Labours New deal policy on Youth Unemployment
In this essay there will be discussion about the effects of the Labour’s New deal policy on youth unemployment. First there will be discussion of why there was a need of new deal policy and also a critical insight into new deal policy. Secondly, there will be discussion regarding whether the new deal policy assisted the young unemployed into employment and if there are existence of barriers into employment. Thirdly, insight into criticisms such as the political oppositions such as the Conservatives party believes that the New deal programme needs to be replaced with a better form of rigorous scheme. In conclusion, the new deal policy needs to consider reducing the barriers and help the young people into unemployment hence to reconsider new training options available to those with most barriers and disadvantaged.
In 1997 the Labour party’s victory in the general election had set a priority for Prime Minister Tony Blair to introduce new employment assistance since youth unemployment was high at 665,000 and was a serious concern (Browne, 2006). It was financed by redistributing £5 million of ‘windfall’ tax money which according to Gordon Brown (1999) ‘a price worth paying’ since to control inflation and stimulate economic growth (Finn, 2001). The innovation was a part of new labour regime of ‘make work pay’ and ‘rights and responsibilities’. According to Tony Blair (2001) ‘it’s a historic opportunity to build on economic stability and reform of the welfare state to secure employment opportunities for all’ (Finn, 2003). The new programme was supposed to change the passive culture of benefits which was creating a link between entitlement to benefits and engaging in work in the labour market hence making sure every individual was responsible for actively seeking employment or was employed.
In 1998, New deal programme was fully implemented which after 6 months of being unemployed, the young unemployed aged between 18-24 years old is required to enter a ‘Gateway’ period where they are given extensive job search assistance with the help of Personal advisor. If the young person is unable to find unsubsidised work, then they can enter one of four New Deal options. One of these is a job subsidy (employer’s options), the others involve full time education and training, and government provided employment (environmental task force) or voluntary work. The key focus of this initiative was the tailored support from the front line service as well as the young unemployed was responsible for taking up opportunities themselves (Finn, 2003). However, sanctions were attached when the young unemployed did not comply with the programme i.e. not attending appointments without good reasons or refusing a job. This will lead to benefit entitlement being terminated for example, for first non compliance two/four weeks and the second non-compliance up to 26 weeks moreover hardship funds (i.e. emergency benefits, housing/council tax benefits) are available for the most needy people especially with those with children (Finn, 2005).
By 2004, there were 67,820 people under 25 years old majority male who were participating in the new deal programme and it has suggested that it has raised the chances of young unemployed finding a job by 5% to 7% and moreover the cost of the programme estimated £ 330 million 2005/2006 (Reneen, 2004). However, Finn (2001) states there were constant changes being made to the regulations of the programme but on the other hand unemployment rate were falling which assisted one million young unemployed in to a job due to robust economic growth during the year 2000-2004 hence this indicates that effect of New deal was a success on youth unemployment (Reneen, 2004). Moreover, research analysis indicates that around two thirds of young people leave the gateway phase which generate ‘carrot and stick’ effect where most people are willing to search for jobs because of increased motivation and new techniques on the other hand others would avoid joining options or avoiding benefit sanctions (Finn, 2005). The programme also produces ‘shaking the tree effect’ where the initial effect of the following the induction of successive mandatory programme has caused nearly 10% of unemployed to sign off Jobseekers allowance before they attend the interview and 60% left after the first interview before entering an option and 40% leave to unsubsidised jobs and under 30% enter known destinations such as education or claiming another benefit however nearly a third leave to an unknown destination (Finn, 2003). The New deal advisors have confirmed that the assessment has provided a better opportunity for the young unemployed comparison to pervious regime however evidence indicate that the advisors were able to help those who were more ‘job ready’ hence people with good qualification or work experience had a better chance of being employed (Finn, 2003).
