Work and Pensions Committee - Youth Unemployment and the Youth Contract - Minutes of EvidenceHC 151

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House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

Work and Pensions Committee

Youth Unemployment

Wednesday 13 June 2012

Neil Carberry, Alex Jackman, Chris Bowman and Nicola Smith

Evidence heard in Public Questions 70-151

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Oral Evidence

Taken before the Work and Pensions Committee

on Wednesday 13 June 2012

Members present:

 

Debbie Abrahams

Harriett Baldwin

Andrew Bingham

Karen Bradley

Sheila Gilmore

Glenda Jackson

Stephen Lloyd

Teresa Pearce

 

In the absence of the Chair, Harriett Baldwin was called to the Chair.

________________

Examination of Witnesses

Witnesses: Neil Carberry, Director of Employment and Skills, Confederation of British Industry (CBI), Alex Jackman, Senior Policy Adviser, Forum of Private Business, Chris Bowman, Managing Director and owner, Paramount Precision Engineering, and Nicola Smith, Head, Economic and Social Affairs Department, Trades Union Congress (TUC), gave evidence.

Q70 Chair: I would like to welcome our witnesses today to this morning’s session. As you can see, you are unfortunately landed with me as your Chairman this morning because our Chair, Dame Anne Begg, is still recovering from her accident. Could I start by asking you to introduce yourselves?

Chris Bowman: I am Christopher Bowman, Managing Director of Paramount Precision Engineering, a subcontract manufacturing company based in Surrey.

Alex Jackman: Alexander Jackman, Senior Policy Adviser at the Forum of Private Business, which is a membership organisation supporting about 18,000 SMEs1.

Neil Carberry: Neil Carberry, Director of Employment and Skills at the CBI.

Nicola Smith: Nicola Smith, Head of the Economic and Social Affairs Department at the TUC.

Q71 Chair: I am going to start by making a declaration of interest. I am a board member at the Social Investment Business, which will have some investments that are no doubt trying to win youth contracts at the moment. I will put that on the record. I would like to start with a question to Neil. Wage incentive schemes have not enjoyed very strong take-up in the past. I wondered why you think this particular Youth Contract is going to enjoy greater take-up.

Neil Carberry: There are a number of challenges in offering a wage incentive scheme. One is the complexity involved in a scheme. Quite often in the past what we have tried is a National Insurance holiday of some description. Those tend to struggle because people who care about National Insurance in a business are a long way away from people who have control over hiring. There is a complexity there. In the past, there has also been a complexity in claiming the incentive, which was one of the key focuses we had in working with DWP on the design of the current incentives.

Simplicity is important, and I think simplicity is being delivered in terms of having a two-page claim form for this incentive, and also taking into account the needs of SMEs, which this does. Secondly and importantly is aligning it with the rest of the Government’s programmes; it is quite important the incentive is available through the Work Programme, it is targeted on people who really need help, and it also has a superstructure behind it that is selling into businesses in a way that previous incentives maybe did not.

Q72 Chair: Do you think the budget-which is to find 160,000 Youth Contract wage incentives over three years at £2,275 each-is realistic and achievable?

Neil Carberry: We published our 2012 spring employment trends survey a couple of weeks ago. The data from that suggested about half of the firms we asked said it was a material offer to them that would make them more likely to engage with this group. Certainly the initial feedback that we have had, talking to a few Work Programme providers and to other companies, is that it has driven interest in the Work Programme more broadly. We are relatively confident that that budget is achievable.

Q73 Chair: Do any of the other witnesses want to take an opposing view on that?

Nicola Smith: I would not want to take an opposing point of view because we are broadly supportive of the job subsidy programme. We think it is the best part of the Youth Contract on offer insofar as it provides young people with real experience, or provides the opportunity for young people to gain experience of a real paid job. We are slightly less confident than Neil about take-up rates. We observed in our submission that the design of these contracts is in some ways very similar to the New Deal. The part of the New Deal that attempted to undertake this started off with very ambitious take-up forecasts, which were quickly not achieved, as fewer private sector employers wanted to engage with the scheme, as you said in your introduction.

We will wait with interest to see what the take-up data show on the job subsidy scheme and see if employers are taking up those offers and giving young people a chance of moving into employment. We also have some worries about job displacement under this scheme. We would like to see stronger monitoring systems put in place from DWP to ensure that, where employers are certifying that they are not removing jobs that would otherwise go to other workers and that the jobs are additional, this is actually the case.

Q74 Chair: Did you want to add something to that, Alex?

Alex Jackman: Yes, just very quickly: it is not an opposing view in any way. We did research around the time that the Youth Contract was being put together. The average amount of incentivisation payment that our members were looking for was about £1,500 to £1,600. It comfortably covers that, and it gets paid in instalments, which is what they were after. There may be an issue with the number of micro businesses that are being engaged through the programme. I have not yet seen the figures, but early indications suggest that the number is disproportionately lower than some of the larger businesses engaged in the programme.

Q75 Chair: If we think about the people this is designed to help incentivise in terms of their hiring, some of them will be much further away from being work ready than others. Does £2,275 provide sufficient incentive for a business to hire someone who is quite far away from the workplace, Chris?

Chris Bowman: Far away in distance, do you mean?

Chair: Far away in terms of perhaps never having had any work, needing quite a lot of help with basic skills or having a disability.

Chris Bowman: Any funding is helpful. In our particular business, taking somebody on distracts a skilled person from the job they are doing. There is a double cost, if you like. It is not just in what we pay towards employing a person; it is the labour we are losing while we are supporting that. We are a fairly small business. Part of the problem is access to the funding. It does not seem to be readily available, from our point of view. There is no easy access to it. I think that needs to be explained.

Q76 Chair: So this simple two-page form on the website would be something that would be quite hard for an employer to access?

Chris Bowman: Honestly, that is something I have not looked at yet, and it is something we need to explore.

Alex Jackman: It is an awareness thing more than anything: it is about getting the information out to the micros. They are harder to engage for contractors, and getting them involved in youth contracts is harder. Until we can raise awareness amongst the wider micro business community, there is going to be a perception that it is hard to access.

Q77 Chair: In your organisation when you have told small and micro businesses about this scheme, have they reacted positively towards it?

Alex Jackman: Absolutely, but we are continually asked by different Government Departments to send out messages on new options and incentives that are out there. We do: we send them out in newsletters and magazines; we write blogs and try to raise awareness. I know the CBI, the Chambers and the Federation2 will do the same, but even if you take all those bodies together they are not accessing the majority of businesses in the country. You have to find other routes of getting out there.

Q78 Chair: Do you have a specific recommendation as to what that route should be?

Alex Jackman: Success in the Youth Contract to begin with will be helpful for encouraging other businesses to try to take up, in the first instance. There have been some issues with the Government marketing freeze over the amount of publicity available for some of the schemes out there as well.

Nicola Smith: I suppose, in the same way as was true of the Future Jobs Fund, a good job subsidy scheme will perhaps never provide support to those young people who are the very furthest from the labour market, because the aim of those schemes is to provide support for young people who were able to move into and hold down a job. A young person with a severe drug problem, for example, or a young person with various barriers that make them very far from the labour market might never have been expected to benefit from either of these specific job subsidy schemes, because at the base level the scheme is for young people who are able to move into work in the immediate short-term future.

That said, we have emphasised that public provision of subsidies might be better able to provide support to those young people with the largest or greater barriers to work because it is better able, perhaps, to be flexible and offer better-quality training placements and more support in the workplace than a private sector employer with a job vacancy might be able to do. One of the findings from independent evaluation has been that the jobs of community benefit created under the Future Jobs Fund helped those young people who were long-term benefit claimants get experience of real, paid employment. We will be interested to see the findings from the jobs subsidy programme and whether, as I suspect, it is young people who are perhaps closer to the jobs market and have more recent experience of work who are benefiting from this programme, as was the case under the Future Jobs Fund.

Q79 Stephen Lloyd: Particularly looking at Mr Bowman, would you not agree that the local Jobcentre Plus would be ideally placed to contact businesses, micro and SMEs alike, because they would know them? They could just phone you.

Chris Bowman: It would be helpful. We have tried to employ people through the local Jobcentre Pluses, and I think the response has been pretty poor.

Q80 Stephen Lloyd: In what way, sir?

Chris Bowman: In feedback, in response. We have placed adverts with them and we have had no feedback at all from them on whether there is any take-up or not. In the past, we found the biggest takeup has been through local advertising in newspapers. We have recently been working with our local technical college with apprenticeships.

Q81 Stephen Lloyd: Neil, have you got anything to add to that? That is a really interesting point.

Neil Carberry: I would acknowledge there are differential levels of takeup from small and micro businesses and from medium and larger businesses. Medium and larger businesses as a rule are more engaged with the subsidy at the moment, although we are only two and a half months in. There are broadly three things leading to that. First, the guidance on how it is structured was published late. There is a simple form, but all of that became clear very shortly before the programme launched.

Secondly, the complexity of the number of potential funding streams is a factor: there are at least 40 available funding streams in England. While we talk about the Youth Contract as a cohesive policy, there are a lot of other streams with other people tasked with looking after them who want to talk to business. There is complexity there which, if you do not have a large HR team, is quite difficult to cope with. The third one-this picks up on the point about Jobcentre Plus-is that we pushed very hard for the single phone line. It is easier to say, "You like the subsidy idea; you want to take it up; here is the number; pick up the phone". When you phone that phone line you would want the person on that line to enable you to take up the subsidy quickly.

