The cost of Neets…and total bollocks in a Work Foundation report

A Work Foundation report:

Beyond the personal costs of being NEET, each young person not in employment, education or
training bears a cost to public finances (through benefit payments, lost tax revenues, and
healthcare and criminal justice costs), and a public resource cost (due to loss of economic
productivity from un- or underemployment, lost personal income and the effects of lost
opportunity).
• Each 16-18 year old who is NEET has been estimated by Godfrey et al to have an
average total public finance cost to society of £52,000 (in 2002 prices) over the course
of their lifetime.9 Recently this average societal unit cost of NEETs has been updated
to £56,000 per 16-18 year old NEET. The current estimated aggregate public finance
costs of 16-18 year old NEETs range from £12bn to £32bn.10
• In 2002 the average unit resource cost of 16-18 year old NEETs was estimated at
£45,000. The 2009 estimate is much increased, to £104,000, with an aggregate
resource cost range of £22bn to £77bn. This increase is largely due to lost potential
wages, resulting from growing wage differentials, and big differences in benefits and
in-work wages between 2002 and 2009.

Now immediately someone is going to start saying, well, look, there\’s a £52,000 loss to the taxpayer for each Neet so we must create jobs for them!

And maybe we ought to, this is true. But note, this is a lifetime cost. Perhaps £2,000 a year.

So, anyone got any bright ideas about how to create a job for £2,000 a year? Quite, not all that simple, is it?

As to the rest of the report I\’m afraid that it\’s total bollocks.

The second driver has been falling youth employment rates. The employment rate for 16-17 year
olds in the UK has been falling steadily since the late 1990s – and has halved over this period to
24 per cent.19 However, the employment rate for 18-24 year olds in the UK was stable until 2004,
and has since been in decline. The recession exacerbated this trend (falling from 65 per cent in
the final quarter of 2007 to 58 per cent in the last quarter of 2009).2

What\’s important in a report is often not what they do discuss but what they don\’t. We\’ve had something of a major change in the labour market for young people since the late 1990s. The National Minimum Wage. Now, if you or I were to try and unravel why there has been a rise in youth unemployment at a time of rising legally mandated minimum wages for young people we would at least raise the point. Perhaps we\’ve the evidence to reject it as the cause of anything, perhaps we\’ve not.

But we would at least mention it, wouldn\’t we? Theory predicts that the NMW will have an impact upon employment. Maybe not much of one, but it will be there. Theory also predicts that said impact will be greatest upon the young and untrained: a theory which even those who propose and support the NMW acknowledge when they agree that there should be a lower NMW for the young and untrained.

We have a disproportionate rise in unemployment for the young and untrained: worth at least testing theory against reality to see whether theory might have something to do with reality, yes? Even if to reject it?

But no, the Work Foundation does not even mention the NMW.

No, really, not even a sniff of it in the whole report.

So it\’s bollocks, innit?

14 comments on “The cost of Neets…and total bollocks in a Work Foundation report

  1. “But note, this s a lifetime cost. Perhaps £2.000 a year.”
    The NMW have misled you. Most sane people would use, “lifetime” when speaking of humanity to mean life span. The NMW, being a bureaucratic orgaisation, use “Lifetime” to mean the 2/3 years young people are eligible to be NEETS. After that period, as far as the MNW are concerned, these young people no longer exist. Therefore the unit cost is £26,000/£17,330p.a. which presumably includes the costs of running the NMW itself. Such a figure is far more consistent with letting the State run anything.

  2. The first lines of the report, “The high level of young people who are NEET – not in employment, education or training – is one of the most serious social problems facing the country”

    No it isn’t. My first reply would be, “they’re as thick as two short planks so they aren’t a loss to society”.

    The real problem is that these NEET’s have been allowed/fostered/paid/etc to get in this position.

