There is a jobs deficit to rival the fiscal challenge we face, and this is before the layoffs that will follow the spending review. Iain Duncan Smith says that money is the one factor that governs people’s decisions to work. Few would disagree that a system which acts as a disincentive to people taking up work is urgently in need of reform. But as many recent school leavers, graduates and over-50s will tell you, the biggest barrier they face in finding work is not the benefits system, it is finding that their skills and experience are unwanted.
There are now five people chasing every vacancy in the UK and our estimates based on Office for Budget Responsibility projections suggest this will shift only slightly to 4.6 people for every vacancy by the end of 2011. Long-term unemployment has doubled in the last two years to 797,000 while the number of job vacancies on Jobcentre Plus books has fallen to 467,000. These are not the only vacancies in the job market but they are the ones most likely to be secured by those with fewer skills or less experience – those most at risk of being left behind in the wake of the recession.
The challenge for the left is to bring greater ingenuity and coherence to how we tackle the jobs gap. While in power, Labour invested in heavily in New Deal programmes which turned out to be most effective for those closest to the labour market. A first step should be to correct the UK’s over-reliance on welfare-to-work support that assumes individuals can find work if they try hard enough. This is just not always true during a jobless recovery and in some parts of the UK it hasn’t been true for years. For those in areas with depressed job markets a more diverse range of approaches is needed, including a stronger local emphasis on job creation.
The key priority should be to challenge the coalition government on its approach to job creation. It’s one thing to abolish the Future Jobs Fund, another not to construct any kind of alternative. A new report published by ippr this week identifies a number of ways to boost the jobs market without having to resort to expensive job subsidies.
Small businesses will be central to sustaining the recovery, creating jobs in new and expanding sectors. Yet many say they can’t find workers with the right skills and don’t have the capacity to recruit. As well as helping people find work, welfare-to-work providers could help stimulate growth by supporting businesses to expand or invest in workforce training, in turn creating jobs and boosting productivity.
Another local approach, used in Finland and Denmark during the recessions of the 1990s, would be to set up ‘job rotation’ schemes. This is where unemployed workers cover periods of staff training or absence, providing those out of work with new skills and preventing a drop in productivity for employers. In Denmark, three out of every four unemployed people found permanent work in this way in the 1990s and it helped businesses in these countries weather the downturn. Redirecting some existing skills funding and greater employer cofinancing could pay for this.
Finally, for both of the priorities outlined above, a more localised approach to tackling worklessness is needed. A glaring anomaly in the coalition government’s ‘devolution drive’ is that welfare-to-work is over-centralised. The evidence suggests greater localisation would help tackle the entrenched concentrations of worklessness in some parts of the country. Reluctant in government to transfer power to local areas to tackle unemployment, the Labour party now needs to think more creatively about how it combines rhetoric on localism with real change on the ground: committing to devolving one of the most centralised welfare-to-work systems in the world would be one way to start.
Now It’s Personal? The New Landscape of Welfare to Work is available now