In contrast, there are concerns of racial group’s unemployment since figures indicate that 7.1% whites, 17.2% mixed raced, 11.8% Asians, 17.3% blacks and 3.4% Chinese youth were unemployed (Bell’s et al, 2010) moreover, further unemployment figures indicate that those without qualifications faced high unemployment rate 14.3% compared to those with high level of qualifications (degree) 3.2% hence this raises the issues about New deal was not working for the ethnic minority. Consequently, according to Finn (2004) participants found they were pushed into jobs that they weren’t interested in and others found that the programme wasn’t no different to ‘signing on’ and one young man stated that the only difference that you go up two extra flight of stairs. In agreement, as the aim of the tailored support from the New Deal front line workers was proved more difficult then anticipated since New deal advisors have acknowledged that there were more difficulties to make referrals to other services for the most disadvantaged such as local services either had long waiting list or advisors found it difficult to identify deep social barriers i.e. literacy, numeracy or behavioural problems (Finn, 2005).
However, further research points out that there was little evidence to support that the young unemployed were compelled to take up ‘Mickey mouse’ jobs but most that were interviewed during the research stated that the new deal advisors were listening regarding participants suggestions. On the other hand, participants experienced a level of pressure towards jobs they didn’t want or faced pressure joining in on option as they progressed through the gateway. Further investigation points out that there were common complaints were the new deal advisors failed to ask whether the individual participants had any and concerns or offer on any vacancies before the gateway process. The new deal advisor have admit to finding it difficult to match jobs accordingly and to tackle unrealistic expectations of participants such as geographical distributions of vacancies as some preferred to walk to work. In response, the New advisors do acknowledged the pressure they put on participants which can result to unemployed leaving the programme before entering the option stage. During the research Finn (2004) states that the programme was losing its features since the advisors didn’t have enough time to follow up with participants placed in jobs or options and too much time spent in complex procedures and processes by excessive paper work and moreover caseloads were difficult to manage as it contained a greater proportion of clients with complex employment barriers. Consequently, focus on individuals was given away to performance targets and increased interests to placements such as the unsubsidised jobs (Finn, 2004). In addition, young people who left to unknown destination was as at 50% at the beginning of the programme, the go away effect from this programme has not been investigated and only 5% of young people were not able to claim because of sanctions. Furthermore, Options providers was more welcoming towards those who were more job ready then the disadvantaged such as low level of skills and educational attainments and studies indicate that unemployment was higher for the least skilled occupations (Finn, 2001).
Recent figures from Office of National Statistics indicate that the youth unemployment has risen to 941,000 and highest since 1994 hence this questions the New deal programme if it has really worked to get youth into employment (BBC, 2010). Oppositions MP’s describe the figures as shocking since the promise of reducing youth unemployment was a priority on New labour’s agenda (Times online, 2009). Moreover further figures indicate that 18- 24 year old 993,000 classified in NEET neither in education employment or education. In response, Labour government claims in 2000 assisted 250,000 and in 2001 over a half million however only under 80% sustained jobs for over 13 weeks hence New deal has produced significant reductions in employment especially amongst the long term unemployed.
Furthermore, in 2002 figures indicate 18-25 years old who were claiming for 26 weeks fell sharply from 66,638 to 35,061 and for those who registered over a year the number fell from 46.629 to 4,130. Short term unemployed was less marked since those who were out of work for less then 26 weeks was 6% and in 2002 204,273 from 1998 216,514 hence this indicates that New deal programme has been recycling the unemployed rather then moving them directly in to jobs hence the effect of New deal programme was ineffective. However studies from National Institute for economics and Social research and Institute for Fiscal studies argue that there was a positive impact and IFS found an economical and statistical significance effect on the flow of young men from JSA to employment. In agreement, National Audit Office who initially scrutinised New deal programme however concluded that it was reasonable that for the first two year s of the programme it was cost effective and reduced unemployment. In contrast, critics argue that the general reduction in unemployment has simply reflected the strength of the economy (Finn, 2005).
