Businesses call for youth jobs subsidy

High and rising youth unemployment is one of the most important economic and social policy issues of the day. The CBI has called for extra funding from the government for a youth jobs subsidy - a £2500 per head payment for businesses that offer apprenticeships. The aim is to widen access to apprenticeships and equip school and college leavers with extra skills to improve their human capital and occupational mobility. If the lobbying proves effective, this is a good example to use of an active-labour market policy whose objectives are firmly on the supply-side of the economy.

According to CBI Chairman Richard Lambert, ““Young people leaving education this summer face the toughest job market in a generation. We know from previous recessions that a lack of employment after leaving education can damage young peoples’ long-term prospects at a critical point as they move from education to the world of work.” Their 5-point programme for reducing youth unemployment is available here.

Given that the government was quick to introduce a £2000 car scrappage incentive (paid paid for by the motor industry) - it might make for interesting discussion in the classroom to weigh up the relative benefits and costs of using a similar pot of cash for a direct subsidy for consumers contrasted with an employment and training subsidy for employers. Who should pay for training? Why is the free-rider problem relevant here?

This Guardian article argues that “Apprenticeships are an out of date idea. The only reason that they are back on the agenda is because of the TV show.”