Select Committee on Education and Employment Appendices to the Minutes of Evidence


APPENDIX 19

Memorandum from the Trades Union Congress (TUC)

The New Deal—and Inquiry by the House of Commons Employment Sub-Committee

1.  INTRODUCTION

  1.1  In July 2000 the House of Commons Employment Sub-committee announced that it would carry out a short inquiry evaluating the New Deal. This document presents the TUC's submission to that inquiry.

  1.2  The first section of the submission looks at different perspectives on measuring the performance of the New Deal and concludes that, overall, the programme has so far performed well in comparison with previous active labour market initiatives in the UK.

  1.3  However, one area of concern continues to be the performance of the New Deal options, especially as regards job outcome levels. The next section of the submission looks at this issue in more detail and makes some recommendations on potential measures to enhance the effectiveness of the options in this key respect.

  1.4  In the third section we examine equal opportunity issues and in particular the fact that ethnic minority participants are still less likely to achieve job outcomes. However, the TUC has been glad to note the seriousness with which the Government has responded to this particular issue and that they have also launched a series of measures specially designed to address it.

  1.5  Finally, the submission looks as the quality of evaluation and monitoring of the New Deal. In general, the TUC believes that evaluation and monitoring information has been of high quality and also widely disseminated, and that this has facilitated the policy of "continuous improvement" (we do, however, have a number of recommendations in relation to the core performance data).

2.  MEASURING NEW DEAL PERFORMANCE

How should the New Deal be evaluated?

  2.1  Public programmes for unemployed people have to be designed with an eye to deadweight, displacement and substitution:

    —  Would participants who get jobs have been recruited by employers in any case?

    —  Or would other unemployed people, who aren't in the programme, have been recruited instead? (In either of these cases there is no net impact on the level of unemployment.)

    —  Have employers sacked existing workers to recruit participants? (In which case the programme is harmful. Programmes which offer employers incentives to recruit participants must pay particular attention to this risk.)

  2.2  Labour market programmes are therefore designed to minimise deadweight and maximise additionality—the proportion of jobs which would not have been created if it were not for the existence of the programme. Levels of deadweight, displacement and substitution are typically very high in programmes like the New Deal:

    —  Two previous UK programmes designed to help workers at risk of redundancy (the Temporary Employment Subsidy, introduced in 1975, and the Temporary Short Time Working Compensation introduced in 1979) had high levels of deadweight. In the Temporary Employment Subsidy this reached 61 per cent.[30]

    —  In 1995 an assessment by National Economic Research Associates of subsidy schemes in OECD countries found deadweight levels of more than 50 per cent were the norm.

    —  In 1997, the OECD argued that subsidies "have large deadweight, displacement and substituiton effects."[31] Studies in Australia, Belgium, Ireland and the Netherlands revealed deadweight levels of up to 90 per cent.[32]

  2.3  The Employment Sub-Committee's Eight Report, New Deal for Young People: Two Years On, published on July 2000, suggested that New Deal deadweight "could be as high as 60 per cent." (Paragraph 4) A recent report for the Employment Service [33] came to a very similar conclusion, estimating deadweight at 61 per cent, with 26 per cent full additionality. The figures above indicate that this figure might not be so bad when compared with similar programmes, and 26 per cent additionality, when applied to a programme as big as the New Deal, suggests that a substantial nmber of jobs have come about which would not have been created if it were not for the existence of the programme.

Is deadweight the most important issue?

  2.4  This is an issue that commentators are well aware of, and it is likely that many submissions to this inquiry will pay it a great deal of attention. In our view, however, this approach misses the point of the New Deal. The New Deal programmes were designed deliberately to take advantage of substitution. Some groups of unemployed people find it harder than others to gain jobs—disabled people, lone parents, long-term unemployed people, older people. The New Deal programmes are designed to help unemployed people from these groups in two ways:

    —  The substitution effect should mean that programmes aimed at unemployed people from these groups will help to reduce their comparative disadvantage vis-á-vis other unemployed people. Professor Richard Layard, who played a large part in inspiring the design of the New Deals, argued that the displaced people, who would otherwise have obtained the jobs now being subsidised "are clearly attractive to employers. If they are not hired here they will soon be used by other employers to fill their vacancies".

