The UK government is introducing new financial incentives for companies to hire unemployed young people, offering employers £3,000 for every unemployed person aged 18 to 24 they hire.
The initiative is part of a wider effort by ministers to tackle rising youth unemployment. Official figures show that more than 950,000 people aged between 16 and 24 are currently not in education, employment or training (NEET), around one in eight young people across the UK.
Under the new regulation, companies will receive the subsidy if they hire young people who have been receiving benefits for at least six months and are looking for work. The scheme, dubbed the Youth Jobs Grants by ministers, is expected to help around 60,000 young people find work over the next three years, although the government has not yet confirmed the full eligibility criteria for companies wanting to take part.
The announcement comes as the government faces growing pressure to address the deteriorating employment prospects for younger workers. Analysts and policymakers warn that youth unemployment could become entrenched unless more opportunities are created in entry-level sectors.
Pat McFadden said the initiative would provide a vital opportunity for young people to gain work experience and build a career.
“Young people need an important first step on the career ladder,” he said, arguing that the rise in youth unemployment was due to long-term structural changes in the economy rather than short-term economic disruptions.
According to ministers, industries that traditionally employ large younger workers, particularly retail and hospitality, have been experiencing major changes for more than a decade due to automation, online shopping and changing consumer habits.
As part of the wider package, the government will also expand an existing jobs support program later this year. This program currently subsidizes six-month jobs for people who have been unemployed for at least 18 months, paying employers the equivalent of the national minimum wage for the job.
Currently the program is limited to younger applicants, but from the fall it will be expanded to include job seekers up to 24 years old, instead of the current 21 years old.
Ministers are also expanding so-called basic training, entry-level apprenticeships designed to help young people develop their skills in the workplace. Employers who take on basic apprentices are currently receiving rates of up to £2,000 and from April the scheme will be expanded to include sectors such as hospitality and retail.
Taken together, the measures represent a shift in government employment support towards a slightly older cohort of young people than previously targeted.
The plan also complements existing tax incentives for hiring younger workers. Employers are not required to pay national insurance contributions for employees under the age of 21 unless they earn more than £50,270 a year.
However, the government’s broader employment policy has been criticized by business groups and opposition politicians, particularly after employers’ social security contributions were increased last year. Critics argue that higher payroll taxes could hinder hiring at the very moment the government is trying to spur job creation.
Despite these concerns, ministers say the new grant scheme will reduce risk for companies considering hiring younger workers, particularly those who have struggled to find work after leaving school.
Meanwhile, a wider government review of youth unemployment is underway, led by former Labor minister Alan Milburn. The review examines the causes of rising unemployment among younger people and recommends further policy changes to improve access to jobs and training.
The conclusions are expected to be published later this year.
The government is also considering adjustments to future pay policy after some employers warned that plans to equalize the minimum wage for all age groups could make hiring younger workers more expensive. Officials have suggested that while the timeline for implementing equal pay could be reconsidered, the policy itself is unlikely to be abandoned entirely.
With youth unemployment now at its highest level in more than a decade, ministers say the priority is to ensure young people can find their first job and gain the experience they need to move up the labor market.
