Eliminating employer National Insurance Contributions for workers under 25 would cost the UK Treasury £5.1 billion and generate only 38,000 additional jobs for young people, according to analysis published on 28 June 2026 by the Resolution Foundation. The think tank's conclusion is pointed: a blanket NIC exemption would be fiscally wasteful relative to its labour market yield, and targeted subsidies would produce more jobs per pound spent.

That finding lands against a deteriorating backdrop for youth employment. The NEET rate — the share of 16-to-24-year-olds not in education, employment, or training — has risen since 2019, and the UK's rate has run higher than in many comparable economies, a structural divergence examined in the Foundation's April 2026 report 'Lost in transition'. By October 2025, the Foundation's 'False starts' report put the two-year increase in the NEET count at 195,000 young people. The numbers compound a problem that predates recent economic turbulence but has been sharpened by it.

The cyclical mechanism is well-established. As the Foundation's Labour Market Outlook Q4 2025 sets out, hiring slowdowns hit young people disproportionately hard because they are disproportionately dependent on new job creation. Established workers retain existing positions; young people seeking a first foothold have nowhere to go when the door stops opening. The UK's NEET trajectory since 2019 reflects both that cyclical sensitivity and what 'Lost in transition' identifies as structural features of the British transition from education to work.

The Policy Arithmetic

The NIC exemption proposal has circulated in policy debate as a low-friction lever — simple to administer, visible to employers, and easy to sell politically. The Resolution Foundation's costing punctures that appeal with precision. At £5.1 billion, the scheme's annual price tag would buy 38,000 jobs. That implies a cost-per-job-created in excess of £134,000 — a ratio that compares poorly with the unit economics of more targeted wage-subsidy or employer-incentive schemes. The Foundation's framing — "wasteful tax breaks" versus "targeted subsidies" — signals the direction it believes the policy design should travel, though the press release does not specify which alternative instruments it prefers or their modelled yield.

The underlying logic of the critique is standard labour economics. A blanket NIC cut for all workers under 25 transfers fiscal value to employers who would have hired young workers anyway. The deadweight cost is structurally high when the exemption is age-based rather than conditioned on additionality — hiring someone who would otherwise have remained NEET, or reaching employers in sectors with demonstrated barriers to youth recruitment. Conditional subsidy designs can sharpen incentives but introduce their own complexity: verification costs, employer compliance burden, and the risk of churn as workers age out of eligibility.

What the NEET Numbers Signal

The 195,000 increase in NEETs over two years is not a uniform phenomenon. The NEET category spans school-leavers unable to find work, young people with health conditions, those in caring roles, and those who have disengaged from both education and the labour market without a clear reason — a heterogeneous group that responds differently to different interventions. A blunt demand-side measure like an NIC cut addresses one subset of the problem: employers who are price-sensitive about hiring young workers at the margin. It does not touch the supply-side barriers that keep a significant share of NEETs out of the labour market regardless of employer incentives.

'Lost in transition' focuses specifically on the transition from education to work and on why the UK performs worse than peer economies on this measure. That comparative dimension matters for policy. Countries that have kept their youth employment ratios higher during the same period have generally done so through a combination of stronger vocational pathways, active labour market programmes, and more integrated employer engagement in post-secondary education — none of which is addressed by a payroll tax exemption alone.

The policy debate will sharpen as the government's spending review and welfare reform agenda proceed in parallel. Youth employment sits at the intersection of both: NEET numbers feed into benefit caseloads, health outcomes, and long-run earnings trajectories that compound over working lives. The Resolution Foundation's intervention on 28 June 2026 is, at its core, an argument about sequencing and efficiency — that the design of any fiscal commitment to youth employment matters as much as its scale.