The costs are closer than you may imagine, but one gets repaid and one does not
There were (as of the estimates published at the end of last year) about 293,000 people in the UK aged 18 to 20 not in education, employment, or training (NEET). Of these, 134,000 were looking for work and 158,000 were economically inactive.
The government, while it would rather these young people were working or in education or training, does want to keep them alive and allocates funds to do that as follows.
If you are out of work the standard allowance for universal credit works out at around £317 each month or £3,804 a year, and if – like more than half of NEETs – you have a health condition that limits your capability for work, the “extra monthly amount” is £423 (or £5,076 for a year). If you live alone (and to be clear most NEETs aged around 18 will not be living alone) you can also claim for the costs of renting a single room in a shared house – I found a room in Darlington (just for the sake of an example) which would have a rent of £4,316 for a year.
If you’ve a calculator to hand you’ll tot that up as being £13,196 a year – a little more than the maximum annual maintenance loan for an undergraduate student living away from home outside of London (£10,830).
The government – as above – is very keen to move people from being NEET to some kind of sustainable employment, and the route to that is usually via some form of training or education. The Jobs Guarantee (which applies to people aged 18-21 who are on universal credit for 18 months or more) covers 100 per cent of employer costs for up to 25 hours a week of employment at the minimum wage for up to six months. The minimum wage is £10.85 for people between 18 and 20, so the salary cost to the government would be £7,025. For full employer costs we add in national insurance contributions (zero for under 21s), minimum pension contributions (3 per cent), £250 per person for onboarding, up to £2,250 for wraparound support or training and £400 for administration.
For employees who are 18-24 and have been on universal credit for 6 months or more there is also a Youth Jobs Grant of £3,000 per hire that goes to employers. These are just the newest entries among a range of support and advice services, which may also direct you to training or education provided by an FE college or private training provider.
If you are a full-time undergraduate student you mainly have to contend with tuition fees: next year the government will loan you £9,790 to cover a single year of a full time undergraduate course. The current training and employment support offer for NEETs is far less easy to put a single sticker price on, but it is fair to put it in the same ballpark.
The glaring difference is that graduates are expected to repay the government’s investment from future earnings and this is experienced as an extra 9 per cent of salary deductions for earnings above £25,000. An individual who has experienced 18 months of not being in education, employment or training may have received a comparable financial level of support but would not be expected to repay that support.
Both are examples of an investment in human capital – a person with a job (or the ability to get one) will be, in simple terms, more productive than a person with no job. And a person with a chance of a “good” job, according to the calculations that underpin our understanding of productivity, will be more productive.
Of course, pretty much everyone agrees that financial support should be needs-based, and that more should go to those in genuine need. And young people with NEET status often have complex and overlapping needs that need significant support. In such situations it remains enormously difficult for someone to find full-time employment aged 18, and it is right that support should be there.
A part of that difficulty is that there are simply not many jobs available for young people. Unemployment for the 18-24 age group is currently at a record 14.5 per cent, and the majority of these are classified as NEET.
In any hypothetical future where we send less 18 year olds to higher education it is unlikely that many of them would find jobs in the short-to-medium term. Some may find other education or training, which again would be subsidised by the government without hope of repayment.
The cost of supporting someone who is NEET is broadly equivalent to supporting someone who is at university, but without the direct repayments. Can the UK afford to swap student funding with NEET support on such a grand scale?