New findings for the New Deal

A new Working Paper from the IFS re-evaluates the impact of the New Deal for young people on employment. It focuses on the job assistance and job subsidy element of the programme. The study places the policy in a historical context, showing the similarities between the job assistance element of the New Deal and the Restart compulsory job interviews introduced in 1986.

The research compares young people in the New Deal pilot areas (where the policy was introduced three months early) compared to non-pilot areas. It also looks at how well the younger unemployed fared compared to the older unemployed who where not eligible for the New Deal. Both of these control groups gave the same basic result:

• Young unemployed men are about 20% more likely to go into jobs between their sixth and tenth months of unemployment as a direct result of the New Deal. This figure was then used to estimate the costs and benefits of the New Deal
• The level of employment of young people is about 17,000 higher per year higher as a result of the New Deal.

The jobs created are much smaller than the total numbers of young people who have gone through the New Deal and into jobs (well over 250,000). This is mainly because the majority of those people would have attained employment even in the absence of the New Deal.

Nevertheless, the policy has successfully stimulated some more employment for young people and the social benefits probably outweigh the social costs. The New Deal has been a modest success.

Ends

Notes to editors

1. The New Deal was introduced in pilot form in January 1998 and nationally in April 1998. There are many component parts to the New Deal. After six months of unemployment a young person now enters the "Gateway period" where he or she is given extensive job search assistance. If a job is not secured during this period the unemployed person has to move on to an option. These options include a wage subsidy of £60 per week ("employer's option"), full-time education and training, public employment ("environmental task force") or work in the voluntary sector. It is mandatory program, effectively time limiting benefits.
2. No More Skivvy Schemes? Active Labour Market Policies and the British New Deal for the Young Unemployed in Context by John Van Reenen, Institute for Fiscal Studies Working Paper W01/09.