In further argument, others point out that the reduction in unemployment about a third of those who participated have returned back to unemployment and about one in five of those who did obtain a job has failed to retain a job for 13 weeks therefore some entering employment third or fourth time round (Finn, 2005). Most was acute for Black origin and living in inner urban areas and depressed industrial labour markets hence concentrated geography unemployment leads to recycling and churning of youth unemployed and local jobs have undermined the programme (Martin et al’s, 2001). The labour government argues that the appropriate vacancies does arise in most local labour markets and the participation has reduced the ‘scarring effect’ of long term unemployment since those re-entering the programme and existing at the same rate as the newly unemployed will keep up the enthusiasm rather then them being detached and entering long term unemployment (Wells, 2002; Bell et al’s 2010). In agreement, Arulampalam et al’s (2001) studies indicate the joblessness leaves permanent scars on people and reduces the probability and future earning and increases the risk of future unemployment. Moreover the study has found the spell of unemployment carries a wage penalty of 6% on re-entry and after three years they are earning 14% less compared to what they would have received during absent unemployment (Bell el al’s, 2010).
In 2000, New deal was strongly criticized by the opposition party by stating that its cost tax payers too much money and New deal programme is a failure and moreover the New deal programme for each participant costs £20,000 which was under estimated by labour party. Theresa May MP for Conservative suggested a alternative initiative named ‘Britain works’ that will address the failings of New Labour’s New deal and will deal with getting the young unemployed ready for jobs, getting them into jobs and keeping them there and will cost £400 million less (BBC,2000). The unemployed rate is high due to recent recession which has affected the young unemployed aged between 18 to 25 years old then any other groups, however Professor Philpott, Chief economist at the Chartered institute for Personal and Development states that the rise of unemployment could be also explained by too many young people leaving school without appropriate skills and because of the influx of workers from Eastern Europe who often do menial jobs previously filled by unskilled young British workers (Browne, 2006; Bell et al’s 2010).
On the contrary, according to Bell et al’s (2010) youth unemployment is one to the most pressing economic and social problems confronting where labour markets have weakened substantially since 2008. The young have been particularly affected by the rising levels of unemployment associated with the recession. As the unemployment rates increase, crime rates tend to rise especially property crime since in 2008 UK’s burglary crime has risen.
The youth labour market is highly cyclically sensitive and there is considerably body of evidence to state that the young whom is least educated and from ethnic minority are to more likely to be unemployed and recent recession hasn’t helped regarding youth employment (Bell’s et al, 2010). Consequently, Confederation of British industry (CBI) which is the main employers association, has come up with a five point plan to help and reduce the youth unemployment and remains positive that youth unemployment can triumph over with there plan being implemented in the government’s policy for youth unemployment. The CBI plans includes for the employers to offer more apprenticeship, ensure that employing young people is attractive, practical help for young people to get a job, offer more young people work experience, and ensure that the education system teaches basic skills (Bell’s et al, 2010).
In conclusion, initially New deal policy did assist youth into unemployment however the evidence above suggests new deal programme worked for youths who were ‘job ready’ or who already had either work experience combined with good educational attainments hence the programme did not benefit those with most barriers and disadvantaged youths who did not have good educational attainments or work experience. New deal policy needs to reconsider in how to help those with most barriers regardless of ethnic background they are from and less focus on paper work process hence more focus on New deal clients. Furthermore, the sanctions proved a success since this has kept the clients complying with the programme however for the new deal advisors to consider looking into why some youth dropped out off the programme at the beginning. And importantly regular follow ups by the advisors to check how the clients are progressing during the training or work experience. In addition, more local training options should be available especially for those who have most barriers and to consider to make sure those youths have relevant national qualifications to assist them into employment before job search. Since New deal programme did not provide beneficial assistance into employment and moreover the evidence suggests the programme did not prove to be monolithic to provide social order amongst youth and this rather proved expensive in term of cost (Finn, 2005). It would be ideal if another programme replaced with low cost and with effective assistance into employment.
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