The latest economic nostrum to waft across the North Sea is the Dutch ‘no dead ends’ approach to youth unemployment. Proponents argue that Britain, with its stubbornly high NEET (Not in Education, Employment, or Training) figures, should swallow this prescription whole. But as always, the devil is in the fiscal detail.
The Dutch model essentially guarantees every young person a job, training, or education place. It sounds noble, even utopian. Yet the City tends to eye such guarantees with the same suspicion it reserves for government bond issuances from heavily indebted states. The question is not whether the policy reduces youth unemployment on paper, but at what cost to the state’s balance sheet and, ultimately, the taxpayer.
Consider the mechanics. To implement a ‘no dead ends’ policy, the government must create or subsidise positions for the hard-to-employ. This inevitably expands the public sector wage bill, increases regulatory burdens on private firms, and distorts labour markets. In the long run, such intervention can crowd out private investment and reduce economic dynamism. The Dutch have managed it with a relatively flexible labour market and robust social partnership. Britain, however, has a more adversarial employment culture and a ballooning fiscal deficit. Gilt yields are already reflecting investor nervousness about our fiscal trajectory. Adding further structural spending commitments could spook the markets into demanding a higher risk premium on UK debt.
Moreover, the policy risks creating a two-tier system: those in ‘real’ private sector jobs and those in government-sponsored roles. The latter may lack the productivity gains needed to drive economic growth. Capital flight, a perennial worry for emerging markets, is less of a concern for Britain. But we have seen portfolio outflows when policy credibility wanes. A perceived lurch toward continental-style intervention could accelerate that trend.
Yet the proponents have a point. Youth unemployment carries its own fiscal and social costs: lost tax revenues, higher welfare bills, and long-term scarring effects on earnings. The Netherlands’ youth unemployment rate sits at around 8 per cent, against Britain’s 11 per cent. The difference may not sound vast, but it represents tens of thousands of young lives. Market efficiency must be tempered with a dose of pragmatism. Perhaps what Britain needs is not a wholesale adoption of the Dutch model, but a targeted version: tax breaks for firms that hire young apprentices, coupled with strict conditionality for benefit claimants.
But let’s be clear. Any ‘guarantee’ that expands the state’s footprint must be accompanied by ironclad fiscal discipline elsewhere. We cannot afford to borrow our way to full employment. The Bank of England’s monetary policy stance is already accommodative enough. Further fiscal stimulus would merely fan inflationary pressures, forcing the Bank to raise rates and choke off the fragile recovery.
In conclusion, the ‘no dead ends’ model is a seductive idea. But the British economy is not a polder. We have our own institutional realities. The City will be watching closely. If the Treasury takes the Dutch route, it must do so with eyes wide open to the market consequences. Otherwise, we risk trading a short-term drop in youth joblessness for a long-term rise in sovereign borrowing costs. That is a trade-off no Finance Editor would recommend.