  3. Besides the minimum wage, there has been wholesale, dare I say, institutional support of mass migration into the country driving down labour costs…Most of the low-paying jobs that would have been taken by the less academic portions of the populace are now taken by (often) over-qualified foreigners willing to take severe cuts in prestige to take the lower end of our payscales (or below).

    The two local Tesco Expresses are now staffed by a preponderance of apparently educated adult Russians and Chinese.

    Not to mention the Poles and other Eastern Europeans in the trades driving down the general cost of services (and not necessarily raising the quality.) It seems the only qualification for a Pole to work as a plumber is to say that he was one in Poland…A Brit has to work for at least 4 years in an apprentice style role (after two years of college) before being able to call himself one.

    This may be good for the free movement of labour, etc., but much of the cheap labour is coming here to partake more of the benefit system than for actual work.

    I grant that the minimum wage may be contributing to the lack of legitimate jobs for young people, but it is not the only force at work here, and definitely not the main one. It is awfully hard to compete with over-qualified labour willing to work at NMW, or under-qualified but willing to work under the table for less than NMW. The average 16-18-year-old is not so well versed in economic theory.

    The two most recent governments have subsidised this state of affairs by a) turning a pretty much blind eye to employers paying below NMW b) turning a blind eye to or even encouraging illegal immigration and c) paying benefits to any and all comers who can game the system.

    The free influx of cheap labour has meant that local employers don’t have the same onus to be competitive in the market for labour as it would in countries that don’t have the same influences.

  4. Not to mention the further government subsidy of cheap foreign labour by the systematic dumbing down of the British educational system. (Which is probably a bigger deal than the National Minimum Wage.)

  5. The Work Foundation describes itself as a “leading independent authority on work…”. I’d like to make it clear that I’m also a “leading authority” (self appointed) on all matters connected with work.

  6. Grumpy…

    I think you’re mistaken. The source research for the figure states that it is a genuine lifetime cost. They go all the way through to additional pension costs. However, I confess that (skim reading to an extent) I failed to find how their various workings gave them their figure.

    What Tim seems to miss is that this £2k a year is the additional cost we can expect if someone is NEET at age 16-18.. because they are more likely to claim benefits, to get pregnant early, to have poor heath etc. I give no opinion at all over the quality and consistency of the assumptions/calculations…. But the point is not that a NEET costs £52k, it’s that a NEET costs £52k more than a non-NEET.

  7. With reference to James & ‘social costs’ & anecdotally:
    When I first fled the family nest & huddled in a bedsit in SW5 I hung with a bunch of aspiring musicians, actors, actresses, dancers, artists…The usual scum that drifted around the Kings Road & Portabello Road. University was something that happened to other people, housing benefits had never been heard of & if there was indeed a dole office over in Hammersmith no-one knew where it was. Our expansive lifestyle was financed by anything that didn’t interfere with our key interests & take more intelligence than possessed by the average whelk. Girls worked in shops, cafés, bars, blokes added the Walls food factory to the list if I remember rightly or in one case a milk round. They either cracked it or went on to do other things. It produced one mega star & one who died in a pool of vomit from a heroin overdose, but that’s the rock business. One of the girls I used to see on TV for years & Mike seems to be playing a bit part in every film ever made in the UK.
    Friend’s kid is a fair guitarist. He’s been waiting for the ‘big break’ for better part of a decade & is currently shacked up with his girlfriend who’s brooding their second sprog. Neither have had a job in their lives.
    It’s easy to condemn them but of what?
    Not everyone wants to have a 9-5 with pension plan. It’s not that they don’t want to work. Nobody wants them.
    The jobs they would have done aren’t open to them. The cafés & restaurants are all foreign run & employ their nephews & cousins. Shops the same or the vacancy’s for a ‘trainee sales manager’ for which read shop assistant on minimum with a suit. Regulation’s turned bar work into something that’s a full time job done by Irishmen & Aussies. Cleaners seem to mostly Africans.
    If they found jobs they’re straight in the benefit trap.

