Memorandum submitted by the Trades Union
Congress (ES 09)
1. This memorandum has been drawn up in
response to the Work and Pensions Committee's inquiry "to
examine the impact of the economic slowdown on the Government's
employment strategy and to assess the employment assistance availa6ale
to those facing unemployment". We expect the current
economic downturn to have a modest impact on overall labour market
performance. Nonetheless, economic circumstances will be less
favourable than in recent years not least in making further progress
in reducing high levels of inactivity among particular groups
in the labour market. The key challenges in the short term will
be sectoral and regional rather than nationalin particular
the continued big job losses from the manufacturing sector and
the impact on regional divides and local economies.
2. This submission argues:
The TUC expects overall growth in
2002 to be within HMT's forecast range of 2 to 2.5 per cent.
But we expect manufacturing to continue
to face severe problems.
Performance may be better in 2003,
but this will depend on a strong recovery in world trade.
We expect overall employment to continue
to grow in 2002, but with continued significant job losses in
Much of the rise in unemployment
in the last year has been in the South and particularly in London.
In 2002, we expect job losses in manufacturing to result in a
return to the traditional North-South divide.
The New Deals have met their main
objectiveproducing a structural reduction in unemployment
by helping disadvantaged groups. They are not job creation programmes,
and should not be judged as such.
Against this background of overall
success, a number of problems need to be addressed. One general
concern about the New Deals is the extent to which equal opportunities
objectives are being met:
Black participants are less likely
to get jobs from NDYP and NDLP;
The reformed New Deal 25 Plus
may not be as successful as its predecessor in delivering equal
results for unemployed women; and
Disabled people and men are losing
out in NDLP.
In areas where unemployment rises
there is a risk that more unemployed young people will be directed
to the less attractive work experience options. If, at the same
time, the number of sanctions rises, there is a serious risk that
young people will turn against the New Deal, which they have generally
supported up till now.
The reforms of New Deal 25 Plus,
introduced last year, seem to have been a success, and to have
been introduced in time for the programme to be better able to
cope with labour market developments in 2002-03.
The New Deal for disabled people
and New Deal 50 Plus are likely to be faced with severe challenges
in areas where unemployment rises.
Employment Zones have only been operating
for two years, but the early results are good, and they have the
added advantaged of being located in the towns and cities that
are most likely to be hurt by any slowdown.
The new Step Up programme is an excellent
initiative, and the TUC has called for extra funding to double
the number of jobs it provides.
The Government should make even greater
efforts to develop regional and local approaches within its overall
national employment strategy. This will necessitate setting aside
substantial funds to support industry and the regions in 2002
and beyond, including a significant increase in funding for the
regional development agencies to maintain UK capacity in viable
The TUC especially welcomes the development
of Frameworks for Regional Employment and Skills Action (FRESAs),
which provide a possible vehicle for linking workforce development
and economic planning.
The new Local Strategic Partnerships,
with their emphasis on coordinating employment and industrial
strategies, is a welcome development. The social partners should
be fully involved in these networks.
The decision to merge the Job Transition
Service and the Rapid Response Fund into the better-resourced
Rapid Response Service is very welcome.
Linkages between the RRS and appropriate
welfare-to-work initiatives are important, especially where the
impact of a redundancy on a community is severe. Trade unions
can also make a leading contribution this process, as they often
have advance warning of redundancies and will be able to trigger
action by the RRS at an early stage.
3. The economy has grown in line with the
November Pre Budget forecast of 2.1 per cent. However, manufacturing
did even worse than expected, but many of the non-service sectors
did better than expected. These imbalances worsened over the course
of the year. Growth in the final quarter of 2001 fell to zero,
as the manufacturing recession worsened and growth in some service
4. Growth in 2002 will be supported by a
very rapid increase in planned public spending. We expect consumer
spending to moderate somewhat but to remain relatively strong.
As shown below, the aggregate labour market has held up well and
we expect real wage growth to remain robust. Households are unlikely
to find servicing debt a problem in the short term. We expect
growth in 2002 to be within the Treasury's forecast growth range
of 2 to 2.5 per cent.
5. There are indications that the worst
is over for the manufacturing sector as a whole, although the
recovery to date is weak. However, we expect job-shedding to continue
as redundancies work their way through and firms attempt to restore
profit margins by short-term cost-cutting measures.