Q82 Stephen Lloyd: Or to signpost you precisely.

Neil Carberry: Indeed, but the feedback we have had on the quality of response to the phone line is extremely variable. That reflects the patchy experience of Jobcentre Plus that our members report. I certainly recognise the picture that Chris has painted. I know that is something the Department are aware of, but I have certainly had members of the CBI say to me, "I got really interested in this. I phoned the phone line. The person on the other end of the line asked me what the job subsidy was." That is the delivery challenge, which will turn off a smaller business much more quickly than a medium or larger business.

Q83 Teresa Pearce: Mr Bowman, you are an engineer, not a public policy person. When you are running your engineering business where would you expect to get information on schemes such as this? Would you look to your accountant, your Chamber of Commerce, industry press, direct mail; what is best for you?

Chris Bowman: Best for me? It would be through a local Chamber of Commerce.

Q84 Chair: I will just repeat this question, because I think it is quite important. The wage subsidy has been set at the same level for a young disabled person coming through the Work Choice programme as it has for any other young person who meets the criteria. Does the panel want to make any observations on that level of subsidy and whether it is sufficiently differentiated?

Chris Bowman: Sorry, I am not aware of that. Are you saying it is the same for disabled people?

Q85 Chair: For a young disabled person it would be the same, yes.

Chris Bowman: From an employer’s perspective and as a company owner, I would say that the cost of looking after a disabled person compared with an average person is going to be higher. They are going to need a lot more looking after and a lot more control. You cannot just necessarily give them tasks to undertake and let them carry on with them; they will need a lot more monitoring. There is a higher internal cost.

Q86 Sheila Gilmore: This is possibly a question that none of the panellists will be able to answer, but I would like to flag it up so perhaps we could ask it later. I was wondering whether any of the Access to Work funding would be available to these young disabled people.

Chair: It would be.

Sheila Gilmore: So it would be additional?

Chair: There would be an Access to Work fund to cover the additional cost, yes.

Sheila Gilmore: Again, for employers it is obviously quite complex and people do not know that.

Q87 Chair: The topic of EU state aid was briefly touched on in your previous answers. Does anyone have any concern that the youth contract wage incentives could break any EU state aid rules? Is that something that you have heard from any of your members, Neil?

Neil Carberry: We have a house view that we worry rather more about EU state aid in the UK than some of our sister member states do. If we cannot make a social policy argument for a youth unemployment scheme being exempt from state aid rules then we are a long way up the wrong path. The broad view in our membership is that the social policy aims here are so great that we can easily defend them.

Q88 Chair: Does anyone want to take a dissenting view on that?

Alex Jackman: I would agree. Looking at a comparable example, the National Insurance holiday scheme has various regional, business age caveats before you can access it. That also has a long list of businesses that are exempt from accessing it because of state aid rules about agriculture and so on.

Nicola Smith: Something else worth noting is that schemes such as wage subsidy are often recommended by those across the EU and international bodies who are trying to look at best practice and tackling youth unemployment. There is an acceptance among many EU member states that this sort of scheme can be a counter-cyclical policy that can help young people at a time of economic need.

Neil Carberry: It does appear in the jobs package as a potential policy option, doesn’t it?

Nicola Smith: I think so.

Q89 Karen Bradley: I have some questions on small business. Alex and Chris, you can probably confirm for the record whether the wage incentive of the partpayment of £700 after eight weeks for smaller businesses is an appropriate level of incentive? You half-answered the question previously, but just for the record, would you confirm or otherwise.

Alex Jackman: The research that we conducted among our members suggested the most desirable format was a regular three-month or so payment coming in to support the additional employment that they have taken on, as opposed to an upfront payment or a National Insurance rebate. To that extent, yes, we are perfectly happy with the eight-week initial payment.

Q90 Karen Bradley: Chris, do you have anything to add?

Chris Bowman: Not really, because it is something we have not looked at. As Alex says, a staged payment would be better than an upfront payment.

Q91 Karen Bradley: That is very helpful. Moving away from micro businesses, most employers have to wait 26 weeks before they can claim the wage incentive payment. Is that likely to deter some employers from participating in the scheme?

Neil Carberry: We talked to members about the payment structure at the time we were putting together our proposal, which looked different in some aspects but was always very clearly designed to pay towards the end, rather than towards the beginning. The view our members took was that there is a behaviour you want the incentive to encourage, which is that people look through the year and through the development of the young person to receive the payment towards the end of the scheme. Our members thought that that was more appropriate than making a payment upfront or in the first few months, subsequent to which the Government then loses a lever over the opportunity that has been given to that young person. Broadly, people seem to be quite comfortable with that. It is important to note that the money is only part of the proposition. For most medium-sized and larger businesses there is a real imperative to get engaged on what business can do on the youth unemployment crisis, which is the thread that runs through a lot of this, and that means that the payment date is circumstantial to the reason some businesses are getting involved

Q92 Karen Bradley: So it is not the payment date driving behaviour; there are other things driving the behaviour of the employer.

Neil Carberry: Yes, and what the incentive does is just shift the business case a little bit. The business has made a decision that there are reasons to get involved in helping young unemployed people, and the incentive merely aligns the business case more closely with something the business intends.

Nicola Smith: I just wanted to say it is important in this discussion that we remember that this wage subsidy scheme is designed, albeit to support private sector employers, but also to encourage them to hire young people for what are real jobs. The recruitment criteria that employers have for that job should be the same as if they were employing another person for that job.

With respect to your previous point on disability, an employer should not be discriminating on the basis of recruitment on disability, in the same way they would not with any other position they had within their company. While it would always be good to have additional support and for Access to Work to be better funded, employers taking on these young people would, we hope, be doing so with a view to continuing to employ them after the wage subsidy has ended. In fact, that was one of the Government’s stated aims and one of the reasons they said they wanted to engage more with private sector employers than with the public sector employment provided under the Future Jobs Fund. It is very important we do not see this as a charitable effort by employers to give young people six months’ slightly subsidised work experience; it is meant to be real experience of paid employment that will lead to permanent jobs for them in the future.

Q93 Debbie Abrahams: Neil, can you just follow up on the other things that you mentioned might be changing behaviour? The wage incentive is only part of the reason; what are the other things, and how does that contrast, say, with the position 10 years ago and the lack of take-up?

Neil Carberry: Let us be clear about what the CBI Chairmen’s Committee has told us about what we should be doing as an organisation. There is a strong view that the biggest longterm influencing factor in the UK’s growth potential is how we educate our young people and how we help their transition into the labour market. That is very strongly held among the CEOs of our member organisations. There is a sense that businesses feel there is a lot more to do.

Q94 Debbie Abrahams: So they have an altruistic purpose.

Neil Carberry: The long-term growth potential of the country relies on having effective policies in this area. The subsidy is part of a mix of Government help for businesses who are ready to engage in this. That is one of the points about why this might be a different environment from previous attempts at using a subsidy to encourage hiring in these groups. The business community as a whole is significantly more engaged and concerned today than in the past with what the current situation for young people means for the long term, both economically and socially.

Q95 Glenda Jackson: Essentially along those lines, you paint a picture of the CBI that is concerned with the future of the country. One of the biggest blocks at the moment, would seem to be youth unemployment and young people simply not ready for the work experience. Also, to pick up on what Nicola was saying, is there an element where employers are looking at both those who are close to employment and those who we are euphemistically saying are a long way from employment? Or are they being very selective in who they take on? Are they leaving those who are more difficult to stay where they are?

Neil Carberry: That is where the incentive is helpful. As Chris said, the cost in business case terms, particularly for smaller employers, is this: the further someone is from the labour market, the more support they will need from members of staff who might otherwise be doing something more immediately productive. The incentive is helpful in making the business case for spending some time with that individual in year one, in the hope that in years two and three that individual is productive for the company, they are doing a proper job, as Nicola points out.

It is a terribly utilitarian term, but one of our member’s HR directors uses the idea of "at what point does this individual become an investible proposition for the company on business grounds?" We think there is someone here we want to work with, to grow their career, to help them succeed for the company and for themselves; that point is further away for people who are further from the labour market. The incentive in year one helps change the balance in favour of bringing that person in and taking a chance on them.

Nicola Smith: I wanted to say it is important in this discussion that we differentiate between the cyclical problems we are now seeing in the jobs market because of lack of demand and the wider structural problems with youth unemployment and worklessness among a group of young people who may be very far from the labour market, which can be shown to predate the recession. When we saw very strong growth in the economy in early 2010, we did see very strong private sector jobs growth. CIPD have shown that two thirds of the employment change over that period was an increase in employment levels among young people. We need to recognise that in the scale of this discussion, the biggest change that could make a difference for young people would be a strong and growing economy, which is something I know we all very much hope we can see in the short term.

That aside, there will still be problems for young people who have very low skills and very limited experience of work. There is then a question about whether a job subsidy programme is the best way to support those young people, or whether there is a wider range of action and change that we need. I would argue that we need the latter. For example, on apprenticeship take-up in the UK, we very much welcomed increased Government funding for apprenticeships in these difficult times, but I think I am right in saying that only about 8% of employers in the UK currently offer an apprenticeship. That is a very, very low level compared with many of our European competitors.

