Local government and Covid-19: addressing the looming youth unemployment crisis

Jonathan Payne, Professor of Work, Employment and Skills, and Director of the People, Organisations and Work Institute (POWI) at DMU[i]

The fall-out from the coronavirus crisis is likely to be devastating and long lasting, and will have a major impact on local economies. The worst-case scenario is of something akin to a ‘Great Depression’, but even if that is avoided we can still expect a long-term negative hit to the economy which, on one recent estimate, could last 7 years.[ii] When the economy does bounce back, there is also a good chance that it will do so in a particular way. There is a very real danger that in a ‘flexible’ (weakly regulated) labour market, many employers will respond by cost minimisation and look to rapidly scale down labour costs. This could lead to an explosion in casual and precarious work, including gig work, agency work and hourly paid forms of employment. There is already evidence that for many young people these are often the only jobs they can get access to, in terms of a springboard into the labour market, as employers use ‘precarity’ as a ‘screening mechanism’ to select for more secure positions.[iii]

Much of course depends on how central government responds. However, we can anticipate that one of the most pressing challenges will be rising unemployment. At present, with central government in immediate ‘crisis-response’ mode, it is unclear how much thought the DWP and DfE have given to this. Much of the detail surrounding the UK’s ‘Shared Prosperity Fund’ (designed to replace European Structural and Investment Funds) is also lacking in terms of how much funding will be available for local actors, and how this will be devolved.[iv] So the big question for local government is: ‘what resources will we have to work with?’ While this makes planning difficult for local government, it cannot simply wait on central government to work out what it is going to do, before considering how it might respond.

The first point to be clear on is that if a future of large-scale unemployment does beckon, then this a problem on the ‘demand-side’ of the labour market, or, put simply, too few jobs. ‘Supply-side’ re-skilling and re-training measures have only limited traction in dealing with such problems. However, tackling demand-side issues (i.e. job creation) is going to be very difficult for local government without concerted action from central government. So how should local government respond? Or what might it practically do in a very difficult situation?

A useful starting point would be to track which groups in the labour market are going to be hardest hit. There are already strong indications that certain areas such as retailing and hospitality will be among them, and that young people without a university education will also suffer disproportionately (although this is not to say that some graduates will not also be adversely affected). One possible scenario is that apprenticeships for young people quickly start to dry up as employers think how they can recoup the costs of the government’s apprenticeship levy in ‘hard times’ by focusing provision on training their existing adult workforce. If that happens, the old problem of ‘deadweight’ and the state subsidising employers’ training grows ever bigger, with young people losing out. We could see a drying up of apprenticeships at the same time as youth unemployment goes through the roof.

While supply-side measures have their limitations, it may, however, be one of the few areas where local government can do something practicable in a context where there are no snap-the-fingers, game changing interventions available locally. A key question therefore is: how can Leicester help prepare its young people for a challenging labour market going forwards? The group to focus on here is NEETs, young people ‘not in employment, education or training’, a group which the DWP tends not to deal with as it lacks the infrastructure. Tracking young people who become NEET will therefore be extremely important. There is a lot of evidence from research on NEETs over many years that indicates they can benefit from tailored and bespoke, one-to-one coaching and support from dedicated ‘key workers’. Indeed, Leicester already has some useful third sector provision in this area.[v] Much of this is currently underpinned by European Social Funding, and there are clearly capacity issues in terms of the number of key workers who could provide such assistance beyond existing levels. The question would be whether this could be supported and ramped up. Thought could also be given to the role of local FE colleges in terms of providing decent and relevant special training options for NEETs. Good quality ‘information, advice and guidance’ on local training and employment opportunities has always been important and will become even more so.

It will also be critical to provide young people with good quality work experience opportunities that can strengthen their position in the labour market. Employer engagement in this arena has been a perennial challenge but some employers have always been, and are, willing to contribute. Proactively working with employers to develop this ‘offer’ would also be really important. At a time of crisis when business groups are talking about a new ‘social contract’ for business[vi], which embraces corporate social responsibilities (‘what can we now give back for state/taxpayer support?’), there may be scope to pull more employers into this kind of an agenda. There are suggestions that local government could lead on developing local ‘Back to Work’ partnerships involving local stakeholders, building on existing local partnerships where possible (e.g. Skills Advisory Panels).[vii] Employers could be asked to sign up to local ‘Back to Work Charters’ setting out clear expectations around supporting people into work [viii] and notions of ‘fair work’.

Equally important is developing support mechanisms to help young people who find work to stay in work. Again, ‘key workers’ who are part of the support journey into work can also be part of this by providing in-work guidance and support.

Given the economic challenges and financial constraints that are likely to exist, it may be that local councils are faced with some very hard choices in terms of where to prioritise resources and provision. Ideally, support should also be ramped up for the long-term unemployed.[ix] Moving the long-term unemployed into work is often a really tough, although important, task. However, this is difficult enough in a tight labour market, and will become only harder still as unemployment rises. Tough decisions may have to be made about what can be done to help young people at risk of becoming long-term unemployed so that they can avoid the well-documented ‘scarring effects’ of unemployment on future employability.

[i] I am grateful to my conversations with Professor Ewart Keep, Director of SKOPE at Oxford University, and his thoughts around these challenges which have helped to formulate this blog.

[ii] See the IES 2020 report, ‘Getting Back to Work; Dealing with the labour market impacts of the Covid-19 recession’, https://www.employment-studies.co.uk/resource/getting-back-work-0

[iii] See Purcell et al (2017), https://warwick.ac.uk/fac/soc/ier/research/pathways/presenttensefutureimperfect__final.pdf

[iv] https://www.local.gov.uk/sites/default/files/documents/2019-07-09%20-%20LGA%20briefing%20-%20UKSPF-%20HoC%20110719.pdf

[v] See Leicester’s Yes project, https://yesproject.org/who-we-are/

[vi] See http://www.smf.co.uk/publications/returning-favour/

[vii] https://www.employment-studies.co.uk/resource/getting-back-work-0

[viii] https://www.employment-studies.co.uk/resource/getting-back-work-0

[ix] https://www.employment-studies.co.uk/resource/getting-back-work-0