The Government’s employment grant won’t get Britain working

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• Offering employers £3,000 to take on young people will achieve nothing

• The Government must permanently reverse the job-destroying measures it has introduced

• Brace yourself for spurious claims that the Government’s new employment scheme has created new jobs

Today’s labour market statistics are the usual jumble of sometimes conflicting indicators, based on different periods and using different methodologies. However, it is clear that the unemployment rate is continuing its slow upward creep, with the overall rate now at 5.2%, the highest since the Covid pandemic (when an understandable blip reversed a long trend of falling unemployment).

Perhaps more concerning is the figure for young people, which is now above the equivalent in many European countries which used to have much higher youth unemployment than us.

To be even more focused, the figure for males aged 18-24 has reached 17.2%, up from 16.1% in February’s data and 13.8% for the comparable period a year ago.

The unemployment rate for young men is particularly worrying; for young women the figure is much lower. Men spend longer in the workforce than women, and are far more likely to work full-time. They are also much more likely to work in the private sector – where wealth is created – while women disproportionately prefer jobs in the wealth-spending public sector. So the inability of a growing proportion of young men – many of them well-qualified graduates – to find work has longer-term implications for the economy as well as their personal futures.

What to do? The Government, which has contributed to this problem by sharply raising employer national insurance contributions and minimum wages, and passing the Employment Rights Act (which makes taking on young people more risky), is now attempting to offset this by offering employers £3,000 to take on young people aged 18-24.

It’s déjà vu all over again for me. A quarter of a century ago, a House of Commons select committee published a memorandum I wrote criticising a similar scheme under Tony Blair’s New Labour.

The problem with these schemes is that they don’t achieve very much, they are expensive in terms of the jobs ‘created’, and they allow governments to make dishonest claims about what they are achieving.

Suppose 10,000 employees are taken on as a result of this scheme. During the period covered by the programme, many of those new employees would have obtained a job anyway. So they are not a net gain. Moreover, some employers will have taken on these subsidised young employees in place of older workers they would have taken on otherwise. So those older people are unemployed instead. Finally, such schemes are hedged around with all sorts of bureaucratic twaddle. Only larger firms have the expertise to navigate the bumf; for smaller firms, it’s not worth the effort. Consequently, large businesses are subsidised and gain market share at the expense of smaller businesses, where jobs are lost. Think coffee shop chains versus Doris’s tea shop.

So the net employment increase as a result of this £3,000 bung is likely to be much smaller than claimed. Evidence from many schemes in many different places and times suggests that these job displacement effects are considerable, up to 80% in some cases. With an 80% displacement rate, only 2,000 of those 10,000 new jobs are a real gain. To put it another way, the cost per job created would be £15,000, not £3,000.

In any case, schemes like this can only ever be temporary. It would be much better if the Government permanently reversed some of the job-destroying measures they have introduced in the last 18 months. But an increasingly left-wing Government is unlikely to do that. We’ll instead hear spurious claims from the Prime Minister and the Chancellor that their whizzy new employment grant has ‘created’ loads of new jobs.

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