When we look at rates of educational participation amongst young people in the UK, they remain, despite very large increases over the last decade, far behind many of the countries with whom we are competing. There are clearly some structural problems in the way we are supporting young people into the jobs market and recognising the increasingly complex transitions they undergo as they try to move from education into work. Those need to be addressed, whatever is happening to the wider state of the economy.

Q96 Karen Bradley: That does lead quite neatly onto the next topic I wanted to cover, which was the interaction between the Work Programme and youth employment incentives. To begin with value for money points, some witnesses have implied that there is double counting-there is a double incentive-and that this constitutes poor value for money. I wondered if anyone would like to make any comments on that.

Nicola Smith: Do you mean value for money with respect to the Work Programme providers?

Karen Bradley: No, for the taxpayer.

Nicola Smith: Our concern has been that Work Programme providers are being rewarded with quite significant job outcome payments that may well be a result of having access to an additional Government programme that is paying employers twice. With respect, that is clearly poor value for the taxpayer if you believe that Work Programme providers should be working harder for the money and the outcome payments that they have been contracted to provide, without having this additional support provided from another programme. We have also made the same argument in the past with respect to Work Programme providers accessing training provision that is provided and paid for by Jobcentre Plus. Arguably, if people are being paid quite significant and generous job outcome payments they should be funding that provision themselves and that should be part of their investment in moving unemployed people back into work. We would share that concern.

Neil Carberry: We need to be more focused on outcomes. The Work Programme is in not quite as early days as the subsidy is, but is still in quite early days. We have not had detailed data from it yet, but I would take the view that the gains to be made from helping a young person into sustainable employment sufficiently outweigh the costs of both the Work Programme incentive payments and the subsidy if that is delivered. That is the critical question: does the Work Programme deliver effectively and with sufficient levels of improvement over the null hypothesis? That is certainly the filter I would like to put on the data when we see it later in the year, rather than worrying too much about which routes of funding different Work Programme providers have access to.

Q97 Karen Bradley: So do you think if a Work Programme provider is getting somebody with enormous barriers to work over those barriers and into work, the fact that the employer gets an extra incentive to put them into that work is not necessarily a bad thing; it gives the right outcome?

Neil Carberry: We need to focus obsessively on work outcomes for young people, and in particular, picking up what Nicola was saying earlier, proper job outcomes: people ultimately on a path to doing a real job in a real company and moving to a world where the state is a lot less involved in their life in all sorts of ways. That is where the real savings to the Exchequer happen, and that is where people get the life outcomes we would want them to have.

Chris Bowman: From a small business point of view, the subsidy is fairly irrelevant. The ability of the youngster and their aptitude for work is more important. To a certain extent, youngsters nowadays are not leaving school with the necessary life skills to look for employment. Furthermore, if we are going to take people on, whether or not it is on a work placement, we want to know they are interested in working and fulfilling the task we want of them. It helps us if we work with our local college, and they do the weeding-out side of it. Small companies have not got the necessary staff to be able to mentor these people, whereas a college can advertise for apprenticeships, take the people on perhaps for the first year and then find them placements, but they are doing the work to see whether these youngsters want to work and where there skills are. Even people with poor education have good skills; they have good hand skills. My particular business does not rely necessarily on academic qualifications; it is physical qualifications.

Nicola Smith: I completely agree with Neil: we need to focus on job outcomes. If the investment can be shown to pay off, the investment and the benefits clearly outweigh the costs. I suppose the question we always have is if there are deadweight effects and we are paying for something that would have been achieved anyway at a lower cost, or if the provision that is being made via the Work Programme is the most effective investment we could be making. The TUC has for many years argued there is strong evidence that private providers are delivering better outcomes than public provision has been able to deliver when it is given the same flexibilities and the same budgets.

We also have an ongoing concern about creaming and parking when private providers are involved in supporting those who are very vulnerable and far from the labour market. Various DWP evaluations have shown that this type of provision leads to less support being given to those who are hardest to help, with those who are the easiest to get into work being placed above those who might need additional support and therefore cost the provider more.

Q98 Karen Bradley: I have a very specific question for Neil on a suggestion from the Centre for Economic and Social Inclusion. To avoid the "unnecessary complexity"-their words-of engaging with the DWP they suggest employers should be paid directly via Work Programme providers. I understand you are opposed to that idea; I wondered if you could tell the Committee why.

Neil Carberry: There is a strong sense in the employer community that the subsidy feels like a Government intervention. They would like it treated as a Government intervention, and they need a discussion with Government about these programmes. One of the things we are doing at the moment is setting up an employer forum with DWP. Our concern is the extent to which all of these services see the employer as the customer, rather than the Government. Picking up on the experience Chris had with Jobcentre Plus in the public sector, similarly in the private sector it is making sure the employer is at the centre of what the Work Programme does. We had a concern about the offer being, "Get involved with us, here is £2,000", as though it was part of the Work Programme, rather than, "The Government is willing to help you do this". That narrative felt more persuasive to businesses. It made it more about public policy.

Q99 Karen Bradley: Finally, following up what Nicola was saying about value for money, what does DWP need to do to ensure it is effectively monitoring the impact of the Youth Contract, the interaction with the Work Programme and all the other incentives? You talked about 40 funding streams; how does the DWP make sure that it is monitoring this?

Neil Carberry: Policy analysis assessment and replanning is essential, and one would like to think a usual part of DWP policymaking. This summer is very important for the Work Programme. It is an ambitious idea; it is a year in; it is clear not everything that is happening will be in a perfect state in 2012. We know that there are likely to be some changes in the provision side; we know there are some changes to the structure of the programme that might be desirable. We are currently working on a piece of work based on feedback from our members about one or two ideas that might help increase the effectiveness of the programme. I have mentioned the idea of having an employer forum with DWP because I think that employer voice has to be louder in the programme. That is one of the things we will pick up on over the summer. Making that real focus on continuous improvement for making the policy that we have embarked work, rather than parking that and having another policy, is absolutely vital. We would all agree that one of the more pernicious tendencies in this area is to park one policy, invent another one and have insufficient thought to the joins between the two. That is when you start to have people falling through the gaps.

Nicola Smith: One change that could be made to the monitoring is for us to have better outcome data made available more quickly. We have certainly been extremely surprised that DWP has not been able to publish any outcome data from the Work Programme as yet, and that we have had to wait so long to see any statistics. We have not been convinced by the explanations that have been given, with respect to the need to quality assure those statistics from the ONS, for why it has taken such a long time to make that information available.

Q100 Glenda Jackson: Are the structures to assess what is happening, to which you are referring, not rather a long way from the shop floor? Is it not rather more the boardroom putting in its two pennies’ worth when it should be someone down there where the work is taking place?

Neil Carberry: That is the point of having an employer forum: one would not put chief executives into that room. You would put people who are in control of the daytoday-

Q101 Glenda Jackson: You mean like the mentors Chris was talking about? Are they the shop floor?

Neil Carberry: You would want shop floor experience coming into the DWP.

Chair: We move on now to our section covering the topic of work experience and the sector-based work academies.

Q102 Stephen Lloyd: With work experience, you will recollect a few months ago there was considerable media controversy. I have a couple of questions around that. In your judgment-starting with Chris-have the views of employers about the work experience scheme changed as a result of the controversy in the media a few months ago?

Chris Bowman: From our perspective, no, I do not think it has changed. We still undertake work experience for local schools. It is unpaid; there may be expenses. It is something we will continue to do. It has caused some damage, though; in as much as it is looked on as cheap labour, the opportunity has been lost for the youngsters.

Alex Jackman: I would add that the controversies in the media revolved around some of the large companies that are offering work experience in very particular roles. One particular company-I am trying to avoid their name-got into trouble for young people doing work experience that just involved shelf stacking, for example. I do not think you get that kind of issue with micro businesses, because a work experience candidate who comes in is going to be doing a whole different array of jobs within the company. He or she will not be specifically focussed in one area. That is what led to the accusations of slave labour that were in the papers.

Q103 Stephen Lloyd: Do you agree with those accusations, or does the FPB have a view on that?

Alex Jackman: We do. Our view is that work experience is vital for young people. It is one of the five key things that the UK Commission for Employment and Skills found that employers looked for when they are trying to employ. The point we have often made is that one person’s character building is another person’s slave labour. We recognise the debate that is out there in the media, but work experience-not just in terms of new skills, but also in terms of workplace conditionality-is crucial for young people looking for work.

Q104 Stephen Lloyd: If I can go to the CBI and then back to Chris in a minute, would you agree broadly with where Alex is coming from that-to finish his line-work experience is crucial both from an employer’s perspective and also from the youngster’s perspective?

Neil Carberry: The debate we had a couple of months back was deeply damaging and pretty pernicious. In a sense, we have to get real about the labour market position of some of these young people. I acknowledge concerns about people doing unpaid work experience for long periods, and people perhaps not getting the quality of experience, but a period of unpaid work experience for people who would not otherwise get in the door-never mind for a job, even for an interview-has to be vital on the path of drawing them towards the labour market. If we get lost in a debate about pay and about trying to turn everything into a fully paid, 35 hours a week, full-time job, then the path we go down is the path of an insider/outsider labour market. That feels deeply damaging to the people we are trying to help, and a bit arrogant, from our members’ point of view.