6. The biggest single risk to economic prospects
for the UK in 2002 remains the global economy. There are encouraging
signs of economic recovery in the US, and prospects for the Eurozone
also appear to be improving. The outlook for the Eurozone is more
important to the UK as we export roughly three times more goods
to Eurozone markets compared with exports to the US. The feed-through
into orders for UK exports is still uncertain, but provided the
recovery in the international economy continues we expect to see
stronger export growth over the coming months.
IV. LABOUR MARKET
7. The aggregate labour market has held
up well in 2001 with continued employment growth. Moreover, the
majority of new jobs continued to be full time and permanent.
However, there have been very big job losses in the manufacturing
sector, especially in the second half of 2001 as redundancies
in the high tech industries accelerated. ILO unemployment increased
in the second half of 2001 but the rise so far has been modest.
There has been no sustained rise in the claimant count measure
of unemployment at the time of writing.
8. Our assessment for the labour market
reflects our view of economic prospects. We expect overall employment
to continue to grow in 2002, supported by increased public sector
employment and continued growth in construction and some service
industries. However, manufacturing job losses will be considerable,
and will hold overall employment growth down. ILO unemployment
may continue to edge up over the next few months, but we think
it unlikely that UK unemployment on the ILO measure will exceed
5.5 per cent in 2002. More surprising has been the fact that claimant
unemployment has not risen at all. This may reflect the effectiveness
of government labour market measures, as well as the availability
of attractive jobs for those made redundant.
9. Much of the rise in unemployment to date
has been in the South and particularly in London. This may reflect
the impact on the capital's tourist and travel related industries
of 11 September However, we believe that more traditional North-South
divides will reassert themselves in 2002 reflecting the regional
pattern of job loss in manufacturing. With the exception of the
South West the biggest falls in manufacturing employment have
been in Northern Britain and the Midlands. This will in turn exacerbate
underlying regional divides in economic and employment performance.
Regional Manufacturing Job Losses 2000
Q3 to 2001 Q3
|Region||Share of GB total (%)
||Employees Q3 2001 (000s)||Change Q3 2000 to Q3 2001(000s)
Source: National Statistics
V. THE NEW
10. The New Deals are at the heart of the Government's
active labour market policy, and will have to take the strain
of any increase in unemployment. In our view the New Deals have
been a success so far, but the continuation of that success depends
upon continuing monitoring and reform of the programme.
11. Much discussion of the New Deal has assumed that
it is a job creation programme, and criticised for having high
levels of "deadweight"most of the jobs participants
move into would have been created even if the programme had never
existed, or are created at the expense of such jobs.
12. It is important to remember what the New Deal programmes
areand are not. New Deal is not a job creation programmeit
is designed to improve the relative employment opportunities
for unemployed people who are members of groups that have previously
fared badly in the competition for jobs. Of course, the Government
can't inject as much money as has been spent on the New Deal programmes
without it creating some jobs, but that is not their purpose.
Jobless people from
these groups can be helped into employment without increasing
inflationary pressures, and the New Deal thus reduces unemployment
indirectly, not by creating jobs for unemployed people.
New Deal for young people £910 million
New Deal 25 Plus £600 million
New Deal for lone parents £530 million
New Deal for disabled people £190 million
New Deal for partners £80 million
New Deal 50 Plus £60 million
13. And it seems to have worked. The most authoritative
study of NDYP concluded that "the number of young people
in jobs has risen by approximately 15,000 as a result of NDYP."
This does not sound
like a particularly big deal, but it is important to remember
that this is not just a matter of helping that many young people:
at any one time, there will be 15,000 more young people in jobs
than there would be if New Deal had not existed.
14. Successful structural changes in employment that
can be traced directly to a deliberate action of Government are
rare. In our view the New Deal is the most successful active labour
market policy ever introduced in this countryand remarkably
cheap, with one study forecasting that, in the four years initially
planned for the programme, it would be "more or less self-financing."
VI. NEW DEAL
15. As the last section indicates, the TUC would make
a positive assessment of the New Deal, and it is against this
background that we would wish to draw the Committee's attention
to some problem areas, especially in the New Deal for Young People.
