There’s a wall keeping jobless teenagers and employers apart

The Times has put a number on what lots of us have long sensed. A 16-year-old on the under-18 minimum wage, working the legal term-time maximum of 12 hours a week, takes home about £94. A teenager signed off can receive £100 a week more.

You can argue about the causes, but not the incentive. Alan Milburn’s interim report spells it out: for a young person with a health condition, inactivity can mean more money, less hassle and less risk than work. It persists because the welfare system treats the individual and the employer as two separate worlds.

Those worlds barely touch: by design, an employer rarely knows whether a young recruit is on universal credit, and a jobcentre only becomes involved once a claim is made. The young person weighs tapers, conditionality and the fear of losing a health payment for a few hours’ work; the employer sees none of it. So the system nudges a teenager towards a claim while firms that might have offered a first job sit on the other side of a wall.

A wall the government keeps building

The youth guarantee, ministers’ flagship response, risks making that wall higher: it promises 18 to 21-year-olds a paid placement only after 18 months on universal credit – eighteen months before an employer even appears.

It has taxed hiring directly too: employer national insurance rose to 15 per cent and the threshold fell from £9,100 to £5,000, hitting low-paid jobs hardest. The Bank of England found 44 per cent of firms cut jobs over that rise, against 29 per cent citing the minimum wage. The cost of taking a chance on an inexperienced young person keeps climbing, and the Employment Rights Act has added to the chill.

It’s no surprise the welfare bill keeps growing. The government’s 2025 attempt at modest reform, sold as saving billions a year, was watered down by a Labour backbench rebellion. The Institute for Fiscal Studies says what became law delivers essentially no savings over the next four years, and costs money in its first two. Andy Burnham, who became prime minister a week ago, inherits not just a welfare bill out of control, but the backbenchers who forced that retreat.

Tinkering won’t turn the dial

Against this, the policy response has felt like tinkering: the levy rebranded as “growth and skills”, a few shorter apprenticeships (so-called “units”), Skills England stood up but weaker than its predecessor, new V Levels mooted without detail. None of it is turning the dial on a NEET count nearing one million and, on Milburn’s diagnosis, heading for 1.25 million within five years – a shocking one in six young people. His most damning finding: in 2024-25, for every £1 spent on employment support for young people, around £25 went on welfare.

Ministers do not lack advice. Sir Charlie Mayfield’s Keep Britain Working review said it last November: on health and work, employers should be “on the pitch”. Milburn’s final report, due this autumn, must say the same about the young, and be heard.

We need to think bigger, not another quango. We already have the Careers and Enterprise Company, the National Careers Service, UCAS and Jobcentre Plus – hundreds of millions of public money a year, with ample room to join up, simplify and expect more.

Instead, government should reverse the jobs tax with an employer national insurance cut targeted at entry-level jobs, and give employers a reason to invest beyond the levy – currently a ceiling, not a floor – with a training tax credit modelled on R&D relief.

At the same time, stop taxing the institutions doing most for NEETs: colleges, unlike schools and academies, cannot reclaim VAT, a quirk that costs them more than £200 million a year, despite teaching more disadvantaged 16 to 18-year-olds than anyone else.

None of it works unless the two worlds connect earlier. Colleges and training providers, trusted by both sides, are the obvious connector: fund them to stay alongside a young person and their employer through the first year of work, when dropout risk peaks.

Government needs employers onside and spending more on training. So far, everything it has done pushes the other way – but Andy Burnham has rightly made tackling the NEETs crisis his priority. Let’s hope his speech tomorrow resets the government’s approach to employers.