Q105 Stephen Lloyd: Nicola, an employer and two employer organisations are being quite categorical about the advantage of work experience. Would the TUC disagree with that?

Nicola Smith: No, we would not. We think good-quality work experience, unpaid, can be beneficial for young people. We have been supportive in the past, for example, of the Government’s work trial scheme, where young people have a few weeks’ unpaid work experience, trial a job with a real vacancy at the end, have access to training and support while they are at work and there are measures in place to ensure that other workers are not displaced. I am categorical that good-quality work experience is absolutely key and can be an important way to support young people into the jobs market.

Our concern with the Government’s work experience programme for young people has been that it is not offering-anecdotal evidence would suggest-the quality work experience that will give young people a better chance of moving into a job. The evidence that has now been published by DWP suggests that there is a small positive impact for some young people, which we welcome, but also given the scale of the programme we worry that the positive impact is not enough. That suggests that large numbers of young people are experiencing, as we have heard, longer ongoing periods of unpaid work in what would otherwise be a proper job. That is a concern for us.

The problems with the particular programme are that it is being scaled up extremely quickly; because of that it has been unable to offer young people the tailored placements that you might expect of a work experience placement. A huge proportion of placements have had to be sourced from retail as a result of officials being under pressure to source very large numbers of placements very quickly. There is a huge difference between weeks and weeks of unpaid work in a shop that you are being told you could be sanctioned for if you leave and that you do not think is going to move into a job, and a good-quality work experience placement.

Stephen Lloyd: I understand. I am cutting in quickly because there are a couple of issues I note that we will be coming to later.

Q106 Teresa Pearce: I have a question for Alex and to Neil, particularly Alex. You talked about shelf stacking. One of the things Chris said earlier was about work experience and work skills. Shelf stacking is not a career, but if somebody has no experience of work it teaches them to do something repeatedly and reliably, which is one of the key skills that sometimes people lack. It is not an academic skill; it is the fact that they have no experience of work, they do not understand that they have to turn up at the same time every day and stay there all day and come back after lunch and that sort of thing. That is what employers have told us. Do you think going forward there should be more investment in schools to teach young people who are not going to go on to university or college what work is like, rather than just occasional work experience? Do you think investing money there would be better for employers because they would not be taking such a risk on young people with no experience?

Alex Jackman: I would obviously acknowledge there is good and bad work experience out there. The point is not whether you are shelf stacking or whether you are doing something that you would view as much more productive. It is the stuff that goes on around that. It is being in the back office and chatting to the other staff; it is being on the front line with customers who might ask you where something is and interacting and getting that kind of conditionality for work. That is one of the overlooked benefits of work experience. I just wanted to cover that off quickly.

There is more that can be done in schools; I do not think it necessarily costs much more money. One of the complaints we had from members when we were talking to them ahead of this Select Committee is that the modular system of exams at the moment does not lend itself to young people being readily available for work experience opportunities when it might suit the employer. There could be a little bit more flexibility as to when those people could come into the workplace, and I think one of the points was some of the rules around the maximum number of hours young people could work at one time. These combined mean that some of our members have stopped some of the work experience placements they have had in the past. There are a number of good and free initiatives out there at the moment that will help employers reach more students in schools. Inspiring the Future is one, which is getting businesses in and talking to young people about what they do.

I will give you one specific example: as an organisation we are based up in Cheshire. We are working with Knutsford Academy on creating an employer curriculum. We are working closely with MPs in both the constituency and surrounding constituencies in forming that. That is not just issues like health and safety and customer service; it is also introducing kids to psychometric testing so they have a better idea of where they might best fit into a workplace. There are a number of good initiatives out there, there are a number of ways we can get more employers into schools, and it does not have to cost the earth.

Q107 Stephen Lloyd: Can I just bring it back to the main JCP work experience? I would like to speak up on behalf of shelf stackers everywhere. I have employed numerous people over the years, and one of the things I look for is reliability and people who roll their sleeves up. I would be delighted to employ people who did seven, eight, six, five weeks of shelf stacking because of that reliability that Teresa was talking about. As an anecdote, I know in my own constituency in Eastbourne a young woman who had worked for three or four years, was in her early twenties and did a few weeks’ shelf stacking at one of the supermarkets. About two months ago, she was offered a £25,000 a year job with Network Rail, on the back of her getting back into the whole work routine.

I would particularly like to ask Chris as a small employer at the sharp end about another issue that sparked tremendous controversy in the media from a number of different pressure groups: the alleged outrage at the benefits sanctions that could be applied to people who perhaps did not turn up to their work experience, behaved inappropriately, walked offsite or what have you. As a small employer with 25 employees, do you believe that it was important for people doing work experience for "the state"-Jobcentre Plus or what have you-to have a facility to use sanctions, if necessary? Do you think that was a good or bad thing?

Chris Bowman: It depends how the sanctions are applied. You need reliability. The whole point of work experience is for youngsters to get used to getting up at a set time to come into work. A sanction, financial or otherwise, against not doing that should be applied. You have to try to encourage youngsters to come; it is carrot and stick really.

Neil Carberry: The nature of the sanction regime was probably more forceful than the voluntary nature of the work experience scheme needed it to be. I think there probably was a mistake.

Q108 Stephen Lloyd: Was that the media, or was that the reality?

Neil Carberry: The reality was that it was never used.

Q109 Stephen Lloyd: Correct, so perhaps it was the media perception.

Neil Carberry: But the DWP did have those sanctions in the rules; this could have happened. I think there are cases where sanctions are necessary. As Chris pointed out, if you bring someone into your workplace and they assault a member of your staff I do not think it is unreasonable that there should be some sanction.

Q110 Stephen Lloyd: What about if you bring someone into your factory, hypothetically, and they keep turning up two hours late every day, take three hours for lunch and then decide to go and watch the football in the afternoon? Do you think there should be sanctions?

Neil Carberry: In that case, the majority view I had from our members at that stage was there was no mutuality of obligation. As an employee, you just walk away from the placement; that is what you should do. There was a sense in which the nature of the rules that were put in place were more or less copied and pasted in from other bits of the benefits system. They were not used in that way in practice in the scheme, but they created a hook for a very simple-minded campaign to attack the whole system, which was very damaging.

Q111 Stephen Lloyd: Do you want to add anything, Nicola?

Nicola Smith: For us the key issue remains the quality of the placement, rather than the conditionality regime. My understanding is that young people can still be sanctioned for severe misconduct. I cannot remember the exact phrasing, but there is still one sanction available for young people participating on this scheme who act in a way that might bring the employer into disrepute. Our experience has always been that good-quality schemes are oversubscribed by jobseekers who are desperate to get onto them and take part in a quality scheme that will increase their job prospects. As Neil said, if employees-I should not call them employees-if young people on work experience are not taking advantage of the placement, the employer can simply stop providing it. Good-quality placements will, I am certain, be oversubscribed by young people who are desperate to gain the experience they provide.

Q112 Stephen Lloyd: Nicola has touched on this briefly, but perhaps I can get a quick response from the others. The Government target is 250,000. We have heard from Nicola. Do you believe, particularly looking at Neil and Alex, representing your respective trade associations, that that number is doable within the private sector-250,000 extra work experience places.

Neil Carberry: Our view is that that is a very ambitious target. It is not unachievable, but it would be a stretch.

Alex Jackman: I would agree. I think it is possible. There is a massively underutilised will out there within the micro business sector. I do not think the Work Programme is necessarily reaching-it is definitely not reaching-the number of smaller businesses that it should be. I also think there is a little bit of an argument to be had over the eligibility issue when it comes to some of these Government incentive schemes. If you are a small business, you see the apprenticeship incentive out there and you want to access it, but if you have had an apprenticeship programme in the past, you cannot access it. You would not find that out until you started to look into it.

I would much rather you had a system where your first point of contact with a scheme was with a scheme for which you were eligible. That might mean some kind of filter. Work providers obviously should not be contacting businesses who are not eligible for particular schemes, but if as a business you are being proactive and you have heard something in the media, why can’t you go into an employment finance finder? The banks have it for normal finance. You can enter the details of your business and you can find out which local Business Angel networks there are. As an employer, you want to employ someone; you put in a few basic characteristics of your business and that comes up with a list of national and local employment incentives that there are out there, so you are not wasting your time.

Stephen Lloyd: I think that is a good idea; I will make a note of that.

Q113 Sheila Gilmore: I wanted to go a bit further into this question of quality. I wondered if the panellists have a view on whether part of the problem we are facing is that you are trying to do two things at once. Through all the discussion, we have heard about people needing to have work experience in order to, if they have never worked, get into the rhythm of work, and on the other hand people who you feel should be given high quality placements. We are perhaps just dealing with different sets of people. If it is all conflated into one, is that where part of this problem is coming from? Some of the people who have complained most articulately about the JCP work experience programme were people who felt it was simply not moving them on anywhere: someone who has already had not just work experience but a job in various sectors feeling that they were being lumped in with people who had never worked and needed to get into the discipline of work. Should we be trying to better tailor these experiences, to help both the employer and the participant?