    —  To the extent that participants' comparative disadvantage is the result of unreasonable decisions by employers, the experience of working with them should help encourage those employers to revise this behaviour. Professor Layard has noted that Workstart, a previous subsidy programme, produced pleasant surprises for employers, who were very happy with the quality of their recruits, 64 per cent said they were adequately skilled, and 83 per cent planned to keep them on after the subsidy ran out.[34]

  2.5  The New Deals, therefore, could fail to create a single extra job and still be successful. If they have reduced the comparative disadvantage faced by their target groups they have succeeded. This judgement is unaffected by rising or falling unemployment generally—the question is whether unemployment in the target group is rising or falling faster or slower than the general trend. Comparing what has been happening to the numbers of unemployed people eligible for the two main New Deal programmes with the numbers not eligible can help us to make this judgement.


DECLINE IN NUMBERS OF UNEMPLOYED PEOPLE ELIGIBLE AND NOT ELIGIBLE FOR NEW DEAL, APRIL 1998 TO OCTOBER 2000

thousands
Group
Apr 1998
Oct 1998
Apr 1999
Oct 1999
Apr 2000
Oct 2000
Decline Apr 1998
to Oct 2000
Eligible
25+unemployed

24 mths+
195
174
156
136
126
110
44%
18-24 unemployed

6 mths+
120
88
71
49
53
37
69%
Not eligible
25+unemployed
126
141
156
139
123
107
15‰
12-24 mths
  
  
 
 
 
 
 
25+unemployed

<12 mths
707
644
689
592
606
532
25%
18-24 unemployed

<6 mths
226
227
230
223
210
205
9%


OTHER WAYS OF ASSESSING THE NEW DEAL

  2.6  Another way of judging the New Deal programmes is to ask whether they have achieved what the Government said they would do. This is a test they have clearly passed. The Government's famous election pledge card promised to "get 250,000 under-25 year-olds off benefit and into work by using money from a windfall levy on the privatised utilities." No other success criteria were indicated, though the Labour Party manifesto briefly described the New Deal for older long-term unemployed people.

  2.7  It has been clear for some time that the manifesto target for the New Deal for young people would be achieved before the next election, and evidence that it has been hit will probably become available very shortly:

    —  Altogether, 244,450 young people had moved into jobs through the New Deal for young people by the end of August.

    —  Since July 1998, the average number per month has been 8,873.

    —  So it is very likely that the manifesto target will be hit in September.

  2.8  In the past, UK active labour market programmes have only measured success by this criterion—how many unemployed people get a job from them. (And, by that standard, the New Deal for young people is very successful.) A serious criticism of such monitoring has been that many of the job results are actually of very low quality; if a participant returns to unemployment soon after leaving the programme, then s/he has actually benefited very little.

  2.9  The New Deal for young people was the first major programme to take serious account of this criticism, and statistics are also collected for the number of participants getting sustained jobs—taken as jobs that last at least three months. These figures are, of course, lower, and one would expect recently unemployed people to have particular difficulty in obtaining the higher quality jobs that are more likely to be sustained. Despite this, the New Deal for young people's performance in helping people get sustained jobs is very impressive.

  2.10  If we take a more demanding target than that set by the pledge card, and ask when 250,000 participants will have been helped into sustained jobs, the current rate of progress (186,080 by the end of August, at an average rate of 6,747 per month) would still lead to the quarter of a million mark being passed in June 2001.

—  "An increase in the proportion of working-age people in employment, over the economic cycle.

—  "A reduction in the proportion of working-age people living in workless households, for households of a given size, over the economic cycle.

—  "A reduction in the number of working-age people living in families claiming Income Support or income-based Jobseeker's Allowance who have been claiming these benefits for long periods of time.

—  "An increase in the employment rates of disadvantaged groups—people with disabilities, lone parents, ethnic minorities and the over-50s—and a reduction in the difference between their employment rates and the overall rate".

As the first of these indicates, these are all long-term objectives, and it is too early to judge whether they have been achieved.

