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Questions for Kickstart

The government recently launched the youth-targeted employment initiative “Kickstart” and released its initial guidance to prospective employers – so what exactly is it?, asks our team's David Robertshaw

After a brief reflection on how it compares to recent youth-targeted programmes in the UK, this blog goes on to raise some key questions. Should Kickstart focus on Universal Credit (UC) and ignore those on ‘New Style’ Employment and Support Allowance (ESA) or Jobseeker's Allowance (JSA)? Will 25 hours a week at minimum wage be enough for claimants or does the Department for Work and Pensions (DWP) need to encourage employers to do more? And will the Kickstart scheme rely upon further top-ups from UC to be viable?

We know that younger people have been some of the worst affected by COVID-19: the results from our most recent rapid findings report suggests younger people are more likely to have experienced job loss compared to their older counterparts. 60.4% of new claims for UC have been made by 18-39 year olds since the start of the pandemic. In this context, Kickstart seeks to create temporary subsidised placements for16-24-year-olds. It has a £2bn budget which has been reported as being sufficient to fund over 250,000 jobs (although Work and Pensions Secretary Thérèse Coffey has also stated that the ultimate number of placements is “unlimited”) making it more ambitious than previous youth-targeted schemes.Under Kickstart, placements for young people on Universal Credit “at risk of long-term unemployment” are subsidised for 25 hours per week (at the National Minimum Wage) alongside the employer’s National Insurance Contributions (NICs), set-up and training costs.

How does Kickstart compare with previous initiatives?

Kickstart’s design marks a significant departure from the Coalition government’s approach to youth unemployment in the last recession. Upon entering government in 2010 the New Labour Future Jobs Fund (FJF) was scrapped, with Prime Minister David Cameron saying it was “expensive, badly targeted and did not work” (subsequent evaluation had more positive things to say). Then, after a surge in youth unemployment in late 2011, the Coalition launched the cheaper Wage Incentive Scheme (WIS) subsidising roughly half of a young person’s wage costs for six months. There are a number of other significant differences between the Kickstart and WIS strategies:

  • WIS initially targeted young people who were unemployed for over nine months, which was later brought forward to six months. Kickstart targets “young people who are currently on Universal Credit and at risk of long-term unemployment”. It is not yet clear how the latter is defined.

  • WIS was a recruitment subsidy – while employers had to commit to a net increase in disadvantaged employees and not making people redundant to fill roles with subsidised employees – it was ultimately geared towards changing hiring decisions rather than the creation of new roles. Kickstart on the other hand is explicitly based around the creation of new roles, and organisations must commit to not “replace existing or planned vacancies”.

  • A question arises as to whether unscrupulous employers might abuse such schemes and what mechanisms exist to monitor compliance with the rules. With WIS it wasn’t apparent that there were any mechanisms for this; for Kickstart it is unclear how the scheme will be monitored beyond the initial application process.

  • WIS was provisionally conceived of as targeting SMEs, though it opened up to a wider range of employers. Kickstart begins from the opposite direction – to apply for the scheme directly, organisations have to create 30 or more placements. Smaller organisations must partner with others to create 30 placements before applying. The Federation of Small Businesses has consequently suggested that it could take months for SMEs to engage with Kickstart.

Kickstart doesn’t really resemble WIS at all. With up to £6,500 funding per participant, the requirement that new roles be created, 25 hours/week minimum, and the condition that employers support participants to look for longer-term work (e.g. CV and interview preparation), it looks remarkably similar to the Future Jobs Fund that the Coalition scrapped in 2011. Pertinent questions about Kickstart have already been raised, for example with regard to its potential to displace apprenticeships, the importance of employer engagement, and the quality of jobs. Here are two more that could use an answer…

What is being done to encourage employers to top-up beyond the 25 subsidised hours?

ERSA, IES and others have rightly raised a question about the extent to which a 25-hour week on the minimum wage will be enough to live on. There’s also an interesting related question about the extent to which Kickstart beneficiaries will be better off financially than they would be out of work and on UC. This especially applies with regard to under 18s and 18-20-year-olds who are on lower rates of the National Minimum Wage. When additional costs of travel to work are factored in, a 25-hour Kickstart placement seems unlikely to make much financial sense to younger would-be participants. Unless DWP encourages employers to top those 25 subsidised hours up, it is difficult to see how they will “make work pay” unless Kickstart placements are further subsidised and minimum wages are topped up with Universal Credit. It therefore seems that, unless employers are encouraged to do more, UC could become central to the functioning of Kickstart.

Another related question is how jobseeker conditionality will feature in this context (and its possible implications for Kickstart’s success). If 25 hours on the minimum wage only has a limited appeal to would-be participants, then the scheme may struggle to meet the numbers. How else might young people be incentivised to take part? Young people who failed “to engage positively” with the Youth Contract did so against the threat of Mandatory Work Activity and sanction. But, for Kickstart, a tougher regime of conditionality could produce legions of reluctant participants, undermining employer participation and, with that, the central objective of the policy.

What about people on JSA and ESA?

The current guidance for Kickstart focuses on 16-24-year-olds on Universal Credit. But with savings over £6,000 or a partner with income, a claimant would be entitled to a reduced amount of UC (or nothing) because entitlement is calculated on the basis of household income. With sufficient National Insurance Contributions (NICs) over the preceding 2-3 years, however, some people have the fall-back option of claiming ‘New Style’ (contributory) JSA or ESA. Our latest Welfare at a (Social) Distance rapid report on the new COVID-19 cohort of claimants indicates that some young people have been doing precisely that – the proportion of ESA and JSA claimants who are 18-24-years-old have both grown since the start of the pandemic. For example, in the year preceding COVID-19 (March 2019-February 2020), 25.6% of all new claims for Jobseeker's Allowance (JSA) were made by 18-39 year olds but this has jumped to 45.1% since March 2020. However, Kickstart doesn’t refer to these other groups of unemployed young people, it’s all about Universal Credit.

On one level this makes sense. In theory, the people with two or three years of NICs are likely to be more ‘employable’, and recent commentators have highlighted the importance of matching placements to the young people who need them most. But can we assume that a young person with a couple of years of NICs will necessarily experience a smoother transition back into work? What kind of work experience do they actually have? Rising unemployment isn’t just about firms not hiring inexperienced young people, young people are more likely to have been working in sectors that have experienced a fall in demand – to what extent will that work experience prepare them for the vacancies that do arise?

Research suggests that the ‘scarring’ effects from youth unemployment are more complex than the signals a gap on a CV sends or lost opportunities for skills acquisition – wider impacts include damage to both confidence and mental health. Kickstart will hopefully succeed in its goal of moving young people into work after the subsidised intervention but to the extent that it doesn’t, it may still at least offer a temporary reprieve to young people who are out of work. Are JSA and ESA claimants excluded from this? After being passed over when other benefits were uprated, the contribution-based claimants appear to have again been left out of crisis social security measures. They may be a relatively small group in the grander scheme of things but it has the potential to reinforce a strange message about the links between contributions and the support that this entitles you to.

It’s early days yet, but questions like these will require answers if the scheme is to be successful. It is suggested that 6,000 young people applied to Kickstart on the first day; it remains to be seen how many others will follow them, and if employers will be equally enthusiastic…

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