Neil Carberry: That is an interesting way of looking at the question. When you get into the quality debate, the traditional Government response is to try to regulate quality. That leads us down the path that we ended up taking with apprenticeships for a few years, which was that you could get all sorts of Government support for apprenticeships, and employers had to get involved in apprenticeships; however, when you got involved in apprenticeships, woe betide you if you had not budgeted a couple of days a week to get through the paperwork, because of the nature of the legal quality standards you had to satisfy. Then we got into a whole stream of discussions with Government Departments about why businesses were turning away from, essentially, free Government money for training.

The right way to look at it is: what is the right scale for this programme? I have already indicated that we think that 250,000 is a real stretch in terms of delivering large numbers of people into experience that is helpful to them, and doing that with exactly the kind of analysis that you mentioned. In our report last year, we were very strongly in favour of adopting an adapted version of the Australian Job Seeker Classification Instrument, which the Australian system used to classify jobseekers’ needs. It predicts the training offer that will be provided to them, but also it could be used to guide the types of work experience and whether work experience is the appropriate intervention. DWP has moved some way down that path at Jobcentre Plus independently, but that bit of the framework and the skill set within Jobcentre Plus to deliver that bit of the framework is something that needs more attention than it is currently getting.

Nicola Smith: I think you are right to ask what the aim of the work experience programme is, because my understanding of work experience is it provides young people who want to work in a particular sector with experience of that job that will give them experience of the workplace and an ability to make a choice as to whether that is the right sector and the right type of work for them. There is definitely a place for work experience in our welfare to work system, but using that solution as an answer to a much bigger problem-large-scale youth unemployment-may not be the best way to go. The evidence does not suggest that this is going to be the best way to tackle the problem of youth unemployment.

The reality is that this is a programme that can provide a very large number of places at a relatively cheap cost. That is one of the driving factors behind its sudden expansion. If you look at the amount of money that is being spent annually on the Youth Contract, compared with the Youth Guarantee, our analysis a few months ago suggested it is about 26% less. Partly we have to acknowledge that the Government wanted to provide a large number of interventions with a slightly reduced amount of money, and that is one of the reasons for driving the expansion of work experience, as a means to provide that opportunity.

Q114 Glenda Jackson: This stems from what Alex was saying. You quoted the example of someone having an apprentice who could not get onto the present apprenticeship scheme. In a broader sense, you painted a picture of employers who are willing to enter into this contract with young people, to train and develop them-but they do not. What are the benefits that the Government are providing? You said that in many instances they do not know there are schemes out there that the Government would be involved in. If they are willing to do it out of a desire to train young people, why do they need what the Government has to offer? That is essentially what I am trying to dig down to. Is it really a block to them entering into these schemes?

Alex Jackman: The fact that they cannot access the incentive?

Q115 Glenda Jackson: You gave the image of people who did not know the incentives were there, or if they did know they were excluded somewhere. The exclusion is something the Government obviously could change, but I am getting the image of employers who are only too willing to do this but are not doing it. What is the Government bit that comes in here? If it is not money or information, what is the block?

Alex Jackman: Just to revisit the point I was making about the apprenticeship schemes very quickly, there are many small companies out there that have had successful apprenticeship schemes in the past. It seems a shame that with those processes in place they cannot take new apprentices on under a scheme because they might be wavering over the cost of them. One of the issues surrounding apprenticeships relates to the abolition of the default retirement age, which came in quite recently. Whereas you would have seen companies in the past have succession planning-as an employee was reaching the age of retirement they would bring in an apprentice for the last year or two before that retirement-that is no longer the case, because they can no longer be sure that the employee at the top end of their working life is going to move on. That is one of the regulatory barriers to businesses accessing apprenticeships in particular.

Q116 Glenda Jackson: With all due respect, you are talking about someone coming to the end of what used to be their work life, which for a man is late 60s, and a complete dearth of apprenticeships for generations in this country, then suddenly an impulse to create apprenticeships again. Those two timescales simply do not figure. If people have had successful apprenticeship schemes in the past, what constituted the success, as far as the employer was concerned, of the Government’s participation? That is what I am trying to drill down to.

Alex Jackman: In recent months, we have seen renewed vigour from Government on apprenticeships. That is partly-almost solely-driving the increased interest from businesses in taking them on.

Q117 Glenda Jackson: What is the benefit that a business takes from that interest? Is it financial?

Neil Carberry: The return on investment for an apprenticeship is long term, and people are mobile in the labour market, as they should be. Particularly for smaller businesses one of the fears is, if I make this large investment, will I make return on it? It is clearly desirable for the sector, for the labour market as a whole, to be doing training. The bit that the Government can add for smaller businesses is some networking. Look at the example of what is happening with Solent Marine, where the marine companies around Southampton are co-operating with the local authority to build a centralised apprenticeship programme for things like boat building. That helps. Also, Government funding means that the upfront cost is mixed between the employer and the Government, which means the return on investment for the business is shorter term, so that if you put someone through a three-year apprenticeship and they only stay for two and a half years after that, you are seeing a return, in a way that if you paid for it all yourself-as apprenticeships are fearsomely expensive-you might not see a return for five or six years, by which time they might be down the road working for your competitor. Your own business case is weakened, even though the sector as a whole and the economic case for apprenticeships is unquestionable.

Q118 Andrew Bingham: Just returning to work experience, Alex, you were talking about the different sorts, with shelf stacking as an example. I would be interested in Chris’s opinion as well as a small businessman. Do you think work experience in a small micro business where you have to do numerous tasks-I am sure Chris does not walk in and say "that is my job and that is somebody else’s"; you have to do a bit of everything-is of more benefit for somebody on work experience, as opposed to going to a huge conglomerate where they have a regimented job, so they get a few skills? If that is so, do you think these barriers are more applicable to these micro businesses who can, perversely, offer a better work experience?

Chris Bowman: You are absolutely right that the whole point of work experience is a generalised work experience; it is not just in a specific task. A lot of youngsters do not know what they want to do. They leave school at 16, or go on to college and leave at 18, or even come back from university and still do not know what they want to do. The fact is the broader range of experience they can get in any business will be beneficial to them. The problem we have from a school point of view is that work experience tends to be the beginning of July. All of a sudden there are tens of thousands of children all coming out at the same time, looking for work placements, and they are just not there. It goes back to what was said earlier on: if there could be more structure in the schools-that they do not just say "do this at the beginning of July or the end of June" but throughout the sixth form, maybe, they phase them into work experience-there would be a lot more opportunity for youngsters to get that sort of experience.

Q119 Sheila Gilmore: I wanted to go back to work experience and see how it could be linked to getting permanent jobs. Some research has suggested that only about 6% of participants in the JCP work experience scheme-as opposed to a wider definition of work experience-are gaining employment as a direct result. I was wondering if you had any views on anything that could be done to improve this, and whether in fact it could be better aligned to some of the other things we have been talking about, such as wage incentives. Would employers be willing to see it as a first step towards, if people succeed at work experience, taking them on? If it is as low as that then it does not seem to be particularly effective in any direct way.

Nicola Smith: I would say that one of the reasons is that the work experience scheme does not require employers to have a job vacancy at the end of the placement, in the same way that the work trial scheme does. Inevitably, large numbers of young people are not going to gain direct employment because a lot of employers providing work experience do not have vacancies to offer them. I also think that the scheme could be better planned and structured so that there would be greater requirements on the employers participating to raise the quality of the placement. It seems to me that it is not unreasonable to ask an employer to provide young people with followup if vacancies do become available in the workplace where they have done work experience, to allow them to at least participate in an interview, or to guarantee them a job interview if a vacancy arises over the period in which they undertake a placement.

Q120 Chair: Do you prefer this whole approach under the sectorbased work academy where the placements are shorter-they are only six weeks-but you are involved in training and you have to guarantee an interview for a real job at the end of it?

Nicola Smith: Yes, although we are worried that the sectorbased work academies provide less training than previous programmes because of demand for employers to reduce the training requirements. Young people do not get an NVQ 2, which they used to under a previous scheme that provided similar support.

Q121 Sheila Gilmore: Looking at how you could better link work experience to permanent jobs, is there anything DWP or the JCP could be doing?

Neil Carberry: There is a challenge to the business community, in that we should not hide from the discussion we had a minute ago about the variety of experiences people have, certainly in larger businesses. We seem to be picking on retail today. That is not a bad sector to look at, because we are talking about a lot of people and, of the sectors that are able to deliver at scale, retail stands alone in terms of potential. Infinity percent more people who have started on the shop floor end up with highly paid logistics jobs at our supermarkets than people who turn down those opportunities.

Within that framework, it is not unreasonable for DWP to expect employers to set out what their plan is for the experience young people will have with them. That is something we would be comfortable with. Where it becomes more difficult is where you start to erect barriers that become bureaucratic, which leads to the point where the employer throws up their hands and says, "I do not have to do this for recruitment reasons because I am getting 300 applications per vacancy because of the economic situation." There is a delicate balance to strike. You could easily create an approach that asked companies taking part in a work experience scheme to articulate clearly the experience people will have and to do that for the young person-who, after all, is the best auditor of what experience they are getting-as well as for the Department. In terms of aligning incentives, which you mentioned before, that is the reason why we liked the delivery of the incentive, while paid from DWP, to pass through the Work Programme, because that enables the Work Programme provider to align different parts of the system.