THE OTHER NEW DEALS

  2.11  The other New Deal programmes are smaller than the New Deal for young people, but their performance has also been impressive. The New Deal for people over 25 had helped 53,560 people into jobs by the end of August. Since July 1998, the average per month has been 2,060. If this rate is maintained this programme will have helped more than 55,000 older people by the end of September, when the 18-24 programme passed the quarter million mark. If the tougher sustained jobs standard is used, the current rate of progress (44,150 by the end of August, 1,698 per month) would lead to 61,000 being achieved by June 2001, when the 18-24 programme will pass 250,000. The 50,000 mark should be reached in December 2000.

  2.12  Over 60,000 participants in the New Deal for lone parents had gained jobs by the end of August 2000. Since November 1998, the monthly rate has averaged 2,728. If this is kept up, more than 84,500 participants will have been helped into employment by the end of May 2001.

  2.13  The New Deal for Disabled People is comparatively small. By the end of June 2000, 3,028 participants in the NDDP Personal Adviser service had been helped into jobs. This is quite a small figure, but it represents an encouragingly high proportion of participants—32.7 per cent of those who had drawn up an action plan.

  Furthermore, the programme now seems to be accelerating—by the end of February, just 2,054 participants had moved into employment and self-employment. And, in addition to the Personal Adviser service, the programme is also funding a number of innovative schemes that, by the end of June, had helped 911 disabled people into jobs—23.3 per cent of the people accepted onto these schemes.[35]

  2.14  The New Deal 50 plus was only launched in April 2000, but 1,700 people had used the programme's Employment Credit to return to work within four weeks of the launch.


3.  IMPROVING NEW DEAL PERFORMANCE

  3.1  the TUC supports the broad thrust of the Government's strategy for investing heavily in active labour market assistance through the New Deal and its policy of focusing this assistance on key groups among the unemployed and economically inactive. By improving the employability and skills of these groups and by encouraging a better match between available vacancies and all jobseekers, the TUC agrees with the Government that the New Deal and related programmes can do much to help reduce unemployment and economic inactivity without adversely affecting wage inflation.

  3.2  The TUC believes that there are three key elements of the "New Deal approach" which make it very different from previous active labour market initiatives in the UK:

    —  quality training leading to recognised vocational qualifications;

    —  a counselling and support framework centred on the individual; and

    —  a choice of "employability" options for those who do not manage to find work.

  3.3  In the TUC's opinion, the successful integration of these three elements has been the driving force behind the success of the New Deal since it was launched in 1998. In addition, the Government's policy of "continuous improvement" based on "what works" has ensured that weaknesses in the programme have been identified at an early stage and measures designed to rectify matters have been piloted and introduced as soon as possible.

NEW DEAL OPTIONS AND JOB OUTCOMES

  3.4  However, in spite of the widely acknowledged success of the New Deal for Young People in helping many long-term unemployed people into sustained employment, the TUC shares the Government's concerns about the contribution played by the New Deal options in meeting the objective. Overall, it is estimated that just over a quarter of participants on all New Deal options progress to any kind of job outcome (ie either short-term or sustained) and that just over a tenth do so directly from the option.

  3.5  However, these general statistics for all the options conceal some essential differences between the job outcomes rates achieved by the individual options, especially once the impact of leavers for "unknown destinations" is discounted. For example, once these "unknown destinations" are removed from the equation it is evident that job outcomes on the employer subsidy options are much higher (around 60 per cent) compared to the other three options (all around 40 per cent).

  3.6  In addition, the very high proportion of leavers moving to "unknown destinations" from the employment subsidy option (around 50 per cent of all outcomes)—more than double the proportion on the other options—suggests both a positive and negative trend:

    —  The official Government research on "unknown destinations" (ie 57 per cent of them being accounted for by moves into employment) suggests that the gap between the job outcome rate on the employment subsidy and the other three options may be even greater than is currently acknowledged.

    —  On the other hand, the high rate of "unclassified leavers" also suggests that there may be a problem with retention on this option and that an element of this will be the limited capacity of private sector employers to deal with the most disadvantaged recruits.