    Is it surprising that the creative arts have turned out such an unmitigated stream of shitheads for the past few decades? Few of them have ever had any connection with the world of work. How does a blues singer put feeling into “Woke up this morning…” when he’s only ever seen afternoons?

    Free movement of labour’s all very market orientated but a society needs shit jobs. Not a career. Sort of thing you can do to do something else.

  8. Bloke in spain:

    1) your trainee sales manager sounds like just the kind of shit job that you are asking about

    2) I haven’t heard of any regulation that mandates that the bar guys need to be Irish or Aussie

    3) I seem to find lots of restaurants and cafe’s in the UK with foreign staff from several different countries (which seems to make it difficult for them all to be related)

    4) having 2 kids without ever having had a job is just plain irresponsible

    5) the minimum wage is not contributing to the creation of shit jobs

  9. 1)Shit job but still one the incumbent is suposed to regard as a career.
    2)There isn’t but regulations means it’s yet another casual work job that’s disappeared.
    3)True, but many more that don’t. Try getting a job at the curry house.
    4)Yes, but now they get housing benefit.
    5)The opposite.

    The point I’m trying to make in conjunction with what James posted is that our society & I do emphasise our society needs a level (in the stratum sense) of employment that our kids can float around in without being reduced to the level of a third world migrant. It may make wonderful economics to have open borders & the rest of but there’s a price paid. The only alternatives for youngsters I hear of are university or the the ever returning apprenticeships whatever. Everything’s structured. You need an environment where youngsters can just f**k about a bit try things out. As long as they’re keeping themselves & not living off the state. It’s not healthy for them & it’s not what they want to do. The sort of kids who start like that are often the real innovators who’ll later on contribute a great deal but it’s kicking around for a few years, trying things out, that provides the experience that pays dividends later. The formal education system doesn’t provide that. If you’ve waited table maybe you’re a more understanding customer & see the advantage of designing ridges on the bottom of dinner plates.

  10. What about a higher minimum wage for immigrants? Apparently they contribute in wonderful ways to the economy, so it shouldn’t be a problem.

    If we’re going down this route, we’d need a stick as well as a carrot, so we’d also have pointless work gangs for British benefit claimants. Since we’re paying them anyway, it wouldn’t make things any worse if we paid them to dig holes and fill them in again, and it would introduce them to the pointlessness of work.

    Only pointless work though, otherwise they might interfere with the market.

  11. “Which is it, James? Are they taking our benefits or taking our jobs?”

    It is actually both. Many people come work here and get child benefit and family tax credit for children living back in their home country if they fall under the income threshold (I don’t believe other EU countries are as generous for families that don’t actually live locally.) I also personally know two Indian ICTs who brought their pregnant wives over to ensure the children were born on the NHS (and who can blame them?)

    On top of that, they can come work here for 51 weeks, go back home temporarily, and get a refund on the NI they paid on the previous 51 weeks and come back to the same job. Certainly not a level playing field with people who have lived here all their lives, is it? Granting migrants the ability to avoid tax (as much as I would rather there were none at all) is a benefit in itself.

    Not to mention ICTs, which are another scam altogether where employers get to avoid the employment tax (Employers’ NI) and replace their lower end of skilled workers…and it is a replacement, not filling a gap: I have personally been involved in programmes where Brits were quite literally training up their ICT replacements in a company that would give you the chop if you were on the bench. Our government is subsidising this in both enforcing Employers NI on those companies that hire British tax payers and making ICTs even easier to grant – yes, they have raised the minimum salary thresholds but not without adding gigantic loopholes.

    I can’t think of any other governments in the world that bend over so far backwards to give competitive advantage to migrants over the local population, whilst making the local population pay for it.