Nicola Smith: There are examples of union and employer negotiated work experience programmes, which are of an extremely high quality and provide some very good practice lessons for how wider programmes could be improved. They have provisions in them, for example to ensure that young people rotate around different parts of the business; to ensure young people on work experience are not used in parts of businesses that are undergoing restructuring; and to ensure that overtime for existing staff is not reduced as a result of use of work experience, which makes existing staff more likely to support the young people and see their involvement in the workplace as positive, rather than a threat to their own livelihood and hours. They also set up proper health and safety induction procedures, and have procedures in place to ensure that young people are provided with an interview if a job comes up, or are in some cases paid on their work experience placement. There are also good practice examples I would welcome DWP doing more to support and endorse in a way that has not necessarily been the case so far.

Q122 Sheila Gilmore: Particularly to Chris and Alex, stepping back from this sort of work experience to more school-based work experience, the school-based work experience that my children did was pretty poor, I thought. I could see that was partly because the school just released the whole cohort in a big bunch; getting anything worthwhile was quite difficult. I actually withdrew one of my children from the scheme; I do not think she has ever quite forgiven me, but I was just so cross with the school. Leaving that aside, we did have a good scheme in Edinburgh where some schools crafted a programme for some of the youngsters who were perhaps likely to drop out and gave them a whole day of work experience a week over a school year, and accompanied it with some college training, as well as school-based work. Do you think that would be of value to employers? Would they welcome that kind of approach, where they are getting someone over a longer period?

Chris Bowman: It is difficult from our business, if someone only comes in once a week, to find them meaningful tasks to do. If they are there for a week, a fortnight or longer you can structure what they do more. It makes it very difficult if it just comes on an ad hoc, one day a week basis. I can see what you are saying, but I do not think that we would find it beneficial as a business. It would be too disruptive.

Alex Jackman: It would vary from business to business. Equally, Chris’s business would struggle, but there are others that would value the flexibility of individuals coming in on different days throughout the year. It comes down to schools building up a lot of employer relationships, getting employers in and finding what suits people’s needs. There will also be the needs of particular pupils-perhaps they are at home caring for their mother when they are not at school-and trying to build around that with employers that are local to them.

Nicola Smith: We often hear from employers, as we have today, that young people do not have the experience of work that they need. We need always to recognise in this debate that young people are inevitably not going to have any work experience: they have just left school. There has never been a time when 16-year-olds were enormously work ready with huge amounts of work experience. That is something young people are about to move into the work to gain. When you look at our position relative to other countries, there is far less integration in the education system and the work of employers than we see in countries that have far higher levels of ongoing educational participation among young people who are starting out in part-time work, for example. There is definitely far more that could be done-that model may be a suggestion-to integrate experience of work and of learning in a much more comprehensive way across the UK.

Neil Carberry: This is an important point that I want to capture. At the moment, we are moving in the opposite direction: we have got rid of compulsory work experience between 14 and 16. Careers advice quality-which started out as poor-is going downhill. We are failing our young people in helping them understand the world they are about to arrive in. There is a really strong belief in our membership that we need to do more in that group.

Q123 Chair: You will be excited to hear we are going to move on to a whole new section on this topic. Before we close off on work experience, speaking as someone whose work experience was so dire it motivated me more than ever to do well at university, I wanted to talk about sectorbased work academies. Have any of you had any experience of working with Jobcentre Plus on these sectorbased work academy placements? The 250,000 places can be either work experience or these sectorbased work academy placements. Have you any experience to speak from on this?

Alex Jackman: I have not worked directly on them, but from wordofmouth conversations-I was in a meeting yesterday with quite a few skills agencies and employer groups-general feedback seemed to be fairly positive.

Q124 Chair: Has anyone else anything to add on those yet at this stage? It sounds like they would address some of the issues people have around work experience, but I take on board Nicola’s point that the training offer may not necessarily lead to an NVQ now.

Nicola Smith: It is certainly a model we would be more supportive of than just the work experience without the additional support and the guaranteed interview.

Chair: If you do pick up any anecdotes on that or observations from your members we would be very interested in hearing them. We are now going to move on to a general section on young people in the labour market and some of the challenges.

Q125 Debbie Abrahams: Many of our witnesses have said one of the key structural issues in employment for young people is the reduction in entry-level jobs. First, would you agree with that?

Neil Carberry: There is definitely a move towards a higher skills base in the jobs that are on offer in the British labour market. We published our skills survey on Monday: there is a lot of strong evidence for growth at moderate skill levels and evidence for job number shrinkage in the low skill level. That has been true for the last four or five years; it has happened quite quickly. I would say it is less about a drop in the number of entry level roles, and more about the fact that the nature of entry level roles is now higher skilled than it was previously, which is a challenge for young people making the transition from school, college, university to the workplace, particularly those who are less qualified.

Q126 Debbie Abrahams: Is that the general agreement of the panel?

Nicola Smith: One trend we have drawn attention to has been the decline in skilled manufacturing jobs and the apprenticeship route that used to offer young people in particular. When you look at young people’s employment there has been a definite change, as there has been across the whole of the labour market, in the number of young people working in manufacturing. There is a far higher concentration in retail, hospitality, and food and distribution. That is one change, given the different nature of the jobs in those sectors, that has had an adverse effect on young people.

There is an argument that our education and skills systems have not caught up with what that means for enabling young people to have a successful transition into work. There is a lot of discussion at the moment about under-employment: the experience of people being in part-time jobs who want a full-time job. When you look at the data by age you find that young people are very highly represented in that group. That gives you a sense that, even for young people in work, it is probably true today and will be in the future as well, that there is more of a sense of not being able to progress from a shorter-term, temporary job or part-time job to the permanent employment route with a career that might have been more easily available in the past.

Q127 Debbie Abrahams: There is a disagreement, then, in terms of the evidence we have had so far, as you are saying that entry-level jobs are still there but they are just at a higher level in terms of qualifications required to get into those jobs. Is one of the solutions to ensure that young people are better skilled at the outset? Is that what you consider one of the structural solutions?

Neil Carberry: It is the core longterm answer for us. There is a triangle of issues we need to look at in this policy area. We have spent a lot of time on one so far this morning, which is short-term crisis management: what are we doing now to help young people who are out of work? Then there is the piece Nicola mentioned about the fact that the most sustainable solution is to create more jobs, to have growth. There is a whole stream of policy thinking we need to do about the long term, and about the fact that we have had this problem since at least the early part of the last decade.

While the youth unemployment issue has been made a lot worse by the recession, the position of young people in the labour market has been deteriorating since roughly 2004. That speaks to schools, skill levels and developing pathways for people. To reach higher skill, we need something more than the single path that the education system drives pupils down: GCSEs, Alevels, degree; and at some stage you fall out of that system. We have got lost in the concept of higher skill meaning a degree. Even in the vocational system, we talk about higher skill in terms that relate it back to a three-year residential university course. We talk about degree-level skills. We need to talk about higher skills. Whether that is higher skills in plumbing or management consultancy, it does not really make a difference; we just need to move more people in that direction.

Nicola Smith: We would argue that we have seen a polarisation in the jobs market. Whereas before there were more jobs in the middle that young people could progress into, we now have a concentration of lower-paid, lower-skilled jobs at the bottom and an increasingly competitive situation for those who want to progress to the better-paid professional jobs further up the distribution. As Neil says, that points to the need significantly to increase levels of educational participation. Research we have published that Paul Bivand from the Centre for Economic and Social Inclusion undertook for us shows that, when you look at EU data, levels of educational participation among young people in the UK are practically the lowest in the European Union: only Malta, Cyprus and Luxembourg are below us. There have been significant improvements, which we should recognise, but we are starting from a very, very low base.

That means that we need to look at other countries and what they are doing so differently for young people over what is now a prolonged transition-from the age of 16 up until about 24, 25 often-of moving into education, into work, combining education and work; and look at how they are supported in all sorts of different jobs, careers and sectors to integrate learning and work at the same time. We have made some recommendations for areas the Government could pursue in future around an integrated youth employment and learning service so that employment and learning provision is not as separate as it is at the moment.

We have also made recommendations around the introduction of a youth credit that would bring together learning with financial support for young people who are looking for work-basically integrating JSA with what is left of the education maintenance allowance (EMA) with conditionality regimes that recognise the need for young people to engage in both education and job searching. We think it is a fairly significant change of that nature that might be needed to recognise the changed environment for young people who are moving into work.

Q128 Glenda Jackson: I just wanted to touch on the need to raise skills, defining those skills as more than a certificate of education, or how we define that. That surely is and always has been the responsibility of employers. Is not one of the problems we are facing that for far, far too long employers did not train for what they needed, but simply poached?

Chris Bowman: That is very true, actually. Historically in manufacturing, certainly the smaller businesses relied on the larger companies taking in a host of apprentices who then would gradually drop out and filter down to the smaller companies. It happened with the skills base as well: the skilled people would gradually leave. Historically, our company used to do that. We reached the level where we had an ageing workforce, because the larger companies have now gone, to a certain extent; the huge manufacturing companies do not exist any more. The smaller companies suddenly found there was a dearth of skilled people. That is why, from our perspective, we suddenly found we had this huge age gap. Our youngest person is now in their early 40s.