  3.7  The TUC is strongly of the opinion that the best means of improving the employability of the long-term unemployed is to provide them with the experience of a "real job" in combination with quality training leading to an accredited qualification. For this reason, the TUC has consistently supported the use of the wage subsidy approach in the New Deal as an important means of achieving this objective. However, we believe that the way the overall programme has evolved since it was introduced has meant that a higher proportion of participants are now engaged in "benefit-plus" options as opposed to paid employment compared to what was initially envisaged. For example, the original planning assumptions were for 40 per cent of option places to be accounted for by subsidised jobs, but the latest DfEE data (see chart) show that in August of this year only 18 per cent of places were (and this was down from 27 per cent a year earlier). In contrast, the combined non-wage options now account for over four fifths of all participants on options compared to the initial planning assumption of three fifths.


  3.8  In light of these trends, the TUC believes that there is a need for a more ambitious programme of measures designed to maximise job opportunities and through this to improve employability measures for the most disadvantaged jobseekers on the New Deal programmes, especially in those areas with high levels of unemployment. This issue will become even more critical once the expanded ND25+ comes on stream as this expansion of the programme holds the potential for generating a substantial increase in the number of disadvantaged jobseekers attending non-wage options on a recurring basis without gaining sustainable paid employment. This, the TUC believes, may be the most serious challenge facing the New Deal in the medium term.

  3.9  Maximising job opportunities would counterbalance the shortfall in subsidised jobs provided by private sector employers and also address the fact that many private sector employers are either unwilling (or in capable) of dealing with some of the most disadvantaged individuals coming through he programme. The TUC believes that there are two potentially effective means of modifying the New Deal to meet this objective:

    —  expanding the current use of local intermediate labour market (ILM) projects; and

    —  expanding take-up of the job subsidy option by the public sector.

  3.10  In relation to these two approaches, there are already models of good practice in parts of the UK that the Government could build on and extend nationwide. Although there has been much debate on the potential of ILMs as an innovative local response to job generation in recent years, there remains a chasm between the amount of rhetoric on this issue and hard data on the numbers involved and the effectiveness of this approach. However, a recent report from the Joseph Rowntree Foundation[36] has gone some way to illuminating the current state of play in ILM provision in the UK and has also highlighted how many of these projects are achieving much higher job outcome rates, than traditional New Deal options while often focusing on the most disadvantaged groups in communities with very high levels of unemployment.

  3.11  For example, the TUC would like to highlight the innovative work being undertaken in Sheffield by the local TUC unemployed centre (Centre for Full Employment), which is running a number of ILM projects delivering around 300 ILM jobs in the city involving 100 employers largely drawn from the voluntary sector (with a particular focus on employer organisations from the black community). According to the Centre this approach is very far removed for the old "make work" approach as the ILM programme is expressly designed to improve the employability of the participants while at the same time operating as a community capacity building programme in the most deprived parts of the city. The Centre is also set to massively expand its work in this area with a key role in a European Objective 1 funded project to generate up to 1,000 ILM jobs across South Yorkshire.

  3.12  While the public sector has so far failed to recruit large numbers of subsidised workers, the TUC believes that this could be changed if the Government considered measures to develop its potential, especially in providing job opportunities for New Deal participants who are unlikely to be recruited by the private sector and also in areas of high unemployment. An inquiry into the limited use of the New Deal subsidy by public sector organisations[37] found that while employers cited the same barriers as private sector employers, this was further intensified by "barriers, which are seen as having particular significance by the public sector".


  3.13  More importantly, the report does highlight some public sector organisations where the New Deal has been a clear success story and the TUC has been particularly impressed by the New Deal model established by Knowsley Metropolitan Borough Council. What is most impressive about the Knowsley approach is that the council is positively recruiting some of the most disadvantaged young people from the New Deal Gateway, many of whom would never have an opportunity to get a subsidised job with private sector employees. It then uses the subsidy to provide an intensive six month traineeship (as a paid employee) to these young people in order to get them to the stage where they can then apply for permanent jobs, an approach which most private sector employers would never consider (more details of the Knowsley New Deal are included in the Annex).

