This blog was kindly authored by Martin Edmondson, CEO of the Graduate Futures Institute.
The government states that it has a number of core missions. One is kickstarting growth, and one is breaking down barriers to opportunity. However, the recent growth and youth unemployment figures – (Growth 0.1 per cent ONS latest release, youth unemployment 14.5 per cent) – suggest that neither of these missions are faring especially well. Something that is perhaps not a surprise when some of the headline policies introduced by the government actively mitigate against those goals.
Put yourself in the shoes of a small business owner – the businesses that make up the vast majority of UK companies. Right now, you have seen the cost of hiring increase through employer NI contributions and through the increase in the National Minimum Wage. In addition, you see the Employment Rights Act coming down the tracks with the introduction of greater day one rights, and a reduction from 24 to 6 months for unfair dismissal rights.
All of these factors do one thing: increase risk. Running a small business is a constant equation of risk management, and all these factors are more likely to make a business leader risk-averse when committing to hiring someone. In addition, hiring an unproven young person can also be seen as a risk – they often don’t have years of work experience to support their credibility and capability. So, when you make that person more expensive in wages, more expensive in NI and harder to move on in cases of hiring mistakes, you can see why unemployment is increasing and growth is stagnant.
I say all of this partly in my role as CEO of the Graduate Futures Institute, the body representing everyone who works in careers and employability in HE. Part of my role is to advocate for the positive things a graduate can do for any business – where the evidence is that a higher proportion of graduates in an area and a business increase productivity, innovation and GDP (research by the OECD and UK Treasury analysis suggests that a 1 percentage point increase in the share of graduates in a local workforce is associated with a 0.5 – 1 per cent increase in productivity). I also speak as someone who has run a small business for 20 years – trying to give opportunity to recent graduates whilst also managing all of that risk.
De-risking youth hiring is not about weakening employment rights; it is about recognising that entry-level recruitment carries different risk dynamics and designing targeted incentives that allow opportunity and protection to sit alongside one another rather than in tension.
Universities are working hard in this area, and can continue to do more to support the careers and employability of young people. Our members do amazing work, but they are also constrained like all in higher education by current funding pressures and this labour market context. However, the data suggests that our unemployment levels are now running worse than those in the EU – suggesting it is a policy environment issue more than anything else.
Having said all of that, I don’t want to be someone who just complains without ideas. So here are 3 ideas – one for universities and two for government.
Government: NI break for hiring young people
Provide employers – specifically SMEs – with an NI break for hiring any employees under the age of 24. Despite my line of work, this isn’t a graduate-specific initiative, but one for any young person regardless of educational pathway. Giving SMEs Employer NI relief makes it more attractive and less risky to hire young people who don’t necessarily have the sort of experience that comes with age.
Government: create city graduate schemes across UK cities and regions.
For anyone who knows my work backstory, this idea will not come as a surprise, but it is a relatively low-cost way to support growth, improve youth employment levels and catalyse productivity in SMEs around the country. The concept is simple, turn a place into a corporate style graduate scheme – where instead of there being 100 jobs in one employer, there are 100 jobs in 100 local SMEs all hired through a central city/region wide piece of attraction and selection. This model has been well tested in Sheffield (RISE Sheffield – led by the two universities and the council) and showed significant ROI in terms of GDP, productivity and GVA. This would be relatively inexpensive (in Government terms) to roll out, perhaps £10-15m per annum to cover 10 cities, and can be seen in action now in West Yorkshire Combined Authority.
Universities: accrediting part-time work
We now know that around 68 per cent of students are working part-time alongside study, and given cost of living pressures this is not likely to decrease. As such universities should find models to capture, assess and accredit the skill and attribute development that is taking place in this work. Many universities are now actively building and deploying skills or attribute models in the curriculum. This will just take some creativity in assessment design to pull in the value from this work. This is an area of big interest for us as well, so we will be running an event on this topic later this year.
Many of us recognise that this Government faces many challenges, and money and growth are in short supply, but this is not helped by significant macro policies that actively mitigate against the stated Government missions. Whilst some of these policies were well-meaning in spirit, if we actually want to stimulate growth and reduce barriers to opportunity, we should look to implement proactive policies and incentives that foster growth, de-risk hiring, and support opportunity for all young people.