We go to the schools which, in the main, have shut down their workshops: they do not do woodwork and metalwork and all these things because they all want IT skills. The thing is, kids are leaving school now not knowing what they want to do. A lot of them like working with their hands. It does not have to be academic skills: they do not have to be rocket scientists; they have to want the ability to work with their hands. That is where we are starting to work with the local colleges. As I said before, they will do some of the theoretical training and we will do the practical training in our workshops.

Q129 Debbie Abrahams: This follows on nicely from Glenda’s question. I was going to say, how can we engage more employers? I know we have formal programmes and so on that we have already talked about, but how can we engage more employers in this wider debate about upskilling young people? I am particularly concerned that there seems to be a mismatch in some people’s views around attitudes: they are saying young people are not in the right mode; other people are saying they are fine, and they have the right skills. What are the real issues? As I say, I am concerned that young people are being vilified in terms of not being of the right attitude.

Neil Carberry: It is dangerous if we get into the territory of blaming young people for what we expect of them, because we expect of our young people a hell of a lot more than was expected of us at that age. Life is more complex and more difficult. When you talk to chief executives in our membership they tend to say the opposite: they tend to say how impressed they are with how young people bear up to what is an immensely difficult situation. The truth is, in the school system, we are failing to give them the advice, structure and understanding they need and are looking for. We have not developed the paths that suit the different interests, abilities and directions that young people will go in. We have talked a lot about the need for quality vocational paths; that is absolutely critical.

We have not mentioned the fact that people fall into a bit of a hole between 16 and 18 where they are not being paid benefits, so DWP does not particularly care about them, but where local authorities have primary control. There is a need for cohesive support; that means more support from business in schools as well. If we look at something like the Business in the Community business class, it is pretty clear that there is a wall of business support and commitment ready to help in this area but that we have not yet found the answer of how to scale up. That is why, when we did our work last year, we said we need someone who understands business in most local authority areas who has one job and one job only: to know head teachers and the local businesses and put them in the same room as one another. We do not need the superstructure that we had with Education Business Partnerships that have become local authority economic growth bodies. We need an ability for head teachers and college leaders to talk to local businesses and understand one another’s needs.

Nicola Smith: Some of the recommendations we have made for increasing employer involvement might include better use of the tax relief that employers can claim on training, which could be targeted-at the moment there seem to be very limited requirements on receipt of that tax relief-and better use of procurement, both by Government and by large businesses who are procuring from smaller businesses who might want to include apprenticeships as part of a requirement of the contract.

We have also called for human capital reporting requirements in annual reports. We are very interested in whether there is some form of social partner sectoral agreement that could be reached, as is the case in other countries, for the provision of numbers of apprenticeships across certain sectors, which would be supported by the UK Commission for Employment and Skills (UKCES) and by the Sector Skills Council. There are various options.

Q130 Debbie Abrahams: Very quickly, in terms of the micro and small businesses, Alex and Chris, you have mentioned about telephone contact and simplifying the application for the formal programme. Is there anything else we can do to engage businesses and make things easier on this?

Alex Jackman: Very quickly, you talked about the mismatch of different views. I have read what previous witnesses have to say, and I think one suggestion I made on that mismatch was-looking at those who are representing larger businesses, or, say, HR professionals, whom you find in large businesses-this size of business has the recruitment programme in place to be able to filter out the best candidates. It is something that is not necessarily available to micros. What you do find-this was an interesting study from UKCES earlier this year-is that while there is a general disappointment at the wider pool of talent out there, the majority of businesses are satisfied with who they end up recruiting.

Q131 Debbie Abrahams: That is very helpful. Chris, did you want to add anything?

Chris Bowman: Not on that front, no.

Q132 Andrew Bingham: We have heard a lot about the way people are prepared for work, and the Chartered Institute for Personnel and Development have said that fewer young people combine work and study; we have heard about that. I have to say, it is refreshing to have Chris here as somebody who has a small business, because that is my background. Are employers less willing to offer part-time options to under-16-year-olds? Like many of us, I had jobs from the age of 12-Saturday jobs and all this sort of stuff-so when I left school I had been in the working environment. Is it true that employers are less willing? If so, what are the reasons? Is it health and safety? Is it just paperwork and all the rest of it?

Chris Bowman: It is several things. The bureaucracy, the red tape of employing youngsters, is quite overbearing for a small business. You mention health and safety; in our line of business, it is very important. In manufacturing, we operate some very dangerous machinery. You obviously cannot put youngsters into that environment. Historically I know from my background that part-time jobs used to be either working on Saturday in stores, as you say, shelf filling, or in a local petrol station dispensing petrol. In our business, we have not got the facility to take on part-time workers, because the type of work we are doing is bespoke; it needs continuity. That is the problem.

Q133 Andrew Bingham: I understand, because yours is precision engineering; it is not what I would call wider engineering. I did Saturday jobs in engineering companies. Do you speak to business networks, other businesses that are not as specialised as yours that probably do have roles, where there are suitable jobs that people could do on Saturdays or whatever, but they just do not want to do it because of the grief, paperwork and all the potential dangers.

Chris Bowman: The jobs are there, but they find the bureaucracy is just too much.

Q134 Andrew Bingham: Alex and Neil, do your members find something similar?

Alex Jackman: It is sometimes tough to find a dissenting view from that just put forward. There is sometimes an issue with perception. I have spoken to a few pub landlords, for instance, who will just not take on any staff under a particular age because they are branded, to a certain extent, by previous experiences. I mentioned a case study earlier where the education system as it is currently set out militates against companies being able to take on young people because of the flexibility they need for those young people to come in. The modular exam system militates against that, as does the cap on the number of hours that certain ages of work experience students can undertake.

Certainly there are complaints we get when we speak to small employers about taking on young people. We have a membership that is very minded to do that, which wants to play the part, recognises the role they have in the community as well in making sure that local unemployment is dealt with. We have research coming out in the next month that will hopefully show just how engaged our businesses are in trying to ensure young people have some kind of experience of their work. There are so many factors against them at the moment.

Q135 Andrew Bingham: In summary, the system is acting as a block, not the employers. Instead of the system facilitating, it is getting in the way.

Alex Jackman: There is some element of perception there, as well, acting as a block for the employers.

Neil Carberry: The debate about CRB checking was particularly pernicious for young people under 16. A lot of people’s opinions are still coloured by that.

Nicola Smith: There is a dissenting employer voice in survey evidence with respect to the impact regulation has on employers’ ability to hire. The recent BIS survey, the small business barometer that they publish, which is a large-scale survey of small businesses, found that only 6% of employers said that regulation was in any way prohibiting their ability to hire. It was way down their list of problems: 45% said that lack of demand in the economy was a problem; 12% said access to finance was the biggest problem they were facing. Given that we have one of the least regulated labour markets in the OECD, we have always to put this discussion in context. There is no evidence that regulation, or excessive regulation, in the UK is having any impact on our jobs market.

Q136 Chair: Neil just mentioned CRB checks, and I know my teenage son had to have a CRB check to do some voluntary work with his school for a week, which seemed to me to be quite a large cost to impose on that activity. Is it CRB checks that you would cite as being a particular barrier?

Neil Carberry: Particularly for store work. The scale here is people working in supermarkets on a Saturday. There are a range of controls on what people can do by age already, and then the CRB is an additional cost on top of that. That is what our members talk to us about.

Q137 Andrew Bingham: I look back to when I was 15 and working in a quarry, and I think, crikey, a Saturday job working in a quarry would not happen nowadays because of so many different things, some of which probably should have been there at the time. It frightens me.

Nicola Smith: That hits on the point that there is a balance; you can always make regulations that are overly arduous or overly complex better, but there is also always a role for regulation in making workplaces safer and ensuring that people are provided with a working environment that is not going to cause them damage.

Andrew Bingham: There is a balance.

Nicola Smith: It is a good illustration of the role regulation can play in supporting employment.

Q138 Stephen Lloyd: Perception is crucial. I come from a business background like Chris, and a lot of SMEs and micros do have an extremely negative perception of taking on kids in this situation because they think there is more regulation than there really is. Getting over that when the Daily Mail says every day there is too much regulation is a bit of a challenge, but there you go.

Chair: We have 15 minutes left. We are coming to you now, Glenda, to talk about the Youth Contract, so you can use this opportunity to mop up on the previous section.

Q139 Glenda Jackson: There is a disproportionate impact on employment for black and ethnic minority young people from those communities. It is the obverse of regulation, because we live in a society where to discriminate is against the law. I wonder if you have anything to say on this. Why are employers picking up on this? Is there some sort of inbuilt rejection of BME people? Are there specific difficulties?

Nicola Smith: What the evidence shows is that some of the effects we see for young BME people and the increased levels of unemployment they face are geographical, because they are more likely to live in parts of the country where there is high unemployment. Some of it will be to do with the characteristics of the population, but there is also an unexplained part of the trend that judgment would say is likely to be down to discrimination, which we do know still affects the employment chances of black and minority ethnic employees across the UK jobs market. It is a combined set of factors, I would say.

Q140 Glenda Jackson: Is there anything we should be doing about this? Clearly we should be doing more.