The under-performance of the work experience options
16. Roughly two fifths of New Deal leavers leave for
"unsubsidised employment." This
compares reasonably well with many schemes operating before 1997,
especially those that concentrated on "motivating" unemployed
people. The figures below are for shorter programmes, and are
taken from a different point in the economic cycle, but the contrast
is still notable: 
|Programme||Proportion finding a job
|Restart interviews ||1.7%
17. There is undoubtedly room for concern about the fact
that one graduate in four who gets a job leaves in the first three
months. On the other
hand, the New Deal is the first active labour market programme
in which a serious attempt has been made to discover whether or
not participants who get jobs are keeping them. For previous programmes
there was plenty of anecdotal evidence that many of the jobs people
moved into were short-lived, but the truth is that we don't really
know whether the New Deal compares well or badly on this count.
18. The TUC is rather more concerned about the fact that
some of the NDYP options appear to have been much more successful
Proportion of NDYP leavers leaving for unsubsidised employment
|Before first interview||33.3%
|During the Gateway, after at least one interview
|From an option||40.9%
|Education and training||32.4%
|Environmental Task Force||36.7%
19. The subsidised employment option is clearly the most
successful. Unfortunately, the number of participants on this
option is much lower than was originally expectedin January,
it accounted for just 15.7 per cent of young people on any option.
When NDYP was being
designed, the planning assumption was 40 per cent.
20. But even the proportion of participants on this option
getting sustained jobs is worrying. 52.2 per cent seems low, given
the fact that this option is likely to claim the most job-ready
of those on an option.
21. A survey of subsidised jobs in the NDYP and the 25+
programme may give
some clues as to what is happening. The researchers found that
31 per cent of participants had left before the 26 weeks subsidy
period was up. Of
this group 40 per cent resigned, 30 per cent were dismissed, 21
per cent were made redundant and 2 per cent left for health reasons.
Of those who were dismissed, 60 per cent were dismissed for poor
attendance, 36 per cent for insufficient quantity of work, 17
per cent for disobedience, 11 per cent for dishonesty and 19 per
cent for some other reason. 
22. Now, these figures almost certainly do not tell the
whole story, but they do not seem to show large numbers of employers
cynically taking on subsidised recruits, and then letting them
go when the subsidy ends. Instead, they rather tend to substantiate
employers' complaints that the New Deal recruits they are sent
are not yet job-ready.
NDYP and equal opportunities
23. The TUC has also been concerned about the New Deal's
racial bias. Black and ethnic minority young people have beenquite
consistentlybetween 75 per cent and 80 per cent as likely
to get jobs as white participants. Or, to put it another way:
Black and ethnic minority young people and NDYP
Proportion of participants leaving NDYP for any destination
|Proportion of participants leaving NDYP for sustained employment
If we look at the options we get a slightly different picture:
Black and ethnic minority young people and options
|All participants who have left the Gateway for an|
|Ethnic minority participants who have left the|
Gateway for an option
24. Plainly, in addition to not getting sustained jobs
from NDYP, black and ethnic minority young people are much less
likely to enter subsidised employment. On the other hand, nor
are they referred to the less popular work experience options,
which we would expect if discrimination by PAs were the explanation.
Two other possible explanations immediately suggest themselves:
We know that there is racial discrimination in
the labour market. It could be that black and ethnic minority
young people face the same discrimination in subsidised as in
We also know that black and ethnic minority young
people show a stronger preference for further education than their
white counterparts, and it could be that, where white participants
choose subsidised employment, black and ethnic minority participants
are much more likely to choose education/training.
It is also possible that there is more than one explanation.
25. On the positive side, more than 39,000 young people
from minority ethnic groups have gained jobs through the New Deal,
and the Government
has responded to concerns about this issue. In particular, the
TUC welcomed the announcement in April 2000 of a series of measures
specially designed to address this issue, including training,
obtaining advice from the New Deal Task Force Minority Ethnic
Advisory Group, and special events around this theme. 
26. A few months ago we would have noted that young women
also lose out in the New Deal (though not to the same extent as
young black people) but their relative position has improved significantly
in recent months:
Young women and NDYP
to Aug 2001
to Jan 2002
|Proportion of participants leaving NDYP for any|
|Proportion of participants leaving NDYP for sustained|
27. It is not possible to make the same comparison for
disabled people, and many disabled young people would participate
in the New Deal for disabled people instead. For young women and
young disabled people the comparison of likelihood of allocation
to different options is particularly interesting:
Women and disabled young people and options
|All participants who have left the Gateway for an|
|Female participants who have left the Gateway for an|
|Disabled participants who have left the Gateway for|
28. Young women are pretty much as likely to be referred
to subsidised employment than the average, and less likely to
be referred to work experience options. Young disabled people
are rather less likely to be referred to subsidised employment,
and rather more likely to be referred to training/education.
