Removing National Insurance Contributions (NICs) for workers under 25 would cost the UK Treasury £5.1 billion but create only 38,000 new jobs for young people, according to analysis released on 28 June 2026 by the Resolution Foundation. The think tank's verdict is blunt: a blanket tax exemption delivers poor value relative to its effect on employment, and more carefully targeted subsidies would produce more jobs per pound of public spending.

The finding arrives during a period of worsening youth employment outcomes. The NEET rate — the percentage of 16-to-24-year-olds not in education, employment, or training — has climbed since 2019, and the UK's rate runs higher than in most comparable countries, a structural gap explored in the Foundation's April 2026 report 'Lost in transition'. By October 2025, the Foundation's 'False starts' report recorded a 195,000-person increase in NEETs over two years. This is a longstanding problem, but recent economic weakness has made it sharper.

The economics are straightforward. When hiring slows, young people suffer disproportionately because they depend almost entirely on new jobs opening up. Workers already in post hold their positions; school-leavers and first-time job-seekers have no existing role to fall back on. The UK's NEET trend since 2019 reflects both this cyclical pattern and what 'Lost in transition' identifies as structural weaknesses in how Britain moves young people from education into work.

The Policy Trade-Off

The NIC exemption has appealed to policymakers as a straightforward policy tool — easy to implement, visible to employers, and easy to communicate. The Resolution Foundation's analysis undermines that appeal. At £5.1 billion annually, the scheme would generate 38,000 jobs, implying a cost per job of around £134,000. That figure compares poorly with more targeted approaches, such as wage subsidies or employer incentives that are tied to hiring specific groups or in specific sectors. The Foundation's message is clear, though it does not spell out which alternative schemes it would recommend or what results they might achieve.

The underlying reasoning reflects standard labour economics. A blanket age-based NIC cut hands money to employers who would have hired young workers regardless. The public money wasted on employers who needed no incentive — economists call this "deadweight cost" — is structurally high. By contrast, conditional subsidies that reward hiring someone from the NEET pool, or that target sectors with youth recruitment gaps, can sharpen employer incentives. But conditional schemes carry their own costs: checking whether an employer is genuinely adding new positions rather than relabelling existing ones, managing employer compliance, and the friction of workers leaving eligibility as they age.

Understanding the NEET Population

The 195,000 rise in NEETs over two years masks real diversity. NEETs include school-leavers unable to find work, young people with health conditions, those with caring responsibilities, and those who have simply disengaged from education and employment without clear cause. Each group responds to different interventions. A demand-side tool like an NIC cut appeals to employers who are cost-conscious about hiring young people at the margin. It does nothing for supply-side barriers — barriers on the young person's side — that keep a substantial share of NEETs out of the labour market regardless of employer incentives.

'Lost in transition' pinpoints why the UK underperforms comparable countries on youth-to-work transitions. That comparative angle carries policy weight. Countries that have maintained stronger youth employment figures have typically done so through a mix of vocational education, active labour market support, and closer links between employers and post-secondary education. None of this is addressed by a payroll tax exemption alone.

The policy conversation will intensify as the government's spending review and welfare reform plans progress. Youth employment sits at the nexus of both. NEET figures feed directly into benefit costs, health outcomes, and long-term earnings patterns that shape economic life over decades. The Resolution Foundation's June 28 analysis, beneath its technical language, makes an argument about priorities and efficiency: how a policy is designed matters as much as how much money goes into it.