The announcement that Labour would introduce a job guarantee for over-25s unemployed for two years or more was greeted with quite some confusion in the media and blogosphere.
Many critical voices on the left interpreted this simply as Labour getting tough on benefit claimants. But the announcement follows the publication of the government’s report before Christmas vindicating the Future Jobs Fund. It surely makes sense to have waited for a full analysis of the FJF before committing to extend it. Since the new job guarantee is based on the FJF, it might help to fill in on some detail.
The idea of a job guarantee is not new, but had fallen out of favour in recent decades. Poorly designed job guarantee schemes can cause several problems. The ‘deadweight effect’ occurs where the unemployed person would have found a job in the regular labour market without the scheme. The ‘displacement effect’ refers to situations where employers hire people in subsidised jobs at a lower cost, at the expense of other employees who are laid off. The ‘lock-in effect’ occurs when those hired delay the search for an opening in the regular job market. Nevertheless it is worth persisting in trying to make a job guarantee work, as there is clear evidence that the best way to prepare people for the labour market is to actually give them a real job.
The FJF was designed in the light of the experience of past schemes around the world, and included specific features to avoid possible pitfalls. Those already out of work for six months were targeted in order to minimise the deadweight effect. Local entities could bid for funding to hire unemployed people, primarily young people. Most of the successful bids were from local government, though the non-profit and social enterprise sectors played an important role. Here was a case of central government getting involved when it needed to, but with implementation on a local level. It is hard to imagine the private sector playing a major role in this type of policy, especially because the whole point is to address the lack of demand for labour by private firms. Bids had to demonstrate that the jobs were really additional, and not merely offering subsidised work to one group of workers at the expense of others. The jobs created also had to be of value to local communities (including 10,000 ‘green jobs’), and participants had to have time off to continue their search for more permanent jobs. There’s an important debate to be had about what work should be included in a job guarantee programme. The scheme was designed in consultation with the trade union movement, and participants were eligible for union membership. This scheme involved real jobs, not workfare.
We could have wished for more. The scheme might have been offered to more people, and at a living wage. Indeed, I believe the living wage should be the minimum wage. But we do also need to understand that Ed Balls has to cost every new policy. I have no doubt that over time a job guarantee will be seen as the bargain that it really is, especially compared with the costs of unemployment, and with alternative stimulus mechanisms. These shortcomings can be addressed as the job guarantee is extended over time and better understood by the public. The policy need not be tied to benefit sanctions, though in the current political climate this is hard to imagine. The job guarantee should also not be criticised for not being what it was never intended to be – it is a transitional measure aimed at addressing cyclical unemployment and preventing it from turning into structural unemployment, not a substitute for a serious industrial policy.
Past policy initiatives were aimed purely at the supply side, namely, offering people help with their CVs, developing interview skills and so on. The job guarantee addresses the real problem at the heart of unemployment which is the lack of demand for labour in the private sector. This is something the coalition doesn’t seem to get, and something that deserves to be welcomed by all of us concerned about the human and social costs of unemployment.
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Tanweer Ali is a member of Progress. He tweets @Tanweer_Ali
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