29. These figures suggest that the most important equal
opportunities issue facing NDYP relates to black and ethnic minority
young people, though problems around equal service delivery to
young women and young disabled people, which should not be ignored.
30. The TUC is concerned about the New Deal sanctions
regime, but before we discuss our concerns it is worth noting
that the New Deal has also been quite popular with young people,
and contrasts well with what went before.
31. A survey of 6,000 participants
found that nearly two thirds believed that the New Deal was very
or fairly useful, and nearly half were completely or very satisfied
with their PAs, but people from disadvantaged groups were least
satisfied. Of those on an Option, 87 per cent were satisfied with
it, with the employment option gaining the highest scores, and
the Environmental Task Force the lowest.
32. This is a good result for a compulsory programme.
By contrast, the pre-1997 compulsory programmes were rated very
poorly by claimants, being given much worse scores than other
Perceived Effect of Schemes on Job Prospects
|Learning for Work||2.46
|Training for Work||2.21
|Community Action *||2.20
|Business Start Up||1.96
|Job Review Workshop||1.87
|Job Interview Guarantee||1.86
|Work Trial *||1.81|
NOTES: Italicised programmes were
Perceived effect: 1 = no difference, 4 = improved a lot
*small sample size
33. These results were supported by 1991 research, which
found that unemployed people believed that they were being exploited,
not empowered, and that their chances of finding work were not
being improved. Unemployed people unsurprisingly therefore had
very little regard for these programmes, and the government had
to intensify the use of sanctions to force people on to them:
Claimants Sanctioned for Failing to Attend or Complete a Compulsory
Programme: Numbers and Proportion of those Who Started
In 1993-94 there were two compulsory programmesJobplan
Workshops and Restart courses. Workwise and 1-2-1 were piloted
in 1994-95 and extended nationwide in 1995-96.
34. One of the changes to NDYP has been the introduction
of a tougher sanction regime. Young people who break the
New Deal's rules previously faced suspensions of benefits lasting
for two weeks in the first instance, and four weeks for each succeeding
instance. A third offence now brings a benefit sanction lasting
up to 26 weeksthe toughest penalty ever in UK social security.
35. Even if one were to leave aside the effectiveness
of sanctions per se, the TUC opposed this reform because
we believe that it will have the worst impact on the most disadvantaged
young people. A Government research study, carried
out before the establishment of the New Deal, found that the JSA
sanctions were disproportionately likely to be applied to certain
groups of claimants. These groups included ethnic minority claimants,
people with caring responsibilities, and those with health problems.
This research also emphasised the degree to which sanctions forced
people into debt, and the fact that those affected were unclear
about how long the sanctions would last and their rights to appeal
or to claim hardship payments.
36. Not only are sanctions applied disproportionately.
There is a risk of the penalties being used to force participants
into NDYP's least popular and least effective options. We saw
above that the work experience options are much less effective
than other elements of the programme, and many participants are
correspondingly reluctant to take part in them. The
Environmental Task Force accounts for 20 per cent of all option
43 per cent of sanctions applied to people at the options stage.
37. In areas where unemployment rises there is a risk
that more unemployed young people will be directed to the less
attractive work experience options, as subsidised and unsubsidised
job vacancies become harder for Jobcentre Plus to obtain. If,
at the same time, the number of sanctions were to rise there would
be a serious risk that the New Deal could begin to attract the
same opprobrium as the pre-1997 regime.
VII. OTHER ACTIVE
38. The TUC also has a number of proposals that relate
to the other programmes:
New Deal for lone parents.
New Deal for disabled people.
New Deal 25 Plus
39. The New Deal 25 Plus (ND25+) is aimed at adults aged
over 25 who have been on JSA for 18 of the last 21 months. Participation
in ND25+ was originally voluntary, but it became compulsory in
April 2001, when the programme was substantially reformed. The
programme now resembles the 18-24 programme much more closelya
move welcomed by commentators who had worried that the bulk of
New Deal resources were being devoted to young unemployed people,
when older long-term unemployed people faced greater barriers
40. ND25+ was a priority for reform, as its performance
was weak: just 17 per cent of those leaving the programme left
for unsubsidised employment, compared with 55 per cent returning
to IS or JSA. Given
the fact that the programme was then voluntary (which would mean
that the most demotivated would be unlikely to participate) this
was an astoundingly low figure. The reformed programme has already
improved on this, with 30.9 per cent of leavers leaving for unsubsidised
employment, and 17.9 per cent returning to JSA (though this last
figure is likely to rise over time, as people who have spent longer
participating come off.) This
improved performance is very welcome, and the 25+ programme looks
to be in better shape for coping with increases in unemployment
than it was a year ago. The TUC is particularly pleased to welcome
these figures as we were cautious about welcoming the reforms:
the improvement is better than we expected.