  3.14  The roll-out of a fully comprehensive ND25+ in April 2001 strengthens the argument for including options which will provide proper paid employment opportunities for unemployed people who are in effect "rejected" by private sector employers or who reside in areas with high levels of unemployment. The TUC believes that there is a strong case for this because many of this client group will already have attended a series of government programmes designed to improve their employability, including both jobsearch and vocational training. Furthermore, for those who do require help with employability, it is crucial that this does not simply involve a "re-run" of what they have already received and that they are offered an "enhanced employability" package underpinned by a "real job".

THE NEW DEAL AND EQUAL OPPORTUNITIES

  4.1  One issue the TUC has been concerned about has been whether the New Deal offers equal support to all the unemployed people eligible. The table below looks at the proportion of participants from different groups New Deal and compares this with the proportion of New Deal participants who got jobs from different groups.

JOB OUTCOMES FROM THE NEW DEAL FOR YOUNG PEOPLE: WOMEN AND BLACK PARTICIPANTS

Group
Proportion of New Deal participants[38]
Proportion of New Deal participants leaving into jobs[39]
Female
28.1 per cent
25.5 per cent
People from ethnic minority groups
14.1 per cent
11.2 per cent


  If we compare the figures for sustained jobs we find a very similar position.

SUSTAINED JOB OUTCOMES FROM THE NEW DEAL FOR YOUNG PEOPLE: WOMEN AND BLACK PARTICIPANTS

Group
Proportion of New Deal participants
Proportion of New Deal participants leaving into sustained jobs
Female
28.1 per cent
26.6 per cent
People from ethnic minority groups
14.1 per cent
11.2 per cent


  4.2  The New Deal for people over 25 is a smaller programme, and it is more difficult to make these comparisons, but they remain instructive. However, the older programme is less problematic from the standpoint of gender equality. The gap between black participation and black job results is not as wide as in the programme for young people, but still significant.

JOB OUTCOMES FROM THE NEW DEAL FOR PEOPLE OVER 25: WOMEN AND BLACK PARTICIPANTS

Group
Proportion of New Deal participants[40]
Proportion of New Deal participants leaving into jobs[41]
Female
15.8 per cent
15.1 per cent
People from ethnic minority groups
10.1 per cent
8.9 per cent


SUSTAINED JOB OUTCOMES FROM THE NEW DEAL FOR PEOPLE OVER 25: WOMEN AND BLACK PARTICIPANTS

Group
Proportion of New Deal participants
Proportion of New Deal participants leaving into sustained jobs
Female
15.8 per cent
15.4 per cent
People from ethnic minority groups
10.1 per cent
8.8 per cent





  4.3  In the New Deal for lone parents, 41.9 per cent of programme leavers have gained jobs. For different groups the proportions are:

    —  males 37.6 per cent;

    —  30.0 per cent of participants from minority ethnic groups.

  Once again there are unacceptable gender and racial differences, though it is worth bearing in mind the fact that the proportion of men on this programme is very low.

  4.4  It is worth noting the fact that more than 27,000 young people from minority ethnic groups have gained jobs through the New Deal, but there remain serious concerns. The TUC has especially emphasised the position of young people from minority ethnic groups. The TUC raised these concerns with DfEE and ES officials with increasing urgency, and at a meeting with Andrew Smith MP, the then Minister for the New Deal. Union representatives on the local Strategic Partnerships (which assist Employment Service managers in monitoring and delivering the New Deal) have pressed for action in areas where the equal opportunities outcomes have been particularly weak.

  4.5  Given that pressure, the TUC has been glad to note the seriousness with which the Government has responded to these concerns. In particular, we have welcomed Tessa Jowell's April announcement of a series of measures specially designed to address this issue, including objective setting, training, obtaining advice from the New Deal Task Force Minority Ethnic Advisory Group, and special events around this theme[42].

  4.6  Discussions with officials have convinced us that there is a serious intention of delivering equal services to unemployed people. This episode indicates that the Government's emphasis on continuous improvement in the New Deal is more than just rhetoric—where New Deal monitoring data has revealed problems a serious effort is being made to address them.

MONITORING AND EVALUATION

  5.1  Inadequate monitoring and assessment has bedevilled previous active labour market programmes. One of the refreshing features of the New Deal has therefore been the commitment to providing information: monthly monitoring data, independent assessments and the publication on the web of the core performance tables, broken down by delivery unit [http://www.dfee.gov.uk/ndimprove/—an excellent website].

