Ketan Makwana's Blog

What does wage subsidies and credit easing really mean?

Ketan Makwana - Director: Enterprise Lab

In a bid to stimulate the economy and also encourage more employment of younger people the government recently set out new initiatives which they believe are set to be ‘game changers’... but what does this really mean? How will these so-called new initiatives impact the British economy, businesses and of course young people?

Nick Clegg announced last week outlined the Youth Contract... this is the government’s new initiative for stimulating businesses/employers to take on more 18-24 yr olds under this contract the outline suggests work experience and training for more than 400,000 young people at a cost of £1bn.

The new programme commences April 2012 and aims to get more young people into a range of employment sectors such as retail, construction and green economies; the government’s aim is to support half the annual minimum wage paid to young people.

This is not a new initiative, nor is it innovation. In 1983 the government introduced YTS – Youth Training Schemes which were and I personally feel was a huge success. In 2009 the Labour Party under Gordon Brown introduced a very similar programme called the Future Jobs Fund – their mission fuelling wage subsidies for 6 months and then progressing young people into full time jobs.

Whilst I applaud the government for digging in deep and trying to support unemployment I personally feel this is the wrong shot in the arm to help the country. By subsidising wages you are merely filling a temporary void. Like the proverbial holy bucket money is pumped from the top but is just lost through leakage, loophole and ill-monitoring.

Whilst supporting employers to take on more young people is a noble cause, employers are still left with the headache of a gap in skills; basic skills such as articulation, grammar and social skills top the list. To add to this how will this programme be monitored as employers could hire, collect and fire.. continually repeat the process and stand to earn out of the programme.

Subsidising the wage is also not going to really motivate young people to engage in employment either, the preconceptions of what a job should look like and the big society push on careers before employment has meant a lot of young people are disillusioned and believe that basic job paying minimum wages are unacceptable. In 2009 the take up by employers and young people was poor and without a crystal ball I can tell you now it will not be any better.

The solution is not just to subsidise the wage but encourage facilitated training and mediation through programmes which engage young people and tailor them into becoming ‘work’ ready for employers.

Funding should support young people with an incentive to take on these programmes and then move into roles which are not temporary or apprenticeships but actually real, defined and opportunistic.

This is something that Enterprise Lab looks to deliver to young people to help them re-engage, become for aligned to employer expectations and have a better chance at sustaining employment rather than be put back on the scrap heap in 6 months time when the funding is taken away.

By offering young people a pathway to a more robust employment opportunity and offering employers carefully designed programmes to support them in making young people more employable the government would be ‘investing’ in futures rather than funding them. This is something Enterprise Lab will be campaigning for and demonstrating in 2012.

Soon after Mr Clegg shared details on the £1bn injection into youth unemployment, Mr Osbourne graces us with the Credit Easing Programme.

Before I sink my teeth into this I have to say the programme is very clever; the aim is to make business loans more accessible to Small to Medium Enterprises.  Banks will be given a vote of confidence by the government...  How have they achieved this?

Well its simple.. they are taking loans at 2% and selling to private sector businesses for 5%.

Although the programme looks attractive and will provide some relief to businesses that are desperate for funding.. this is not the only solution that can be put into place to resolve the issue; furthermore the programme does not also support start-up businesses which is really where most people will be.

With unemployment rife... people have turned to self-employment and business start-up to fuel economic stability but more importantly to sustain a living... how does this programme help these people?

In my opinion the projected £10bn-£20bn (I have to give approx, as every report I read changes the amount) is designed to ensure businesses do not collapse, surely we should have a Start-Up Support Programme?

I may be called narrow-minded here but surely investing in more start-ups will help generate more trade.. this in turn will create a stable economy and jobs will be more readily available.

As I conclude this rant rather than a blog I want to say that I am really pleased to see that there is action being taken by the government to protect Britain from falling or lapsing back into recession; the action that is being taken cannot and will not really help the majority as it is short sited and does not serve the root problem.

If you want to improve youth unemployment, commission better programming, encourage education to facilitate entrepreneurship and ‘invest’ in new enterprise... otherwise it’s just like robbing Peter to pay Peter.

Ketan Makwana is the co-founder of Enterprise Lab  a progressive agency that provides bespoke and complimentary programmes to encourage social, enterprise and employability skills in young people either in or out of education.

Ketan is passionate about development of young people and enterprise and is the brainchild to Youth Enterprise Live a landmark 2 day event for young people coming in Oct 2012 supporting Enterprise, Education and Employability.