41. The pre-reform programme was rather better than NDYP
at delivering equally to black and white participants, with black
and ethnic minority participants 90-95 per cent as likely to get
jobs as white participants. It
is early days at present, but the reformed programme's performance
is similar, with unemployed people from ethnic minorities accounting
for 11.9 per cent of all those who have left the programme, and
11.0 per cent of those who have moved into unsubsidised jobs.
This is better than
the 18-24 programme, but any differential is a failure, and the
Government should maintain its commitment to eliminating the race
gap in all the New Deal programmes.
42. In the old New Deal 25 Plus, 15.7 per cent of those
leaving the programme were women, and women accounted for 15.6
per cent of those leaving for unsubsidised employment. In
the reformed programme, women account for 18.1 per cent of leavers,
but just 15.4 per cent of those leaving for unsubsidised jobs.
Of course it is too
early to say whether a new pattern has been established, but these
figures are worrying. If the reformed New Deal 25 Plus faces a
more difficult future in some parts of the country it very important
that unemployed women should not pay the price.
New Deal for lone parents
43. The New Deal for lone parents (NDLP) is a programme
that illustrates how working age benefit claimants' rights and
duties to participate in active labour market programmes are changing.
The programme is particularly important, as the Government has
made a public commitment to raising the employment rate of lone
parents from 50 per cent to 70 per cent by the year 2010. This
is an ambitious target, and one which would be more difficult
to achieve if a slowdown hit job creation.
44. One little-noticed consequence of the importance
granted to this programme (and of falling youth unemployment)
is that NDLP is now the largest New Deal programme:
Participants in January 2002
|New Deal for lone parents ||107,640
|New Deal for Young People||83,900
|New Deal 25 Plus ||64,800
45. An interesting April 2001 written answer shows that
more than two fifths of those who decide to participate get jobs
and a tenth move into education and trainingbut that only
a quarter of those invited to an interview agree to participate:
|Initial invitation letters issued||761,290
|Initial interviews booked||254,853
|Initial interviews attended||212,490
|Number agreeing to participate||188,500
|Number entering education/|
|(Those obtained by part-time|
workers increasing their hours)
46. The Government take on this has been that the programme
is a success, and that the main difficulty is in getting lone
parents to the initial interview. So it should come as no surprise
that lone parents claiming benefit are now required to attend
a "work-focused interview" to discuss the advantages
47. NDLP's record on equal outcomes from black and ethnic
minority participants is no better than NDYP's, and the results
for disabled people and for men are worrying as well:
Proportion of NDLP leavers who leave IS for employment
|Disabled people ||46.4%
|Black and ethnic minority people||40.4%
48. As with the other New Deal programmes, equal service
delivery for all groups of participants is important. The distance
between the results for all participants and for black participants
is greater than in the 18-24 or 25+ programmes, and this suggests
that the programme needs careful watching.
New Deal for disabled people
49. Until July 2001 the New Deal for disabled people
(NDDP) was a pilot programme, but it is now being gradually extended
nationally. NDDP has two components, the first is a "gateway
interview" looking at the advantages of employment, the second,
and more widely noticed, is the "Job Broker."
50. It is too early to assess the new national NDDP,
but the lessons from the pilot programmes are mixed. On the positive
side, more than 8,000 disabled people got jobs through these pilotsover
half those leaving the programme left for jobs. On the other hand,
these participants amounted to a very low proportion of those
invited to joinabout 2.2 per cent. 
51. If, as we expect, the impact of the slowdown is limited
to certain areas, then we can expect the problems encountered
in NDDP's pilot phase to be repeated in those areas. Many disabled
people who could well be capable of returning to employment write
themselves off because they make a downbeat (but often realistic)
assessment of the opportunities for them in their local labour
market. This is a serious problem for the Government, as Incapacity
Benefit receipt (control of which is a major NDDP objective) tends
to be concentrated in areas dependant on manufacturingprecisely
the areas most likely to be affected.
