What can we do about unemployment?

If this were an ordinary recession the world economy would be bouncing back strongly.  That it isn’t tells us two things.  Firstly, that this isn’t an ordinary downturn and, secondly, that unemployment is set to be a big problem for a long time to come especially for younger people.  So what can we do about it?

Only last week Iain Duncan-Smith urged UK businesses to “give a chance” to unemployed young Britons, rather than relying on foreign workersas the BBC reported.

Well, I’m with him on that except to ask why this sort of intervention should be necessary at all.

One part of the problem is that a section of the population has totally unrealistic expectations and no motivation.  Frank Field MP on Radio 4’s World at One last week described how some of his younger constituents who can neither read or write refuse to get out of bed for less than £300 per week.  When he told them that if he were minister they would have to (given that there were jobs available) one responded by saying,  “So YOU would make us take jobs that immigrants take!”

In general the government finds it fairly difficult to organise a party in a brewery so changing cultural attitudes is a big ask but one that must be attempted.

But a far larger problem is that, courtesy of the Great Recession, there simply aren’t enough jobs and worse than that, there is a perpetual skills mismatch between those jobs that do exist and the candidates who might take them.  The government loves to talk of ‘market-based solutions’ but when push comes to shove they actually rely on administrative approaches.

What the government should do about the recession is a matter for another post but when it comes to training and retraining there should be no excuses for continued failure which continues to be papered over  by the traditional approach of employing immigrants while the system fails citizens.

The failures are not for want of spending.  As a nation we pour untold amounts into education and training of all sorts yet a huge proportion of this investment is obviously delivering no useful result – from school leavers who can’t read or write to and employers who can’t find suitable skills.  Something is badly wrong and it’ so pervasive the government can’t blame it on their favourite usual suspects – bad teachers, bog-standard comprehensives and uncooperative LEAs.  The common factor uniting all the multiple failures is, ahem, government and its utterly misguided approach.

Successive governments have pushed education from pre-school to university as hard as they could.   And that’s the precisely the trouble; producer-push approaches never work although they’re very good at consuming resources.  So, the beginning of wisdom in education would be to remodel it to create consumer-pull.

That means thinking about the top end where the pull must come from but this is confused by the government’s one size fits all mentality.  For post-school education to ministers and senior civil servants has always meant university and, in practice, only university although they might claim differently.   Hence Tony Blair’s pulled-from-thin-air target of 50% going to university, hence the conversion of Polys into universities, hence the neglect of apprenticeships.

‘University’ used to mean an academic institution combining original research with teaching the most talent stratum young people.  Yet we are in great danger of devaluing the word forgetting that if it means everything it means nothing.  We need to invent – or perhaps reinvent – new words and new institutions suitable for those young people (and in some cases mature students wanting to retrain) who are not particularly academic, for instance those whose skill lies in their hands.

The obvious answer is apprenticeships but restructured to create a ‘pull’ for school students.

In practice this would mean a demanding entry qualification that school students (and their parents) would understand as a key objective to work towards through school much as A-levels are for the more academic youngsters now.

For the rest it should mean that the decision of a young person to go into, say, plumbing is not one the government effectively makes by providing X number of places on plumbing courses.  Rather it should be between the candidate and a plumbing employer who wants to take on a trainee.  The necessary classroom element should be provided by third-party trainers on a fully commercial basis but exams should be set by the ‘Association of Certified Plumbers’ (or whatever they might call themselves).  (Yes, this is a thoroughly market-based solution!)

The traditional difficulty with training is that it suffers from a classic market failure in that it costs employers a fortune yet the trainee can leave, taking all the investment he or she represents.  There is a simple solution to this; government should pay a contribution to course fees and also a (course-specific) subsidy to the employer to reflect the low productivity of the trainee and the high cost of supervision (especially in the first year when most trainees are still finding their feet).  But – and this is important – the government’s contribution should only be paid only AFTER the trainee has successfully passed each stage of exams.  Otherwise unprincipled employers would just exploit trainees to get the subsidy.

If this model sounds a little bit familiar it’s because, the government subsidy bit apart, it’s how accountants do it now so it’s a proven approach.

Would it be expensive?  Yes, of course.  But much cheaper than the current alternatives of either leaving young people on the scrap heap or driving them into too often inappropriate and even more expensive universities.

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