Nicola Smith: On increased support, all the types of programmes and increased access to education that we have talked about will help those young people who are unemployed, and that will support young people from BME backgrounds in that situation. There is always more that could be done to stamp out discrimination. For example, the recent reductions in funding for the EHRC3 are a real concern, as it will now be significantly hampered in its ability to take action and highlight these problems because of reduced resources.

Alex Jackman: Just to add to that, the most recent survey we did with our members, albeit in 2010, suggested that four in five felt that their business was structured to gain and retain the best people, regardless of age, gender or ethnicity.

Nicola Smith: But one in five did not, then?

Alex Jackman: 8% did not; there is a little bit in the middle where perhaps they were unsure. I will write to the Committee and flesh it out.

Glenda Jackson: That would be good, thank you.

Chair: Glenda, are you ready to go on to the Youth Contract approach?

Q141 Glenda Jackson: When am I not? Is the extra £1 billion government funding over three years to tackle youth unemployment a proportionate short- term response, given the extent of the problem?

Nicola Smith: No; our research, which was undertaken by Paul Bivand, has shown that it is likely to provide support to one in 10 of the young people who will flow on to JSA over the period. We do not think it is proportionate. As I have already said, it is a small reduction in funding, compared to the size of some other cuts, relative to what was previously invested in the problem of tackling youth unemployment. When it is combined with wider reductions in support for young people, such as the dismantling of what is left of the careers service and the removal of EMA, it is very concerning. Given that, even before the recession, we spent far less as a proportion of GDP than most of our competitor economies on welfare to work support, and support for unemployed young people across the labour market, it is very worrying that that ratio has probably declined slightly at a time of increased need.

Q142 Stephen Lloyd: Even though we don’t have structural unemployment as compared with many of our EU partners, interestingly enough. That is curious-it is the flexible labour market, I suppose.

Nicola Smith: The quality of our programmes has traditionally been poorer, under governments of different colours. As a proportion of our GDP we have not invested as much in those who are unemployed as some other countries have done.

Q143 Glenda Jackson: That one in 10: do you have details of how that breaks down? Does it break down into specific groupings of young people, or is it the kind of loss, as you said, of careers advice? How does it come about?

Nicola Smith: The one in 10 is based on an estimate of the likely flow onto JSA over the three-year period for which the youth contract is operational. That estimates that over that period 4.5 million young people will flow on to JSA. When you compare that with the number of places that are available, which is 450,000, it means that one in 10 will have access to support. Of course, you would not expect everyone who flows onto JSA to have an intervention. Some of them will flow on and off within a month. We know that there is a lot of flow on and off JSA every month, but I think it demonstrates the scale of the gap; for the programme only to be providing support to one in 10 young people who are on JSA over the period does not seem to be enough, to us.

Q144 Glenda Jackson: Does anybody else want to chip in?

Neil Carberry: Coming back to when we were discussing the review of the Work Programme earlier, I am always resistant to use funding as the measure of success for these programmes. If you look at something like the Future Jobs Fund, which had a cost of £9,000 per job outcome, that is an expensive programme. In truth, it is only in the fullness of time you will work out whether that £9,000 was adequately invested or not. We have to focus on what the job outcomes are. Also, we have to not pretend that we can create jobs by government diktat. The truth of the matter is it is growth that will resolve the problem. What we can do in these programmes is help, and through things like the incentive persuade employers to take a chance on someone a little further from the labour market and thereby in the long term improve the levels of labour market participation. I would echo exactly what Nicola said about things like the careers service, which has been allowed to ossify and then drop away and need attention, because the advice and guidance framework we give our young people is nowhere near fit for purpose.

Q145 Chair: We are told that there is this new National Careers Service, but you are saying that is not going to do the job.

Neil Carberry: The National Careers Service is an effective tool, but in truth it is a website. It has the chance to be a very good website, and we as employers need to step up and support its development. We need more than that, particularly in difficult areas around advice and mentoring in person. Some of that can be and already is being supplied by businesses.

Q146 Chair: There is a facetoface element for young people, though, is there not?

Neil Carberry: Yes, but not yet sufficient, I think. We need to invest a lot in the advice we are giving to people pre16.

Nicola Smith: The Connexions service used to be able to provide far more advice to young people. The scale of reduction in facetoface advisers that we have heard about is fairly colossal. It has been suggested to me that some constituencies have gone from about 70 people providing facetoface advice to fewer than 10. It is that degree of reduction that has been happening at the same time as youth unemployment remaining at a record high that is a real concern for us.

Q147 Glenda Jackson: In the longer term, to take Neil’s point, which I entirely agree with, it is not governments, essentially, that create jobs. What has become clearer during this morning is that there seems to be two issues. One is jobs for young people and young people being able to take them; the other is that there are vast numbers, apparently, of young people who are not in a state to be able to enter the world of work. That is the area that the Government, I assume, is concentrating on, and which we all think they should be concentrating on. What, in the longer term, should they be doing? To go back to one in 10, if the short term is not going to do it, what is the longer term?

Nicola Smith: The other issue is recognising that short term interventions do have a role in preventing young people from experiencing prolonged periods of worklessness where they are not doing anything.

Q148 Glenda Jackson: Presumably-forgive me for interrupting you-those are young people who are closest to entering the world of work and business, not the ones we are euphemistically talking about being furthest away.

Nicola Smith: I suppose it is thinking there has always been a problem in the UK for many years with young people who are not in education or employment, but the risk during a downturn is that we have large numbers of young people who would otherwise be in work, if there was demand and jobs were created, spending prolonged periods of time doing very little. That then has a scarring effect throughout their lives. If we can increase investment in education so that more young people are in higher or further education while there are no jobs for them to do, that is a sensible thing to do as a response to a downturn. It means they are engaged in meaningful activity that will give them the best possible chance for a job when the labour market picks up. It is recognising that while we cannot create the jobs, we can provide interventions that will give young people a better chance of getting them when they are available again.

That aside, the one in 10 figure that I gave relates to those claiming Jobseeker’s Allowance. The wider report we have also published-we included reference to it in our submission-points out that the way that you look at the ILO data for youth unemployment can often give a slightly distorted picture of the experience of young people who are unemployed and that it also excludes young people who are workless. You often hear about the one in five young people who are unemployed on the ILO definition; the one in five figure we think is really concerning is young people who are either unemployed and not in education or young people who are economically inactive and not in education. Those two different groups account for 20% of the entire youth cohort. We do not believe that the system provides adequate support to the latter group. Young people who are economically inactive and not in education do not get anywhere near the level of structured engagement with the Government that those people who are unemployed and actively seeking work will do through Jobcentre Plus and being part of the JSA regime. It is a worry that there are two differential regimes running side by side. I will stop there.

Q149 Chair: Stephen has very kindly said that he thinks we have covered a lot of the area he was going to cover a bit earlier on. I am going to suggest we close this by saying to each panellist that we would like from each of you three specific recommendations, your top three recommendations, for what you would do to improve this particular intervention by Government for young people. Then we can bring the meeting to a close. There is nothing else that I did not mop up on the way, I think.

Nicola was just reading out a long list, so Nicola, you have to pick from your long list the top three you would do.

Nicola Smith: I would reinstate a Future Jobs Fund model of support for young people, recognising that investment now is the best way to support those who are furthest from the labour market and give them real experience of work. I would focus on work trials as opposed to work experience. And I would put far more money into apprenticeships and new ways to engage more employers in providing them. That will help more young people in the longer term.

Neil Carberry: We need to address the issue of making sure that employers are treated as clients in the system and that the system dances to what employers need, not what Government will pay for, on both the skills and the Work Programme side. We need to help Work Programme providers talk more effectively to business. Thirdly, picking up on the longterm solution point, we need to think about schools and do two things: one is about how we embed schools and businesses working in partnerships so that we are delivering an inspiration strategy to young people, so they understand why what they do in school is relevant. More broadly, we need to take that earlier than we currently do. We have focused on 14 to 19 for too long; if we are really going to raise ambition we need to go earlier than that.

Alex Jackman: A focus on employability skills in schools; better work with those work providers out there to ensure they access micro businesses across the country; finally, both widen the eligibility for some incentive schemes out there but at the same time work hard to create a portal for micro businesses so that their first inquiry into a scheme is one they are applicable for.

Chair: So better publicise what is already there.

Stephen Lloyd: And simplify it.

Q150 Chair: Is it only in apprenticeships where that there is this barrier you are finding if you have previously had them?

Alex Jackman: It is a number of things: I mentioned the National Insurance contribution holiday, for instance. It is only available to new businesses; there are geographical criteria as well. We can look to tinker with some of the schemes out there, perhaps make them more applicable and less generous to a wider section of firms. Rather than 10 National Insurance contributions holidays for the first 10 employees of a new firm, why not the first two employees of any firm?

Chris Bowman: It is something I alluded to, and something Alex said earlier. I have an ageing workforce, and I cannot replace them because the cap on retirement has now been taken off. That is our biggest single problem, and that is going to stop us taking youngsters on. We have no time to discuss that.

Q151 Chair: Do you want to do two others, or is that just going to be your one point?

Chris Bowman: The other thing is working closer with local colleges to bring the necessary skills; that goes back to the schools with their work experience being more structured.

Chair: Thank you very much indeed for coming.


[1] Small and Medium sized enterprises

[2] Chambers of Commerce and the Federation of Small Businesses

[3] Equality and Human Rights Commission

Prepared 19th September 2012