The altitude of growth and unemployment, according to received economic wisdom, are inversely related. When one falls, the other rises. So recent drops in the number of people looking for work, while the UK officially remains in recession, have left analysts scratching their heads. When the Jobseeker’s Allowance (JSA) claimant count rose by well over 100,000 a month in early 2009, the prospect of a return to over three million unemployed was very real.
The latest figures show both ILO unemployment and the JSA count declining, with the former still currently under 2.5 million and the latter just over 1.6 million. Given the scale of the GDP contraction, this is a massive testament to the individuals, unions and employers – supported by the Labour government – who have sought work and avoided job losses despite highly inhospitable conditions.
There is still considerable uncertainty about economic recovery and future job prospects. Nonetheless, if unemployment continues to fall, Labour will be able to make a strong case that its response to this recession has been strikingly different, and decisively better, than that of previous Tory governments. Youth unemployment continued to rise for four years after the 1980s recession ended. Last quarter, youth unemployment fell. Following the early 1990s recession, the number of people on disability and lone parent benefits rose by a million. So far this time they have barely risen at all.
Rather than unemployment being a price worth paying, Labour has shown that attacking it is a price well worth paying for – morally and economically. According to the 2008 Work Foundation report Hard Labour: Jobs, Unemployment and the Recession, unemployment damages people’s health, diminishes their income and drains their sense of purpose and self-esteem. It is a disadvantage that invariably corrodes many other aspects of people’s lives. Extra spending to support people out of work is also proving to be one of the best deficit reduction policies around. Between the budget and the pre-budget report, the JSA claimant count rose by 400,000 less than had been predicted, saving £10bn in benefit spending over a 10-year period.
However, when the general election comes round, this argument will not be enough. There will still be far too many people without a job who need one, for whom claims about positive national trends will ring hollow. A return to full employment will be very much a work in progress. Labour also needs to convince the public that it has the courage and vision to continue reforming welfare and improving work – especially in light of the lessons of the recession.
It can do this by setting out a practical but radical approach driven by the goals of increasing people’s power, providing greater security and embedding reciprocity.
These themes draw on the reality that people are the central agents in bringing about change in their lives, combined with the recognition that freedom grows from social context and power is shaped by the structure of society. They also reflect the importance of relationships and engagement in meeting people’s personal needs and making for a life worth living. And they embody a sense that the welfare state does not offer people enough protection against risks in the modern economy – and is not demanding enough either. This should lead to three bold pledges in Labour’s manifesto.
First, Labour should guarantee the dignity and purpose of work to everyone at risk of long-term unemployment. Even during the recession, the vast majority of people find a job themselves, with the support of Jobcentre Plus and external providers. However, a minority face prolonged periods out of work, with all the damaging consequences that brings. The lesson from the recession is that when the market fails to provide sufficient employment for the needs of society, government must step in. So Labour should extend and embed the principle behind the Future Jobs Fund so that anyone reaching a year out of work is offered up to six months of paid, useful employment. To make both the right to work and the obligation to work real, people should not able to turn down the offer of employment and continue to receive benefits.
A job guarantee scheme needs to be carefully designed to avoid ‘lock in effects’ where people’s re-engagement with the open labour market is delayed. By reducing long-term unemployment – and effectively limiting the time someone can be on JSA – this policy would generate savings to help fund itself. However, extra resources are likely to be needed, at least in the short term. These could be found by redirecting resources from those parts of the skills budget which evidence suggests have least impact on people’s employment prospects (such as vocational NVQ2s). Giving people the chance to build their work habits and employability skills through a job would be a far better use of scarce public resources.
Labour’s second pledge should be to end in-work poverty, so that everyone who works hard has a decent standard of living and the respect they are due from society. While poverty and worklessness have fallen under Labour, at least until the recession, poverty among working people has risen. Over half of poor children have a working parent.
The more that can be done to address this injustice through boosting people’s wages the better. In 2006, over five million people earned less than £6.70 an hour (around £12,000 a year for a full-time worker). So the minimum wage should continue to rise as high as possible without costing jobs, and campaigns for a ‘living wage’ in particular locations should be supported by public sector procurement rules. The public sector could commit to being a ‘living wage’ employer – with a level that varies from area to area – alongside plans to hold down the wages of better-paid public employees.
Even with steps, there will still be a need for the state to boost the income of low-wage families. Labour has removed the most pernicious unemployment traps, but people moving into work still face ridiculously high marginal tax rates – where lost benefits cancel out a big proportion of increased earnings. Tinkering around the edges can’t solve this problem, as it’s intertwined within wider structural deficiencies in the benefits and tax credit systems. Labour should grasp the need for reform by establishing a Back to Work Commission to consider fundamental reform, aimed at improving the financial gain to work and making the system easier to understand and navigate.
Beyond this, the goal of a new ‘industrial activism’ must be to increase the number of good, well-paying jobs that give people the chance to build meaningful careers. A new agenda for work should also aim to improve job quality through properly enforcing labour regulations and increasing employee voice, supported by democratic workplace institutions, such as trade unions.
Finally, the third prong of Labour’s agenda should be to increase people’s power, in the context of a reciprocal welfare system. This means expecting the vast majority of people on benefits to be taking active steps towards work, but where support and challenge are tailored to individual’s needs, through personal action plans, especially for those with complex barriers to work.
This should be combined with giving people, alongside personal advisers, more control over the resources spent on their behalf. A Claimant’s Charter should set out what claimants can expect from the system and what is expected of them in return. This agenda requires a concerted strategy to raise the skills and professional development of personal advisers – to enable them to have greater autonomy at the frontline, backed up by clear accountability.
If unemployment is falling at the time of the general election Labour will be fairly able to claim that its actions have averted the terrible consequences of previous recessions. To win the argument about the future, it must set out a clear and compelling agenda for reforming welfare and improving work that chimes with enduring Labour values: power, security and reciprocity.
Graeme Cooke is head of the Open Left project at Demos. Liberation Welfare, edited by Paul Gregg and Graeme Cooke, will be published shortly by Demos.