    The Germans certainly don’t, and they have even more restrictive employment rules than we have whilst still retaining a (relatively) robust mittelstand. And try getting an entry level job in Germany (not even customer-facing) without speaking fluent German – I would wager it would be next to impossible. In this country I have been served in person by Poles (and others) – and over the phone by Indians and Filipinos – who could not string together a syntactically correct sentence in English.

    And our political masters are wilfully oblivious to this.

    Are British businesses so poorly run that they need to hire dirt-cheap labour to improve the bottom line rather than, say, develop better products?

    I’d like to think not…

    I worked a few minimum wage jobs when I was a teenager in the US. I even once worked on a construction crew with a bunch of illegal Mexicans. Almost invariably, most employees who were worth their salt were given pay rises well above the minimum wage within six to twelve months, as those employers had to compete for good workers. Our government (in the guise of both Labour and Con/Lib) has eliminated the need for competition for good workers at the lower end by subsidising alternative solutions for employers (and foreign workers.)

    I am a dyed-in-the-wool free trader, but the benefits of free trade need to accrue to workers (but not just as consumers of cheap Chinese tat) as well as employers within an economy, or else what we have is indirect rent-taking by the employers, not free trade.

    I would eliminate the NMW, but I would also eliminate NI, eliminate ICTs or add a tax on them equal to the employers NI saved, introduce NHS fees for non-Brits, and eliminate open borders with countries that don’t reciprocate (statutorily, culturally or economically – which pretty much leaves only Anglophone countries, because other countries are much less tolerant of cultural differences.)

  12. “In this country I have been served in person by Poles (and others) – and over the phone by Indians and Filipinos – who could not string together a syntactically correct sentence in English. ”
    Oh, can top that with ease. An phone enquiry to a London council to request details of a premises for business start-ups scheme, advertised in the local paper, was answered by a female, Nigerian or other W.African by the accent, whose command of English extended little further than “Hello”. Seriously. The only information I was able to elicit was that I was through to the correct office & she was working in it. (I at first suspected she was a cleaner, but apparently not.) Apart from that, the conversation foundered on the lack of a common language. I even tried French.

    I suspect what James is talking about has been with us from the post war period. Legacy of Empire maybe. By the start of the 50’s UK was experiencing a labour shortage. Industry was recovering & there was demand for consumer goods. The NHS & the growth of the Welfare State, the railways. Big demand for workers. What the UK could have done was let the various requirers compete. Wages rise. Much more incentive to modernise, automate, become more productive. Didn’t suit the Tories who still hankered back to the days of domestic servants. Didn’t suit the Labour & the unions who didn’t give a toss about the prosperity of the workers. They were more interested in power & a large but dissatisfied workforce was an asset. Hence the Widrush & later the influx from the sub-continent. Cheap workers to fill the gaps instead of new machinery, practices & ideas. Come the sixties & British industry’s a mess of restrictive practices operating in factories full of clapped out plant. When they do replace it the unions won’t let them benefit by reducing labour costs. Company I worked for briefly in the 70’s were trying to manufacture colour film on a machine made gun camera film for Spitfires. Bulk acetate moving through it at snail’s pace with a crew of 15. Modern plant’d coat a kilometre in 10 minutes with 5 but when it was introduced unions insisted on maintaining the crews & astronomical productivity deals. Site’s a housing estate now.
    And we’re still there aren’t we? I know the construction industry fairly well. Two ways of doing anything. Use a lot of blokes or buy fancy gear. Bloody hard to justify risking spending money on an electric hoist when you can have Russian labourers humping cement up 6 flights for £30 a day & the opportunity to doss down on site overnight. Yes, that happens I’ve seen it.

  13. “In this country I have been served in person by Poles who could not string together a syntactically correct sentence in English”

    Sadly our education system is so piss-poor that their English could still be better than a large minority of English children who have gone through 11 years of compulsory tax-funded schooling.

    But it’s not surprising; judging by the printed notes that my son brings home from school, the headmaster and several of the teachers (all English) are incapable of writing “syntactically correct English”.

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