth Guarantee do not displace others. He said: “What you’ve got to do is to try and make sure that the scheme, when it’s operationalised, is not essentially letting employers get rid of or pay off large numbers of people to then take younger people subsidised into that. It has to be about trying to track evidence of genuine news jobs and new opportunities, and not replacement.”

He added: “The other more general point is, I think, it’s right that you have a mechanism for young people, but what other support mechanisms are in place for other people in the income distribution or other people in the age distribution as well? 

“It can’t just be seen as the only labour market response, to support young people. We need a suite of labour market responses to support people across the board, of which there might be a targeted focus on young people, but there’s also got to be mechanisms to support other people too.”

A recent OECD report, which recommended governments enhance adult learning and align this with business needs, also noted older adults are less likely to receive training opportunities than their peers. 

While emphasising that those perhaps ten or 15 years out from retirement age should have equal access to support schemes, Gunson also spoke about utilising their skills as they wind down their careers: “We’ve done some work about how you could almost capture the experience of older people and pass that on in a much more formal, systematic way to young people – whether through mentoring, whether through peer-to-peer support, whether through the skills system itself. 

“Bringing in older people that have got great experience after a career, or most of their career of work, to help young people getting onto the market, onto the ladder, could be a really neat way of helping both sides of that equation, both older people and younger people.”

But the broader impact coronavirus will have on the economy is the elephant in the room. The uncertainty over the medium term makes it difficult to estimate the levels of unemployment to expect and how long support measures will need to last. The speed of recovery will also play a central role in meeting the challenges, because insufficient growth comes hand in hand with insufficient employment opportunities. 

The biggest economic lever available to governments – borrowing to create a financial stimulus – lies with the UK Government. Gunson said: “We need action and spending from the UK Government that can then free up the Scottish Government to do more – whether that’s borrowing powers for the Scottish Parliament to do a bit more of this stuff by itself or whether it’s extra spending on the back of borrowing from the UK Government that allows consequentials to come up to the parliament.”

The Youth Guarantee is a necessary intervention. But if the economy is to recover from the scarring effects of COVID, it must be one part of the treatment plan.