By Peter Burgess, Managing Director of Retail Human Resources,
Abolishing National Insurance contributions from the minimum wage could boost youth employment figures
The young workforce faces unemployment, low wages and a high cost of living in a volatile economy. It’s a tough time to be battling it out on the employment frontier. Now is the time to address these issues by introducing changes to legislation that will not only benefit the youth, but also make them more attractive to potential employers. In 2013 chancellor George Osborne abolished job tax for young people under the age of 21 in a bid to repair the youth unemployment bulge. This is set to make a significant impact on the cost to the business and the net wage of the young employee; however, to boost employment figures and support the growing youth economy there is more that can be done to turn this situation around.
Unemployment is a dangerous beast and is a root cause of many problems within society, and youth unemployment is the most dangerous of all. Steps must be taken to encourage employers to take on more young people so that they are given an opportunity to gain vital experience in their chosen trade and kick start their careers. The 1980s employment crash was primarily caused by the fact that many young people were unable to get jobs and many of these remain unemployed to this day, along with their children. To resolve this issue and prevent history from playing a re-run, shifts in policy are vital.
Removing National Insurance (NI) for staff under the age of 25 is one move that would certainly encourage both the youth and the potential employer. A young work force that comes without NI employer contributions is a far more appealing prospect to both parties. For the employer this reduction in cost will have a marked impact on their already tight bottom line and allow for them to take on staff that they may not have had the capacity for in the past. This is especially relevant to the growing small and medium business market that is making significant strides in boosting the UK economy, but also battling tight budgets and a fluctuating market.
Not only will removing the onus of NI contributions from the employer of those under 25 play a role in this shift, an additional layer of legislative change can be added to the pile. Taking away NI from anyone on the minimum wage as well as employers’ NI contributions would also drive job creation and encourage more people to seek out full time employment. In industries such as hospitality and retail, which employ around 20 per cent of the UK workforce, this bold move could create work opportunities as wage costs would be reduced and the barrier to entry dropped considerably. In these industries many of the positions are at the lower end of the scale so the impact of these changes would be keenly felt and the knock-on effect for the economy would be overwhelmingly positive.
Creating a pool of talent that can be tapped into without heavy cost to the company is a neat solution to a pressing problem, and it need not be an expensive one. There are a number of “Back to Work” advisory programmes running throughout the United Kingdom that cost billions of Pounds in time, investment and management but that have done little to dent the queues around the unemployment blocks. Scrapping these programmes and introducing changes to NI cost would see these queues dropping and employment rising.
Now is the time to make the bold decisions. As the 2015 General Election approaches and the issues around the cost of living raise their heads in protest this is the right opportunity to shift old legislation and introduce changes that can turn the youth employment bulge around.