Tax cuts would cost £132,000 per job created versus £36,700 through targeted grants.
Tax cuts for employers would cost £5.1bn to create just 38,000 youth jobs—£132,000 per position—making them wasteful compared to targeted programs. Youth unemployment reached 1 million NEETs in 2024; apprenticeships generate £13-15 public benefit per £1 spent for under-25s versus £7 for older workers.
- Over 1 million young people aged 16-24 are not in employment, education, or training
- Scrapping employer NICs for under-25s would cost £5.1bn to create 38,000 jobs
- Apprenticeships generate £13-15 public benefit per £1 spent for under-25s versus £7 for older workers
- Youth jobs grant expansion from 20,000 to 80,000 places would create 11,200 additional jobs annually
- Ringfencing apprenticeship levy for under-25s would free up £1.55bn for 145,000 apprenticeships
Resolution Foundation study finds reversing employment tax increases would ineffectively address youth joblessness; recommends scaling apprenticeships and youth job grants instead.
Britain's youth jobs crisis has reached a grim milestone: more than a million young people aged 16 to 24 are now neither working nor in education or training. The number carries weight not just as a statistic but as a warning about what happens to a generation locked out of the labor market early. Yet as business groups and prominent politicians push for tax cuts to solve the problem, a major independent research organization is saying the answer lies elsewhere entirely.
The Resolution Foundation, a respected thinktank, has completed a detailed analysis of what actually works to get young people into jobs. Their conclusion is blunt: cutting employer taxes and lowering the minimum wage for under-21s—the solutions demanded by business lobbies and echoed by figures like former prime minister Tony Blair—would be expensive failures. The math is damning. Scrapping employer national insurance contributions for under-25s entirely would cost the government £5.1 billion while creating just 38,000 jobs. That works out to £132,000 per position. Reversing minimum wage increases for younger workers would be similarly wasteful, costing the government money while generating only 15,000 additional jobs and stripping £379 million annually from the 230,000 young people already earning the current rate.
The business case for tax relief rests on a simple logic: make hiring young people cheaper, and employers will hire more of them. But the Foundation's researchers found that most under-21s don't trigger employer national insurance contributions anyway, which means cutting the tax would largely subsidize hiring that would have happened regardless. The real problem, their analysis suggests, is not that young people are too expensive to hire—it's that employers lack targeted incentives to take a chance on workers with no track record.
Instead, the Foundation recommends scaling up programs that have proven far more cost-effective. The youth jobs grant, which offers companies £3,000 to hire an 18- to 24-year-old who has been claiming universal credit for at least six months, creates jobs at roughly £36,700 each. The scheme, which launched this week, currently offers 20,000 annual places. The Foundation argues it should expand to 80,000 places, which would create an additional 11,200 jobs per year. The government should also broaden the jobs guarantee to reach young people who have been looking for work on universal credit for a year or more.
But the most striking recommendation concerns apprenticeships. The Foundation found that apprenticeships generate between £13 and £15 of public benefit for every pound spent on workers aged 19 to 24—compared with just £7 for workers over 24. This is not marginal difference; it is transformative return on investment. Yet the apprenticeship levy, a tax on large employers meant to fund training, is currently spread across all age groups. If the government ringfenced the levy exclusively for workers under 25, it would free up £1.55 billion—enough to fund 145,000 young apprenticeships and provide participating firms with a £2,000 incentive per trainee.
Lindsay Judge, the Foundation's research director, called the rise of youth joblessness to over a million "a sobering milestone." She argued that reaching for employer tax cuts to solve it "doesn't add up." The government, she said, should instead scale up the programs that actually work: more youth jobs grants, a broader jobs guarantee, and an apprenticeship levy reformed to prioritize young people. The Foundation's report, titled "Take a chance on me," is expected to shape the recommendations of Alan Milburn, the former health secretary, who is preparing a government-commissioned follow-up report on youth employment for the autumn. The question now is whether ministers will listen to the data or to the business lobby.
Citas Notables
Reaching for employer tax cuts to resolve this doesn't add up. Instead, the government should scale up their most cost-effective programmes: more youth jobs grants, a broader jobs guarantee, and reforming the growth and skills levy.— Lindsay Judge, Resolution Foundation research director
The vast majority of under-21s attract no employer NICs anyway. Scrapping employer NICs for under-25s entirely would be very expensive—costing £5.1bn and creating just 38,000 additional jobs for young people—at a wasteful ratio of £132,000 per job.— Resolution Foundation report
La Conversación del Hearth Otra perspectiva de la historia
Why would tax cuts fail so badly when the logic seems straightforward—cheaper labor means more hiring?
Because the logic assumes employers are rationally calculating the cost of hiring young people. But most under-21s don't trigger the tax anyway, so cutting it doesn't change the actual cost equation. The real barrier isn't price; it's risk and uncertainty. Employers don't know if a young person will work out.
So what does the apprenticeship route offer that a tax cut doesn't?
A direct incentive tied to training and skill-building. When you give an employer £3,000 to hire someone from universal credit, or £2,000 to take on an apprentice, you're not just making labor cheaper—you're saying "we'll share the risk of developing this person." The data shows it works.
The numbers are striking—£132,000 per job created through tax cuts versus £36,700 through the jobs grant. How did it get so expensive?
Because you're subsidizing hiring that would happen anyway. Most of the tax cut goes to employers who were already planning to hire. The jobs grant is narrower—it targets people who've been out of work for months, people employers might otherwise skip. You're paying for the marginal hire, not the whole payroll.
What about the living standards angle—the 230,000 young people already earning the minimum wage who'd lose out?
That's the hidden cost nobody talks about. If you reverse the minimum wage increase, those young people earning the current rate don't get a raise. They lose £379 million collectively. You've "created" 15,000 jobs by making 230,000 people poorer. The math doesn't work for anyone except the employer.
Why is apprenticeship return on investment so much higher for under-25s than older workers?
Because young people are still forming their skills and habits. An apprenticeship at 20 shapes your entire career trajectory. At 30, you're already set in your ways. The public benefit—higher earnings, lower welfare dependency, better health outcomes—compounds over decades when you start young.
If the apprenticeship levy were ringfenced for under-25s, where would the money actually go?
Into 145,000 apprenticeships that don't exist now. Real training slots, real wages, real skill development. And employers get £2,000 per apprentice to offset the cost of training. It's not a handout; it's an investment in people who'll earn more and pay more tax over their lifetimes.