Take a chance on me

How can employers be incentivised to employ NEETs?

Nye Cominetti
Nye Cominetti
Julia Diniz
Julia Diniz
Lindsay Judge
Lindsay Judge
Imogen Stone
Imogen Stone
Greg Thwaites
Greg Thwaites

This briefing note considers how public policy can best incentivise employers to hire more young people in the UK today. We estimate the gross cost to the Exchequer of each additional full-time job created by a range of policy reforms, allowing us to compare their impact and cost-effectiveness.

The UK hit an unenviable milestone in the first quarter of 2026. For the first time in thirteen years, the number of 16-24-year-olds in the UK not in education, employment or training (NEET) breached the 1 million mark. This is a sobering statistic, not least because it has long been established that even short periods of unemployment when young can have ‘scarring effects’ on employment, earnings and well-being throughout one’s working life. Given this, policy makers are thinking hard about how to encourage firms to ‘take a chance’ on more young people in the UK today.

Policy interventions that aim to boost firms’ appetite to employ young workers involve all kinds of important considerations, but the analysis in this briefing note shows that none is more important than deciding between reforms that affect all young people versus targeted schemes. Our conclusion is unequivocal: although cross-cohort policy reforms have the biggest effect in terms of extra jobs created, targeted schemes offer much better value for money when we consider the fiscal cost per additional job created.

Key findings

  • If there had been no convergence between the youth rate of the minimum wage and the adult rate since 2023, we estimate that there would by 15,000 additional jobs as a result. However, those young people firms have been prepared to employ at the prevailing rate would have lost out by £379 million collectively.
  • Raising the employer NI threshold back to its 2024 levels for under 25s would create just over 7,000 additional jobs year, but with a hefty overall price tag that works out at £132,000 each.
  • We estimate the Youth Jobs Grant could boost jobs by around 2,800 a year, at a cost of £37,000 each. But demand from young people for this scheme could easily outstrip supply.
  • The Jobs Guarantee scheme will create 17,500 additional jobs a year at a similar cost per job as the Youth Jobs Grant. But in contrast to that scheme, demand for young people looks likely to match supply

Recommendations

  • The Government should not only pause convergence of the 18-20-year-old youth minimum wage rate with the adult National Living Wage (NLW) rate but abandon its commitment to ultimate convergence.
  • The Youth Jobs Grant should be extended by quadrupling the numbers available to employers each year to 80,000. At the same time, the payment structure should be reformed to improve retention, with the last payment made at the end of six months rather than the current three.
  • The Jobs Guarantee scheme should be extended to those young people on UC Health and those that have been looking for work and in receipt of UC for 12 months plus rather than 18 months plus. The rules should also be changed so that all jobs that attract support under this programme are new jobs and not existing roles.
  • Finally, the Growth and Skills Levy funding should be ringfenced for under 25s only. The £1.55 billion of extra funding this would liberate should be used to extend the £2,000 payment that is already offered to SMEs that take on a young apprentice to larger firms, to boost the number of apprenticeships for younger people.

https://doi.org/10.63492/ugii1652

Nye Cominetti
Nye Cominetti Principal Economist
Julia Diniz
Julia Diniz Economist
Lindsay Judge
Lindsay Judge Research Director
Imogen Stone
Imogen Stone Economist
Greg Thwaites
Greg Thwaites Research Associate