  5.2  This is a breath of fresh air, and reaches US standards for monitoring and assessing labour market programmes. If anything, there is too much information, or at least too much for conclusions easily to be drawn.

  The core performance tables on the web illustrate this. The tables are:

    A:  The numbers of New Deal participants and the proportion of each cohort moving into i) unsubsidised jobs, ii) subsidised jobs and iii) all jobs.

    B:  The numbers of participants and the proportion of each monthly cohort moving from the Gateway and each of the options into unsubsidised jobs.

    C:  The unit costs of the outcomes covered at (a) and (b) above.

    D:  The number of participants and the proportion of each monthly cohort remaining in jobs six, twelve or eighteen months after leaving New Deal, as measured by the renewal or otherwise of claims for JSA or other benefits.

    E:  The numbers and proportions of participants who are disabled, from ethnic minority backgrounds and who are men and women achieving the outcomes in (a), (b) and (d) above.

    F:  The numbers of subsidised jobs made available by employers and the level of employer satisfaction.

    G:  The level of satisfaction among participating young people.

    H:  The number and level of qualifications achieved by New Deal participants.

    I:  The number of participants and the proportion of each monthly cohort leaving the New Deal for known destinations.

  5.3  Each table is repeated for up to seven cohorts, and 12 monthly sets of results. The numbers of cohorts and monthly sets of results are, of course, growing all the time. The monitoring data is less complicated, but there can be confusion about the use of cumulative and snapshot results. It is very difficult in this welter of statistics to work out what is and not significant, what sets of data should be compared, what conclusions are reasonable. For the non-statistician it can be equally difficult to grasp when aggregation of local data is and is not appropriate. Neither the core performance tables nor the monitoring data are particularly easy to use when trying to establish trends in the programme.

  5.4  While the statisticians may want to hang on to as much data as possible, it might be useful for the rest of us if the core performance data was redefined as a much more limited way. We would suggest just two: the numbers of leavers getting sustained jobs and differences between white and minority ethnic participants.


30   Employers, Young People and the Unemployed: a review of research, C Hasluck, IER for ES, ESR12, 1999. Back

31   Enhancing the Effectiveness of Active Labour Market Policies, OECD, 1997. Back

32   The OECD did, however, report that US experience indicated that combining subsidies with training (as in the New Deal) could produce more positive results. Back

33   New Deals for Young People and for Long-Term Unemployed: Survey of Employers, Jon Hales, Debbie Collins, Chris Hasluck and Steve Woodland, Employment Service report ESR58, September 2000. Back

34   "Preventing Long-Term Unemployment: Strategy and Costings", Richard Layard, Employment Policy Institute, Economic Report, March 1997. Back

35   More disabled people participate in other New Deal programmes than in the New Deal for Disabled People. By the end April 2000, 58,400 disabled people had joined the New Deal for young people, 50,600 the New Deal for Long-Term Unemployed People aged 25 and over, and 4,500 the New Deal for Lone Parents. Also, by the end of June 2000, 178 disabled people had attended a New Deal for Partners of the Unemployed initial interview. (Commons Hansard, 28 July 2000, col 1051W). Back

36   The Intermediate Labour market, B Marshall and R Macfarlane, Joseph Rowntree Foundation, 2000. Back

37   Going Public, New Deal Task Force Group on the Public Sector, November 1999. Back

38   The figures for New Deal participants are taken from the data on cumulative numbers who had started the programme by the end of August 2000 in DfEE Statistical First Release, SFR 44/2000, 26 October 2000, table 1. Back

39   The figures for New Deal participants leaving into jobs are taken from the data on cumulative gaining jobs by the end of August 2000 in DfEE Statistical First Release, SFR 44/2000, 26 October 2000, table 12. Back

40   The figures for participants are taken from the data on cumulative numbers who had started the programme by the end of August 2000 in DfEE Statistical First Release, SFR 44/2000, 26 October 2000, table LTU1. Back

41   The figures for jobs are taken from the data in DfEE Statistical First Release, SFR 44/2000, 26 October 2000, table LTU6. Back

42   DfEE press release 182/00, 27 April 2000. Back


 
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