New Deal 50 Plus
52. The New Deal 50 Plus (ND50+) is a voluntary programme
for people aged 50 and over, who are not in employment and have
been claiming a qualifying benefit for at least six months.
53. Overall, the programme has been a success. Of those
who decided, after their initial meeting, to enter the programme,
more than 70 per cent got jobs, and the most comprehensive evaluation
concluded that ND50+ has "been successful in moving a high
proportion of clients into employment. Moreover, drop out from
employment during the period of the Employment Credit has been
modest. Sustained employment outcomes look to be significant."
54. The main difficulty has been that the programme has
not attracted the people it was primarily designed to reach. The
Government wants to cut the growing number of people who leave
the labour market before normal retirement date, via Incapacity
Benefitjust over half of all IB claimants are aged over
50. Among working-age
benefit claimants over 50, there are 7.8 receiving IB for every
one receiving JSA. But 90 per cent of participants have been people
receiving JSA, not IB. 
55. The Government has responded with the establishment
of a £1 million marketing budget for ND50+, and extra funds
for personal advisers to help with return to work expenses. This
is very worthwhile, but it is hard to avoid the conclusion that,
in coping with an economic slowdown, ND50+ will face very similar
problems to New Deal for disabled people.
56. Employment Zones are a welfare-to-work initiative,
established in parts of the country with persistently high levels
of long-term unemployment. Employment Zones a response to the
fact that large sums of public money are spent the regeneration
of these areas, and on training and benefits for the people who
live in them. EZs are an attempt to promote a more flexible and
imaginative use of these funds by targeting them directly on individuals.
Each participant has a personal job account, combining
resources from benefits, training and other programmes, and EZ
providers have a great deal of discretion to use this account
to fund whatever they think will help the individual client to
get a job.
57. EZs are structured in a different way from the New
Deal programmes, which makes comparisons complicated, but possible
if we look at "cohorts"groups of participants
who all joined at the same time. For EZs we only have data for
one cohort, the people who joined between April 2000 and March
2001. By the end of 2001 31 per cent of this group had been in
employment for 13 weeks, and another 4 per cent for less than
|Step 1/2||Step 3
||Sustained employment||Left for other reasons
58. If we compare this with a similar NDYP cohort (people
who had their first interview in January 2001), we get a similar
performance by the end of last year:
||Left for other reasons|
59. The table may under-state EZ performance, as the
"other reasons" group includes people who found employment,
but left the EZ before being in the job for 13 weeks. The Departmental
press release for the statistics says that, if we add in these
people, then 39 per cent of this cohort got jobs, 80 per cent
sustained for at least 13 weeks.
60. The figures also show that EZs are doing well on
equal opportunities criteria. By the end of 2001:
85 per cent of all entrants were male,
and 72 per cent white.
85 per cent of those getting sustained jobs
were male, and 71 per cent were white.
61. To the extent that we can judge EZs' performance
so far, they seem to be doing well. What is more, they are sited
in some of the areas where any slowdown is most likely to have
an effect. The main problem is that they cover fairly small geographical
areas, which means that many unemployed people who could benefit
from their assistance will lose out.
62. The Government's active labour market measures build
on the foundation of economic success and rising employment. These
circumstances favour a policy that aims to help unemployed people
to take advantage of the jobs generated by the open economy. This
is more difficult during a slowdown, and in areas where unemployment
stays high even though other parts of the country are in the recovery
phase of the economic cycle. In times and places where this happens,
programmes that help people compete for jobs that don't exist
are very likely to become discredited. That is why, since 1999,
the TUC has lobbied for a time-limited and geographically-targeted
job creation supplement to the New Deal in high unemployment localities.
63. Job creation is not a panacea, and it is important
to bear in mind the fact that there are very real problems associated
with badly-designed job creation:
Participants in job creation programmes have little
time to look for other jobs, and their qualifications, skills
and experience soon become outdated.
Where programmes are time-limited, most participants
return to unemployment when their time is up.
Where programmes are not time-limited, participants
stay in them indefinitely (even when economic conditions improve,
and they might otherwise have been able to get a job in the open
A work programme offering similar pay to that
available in the open labour market would be very expensive.
Low-paid jobs, on the other hand, threaten
the pay of existing workers.
This is why job programmes have often become
"make work"the only tasks which avoid both problems.
Put both these problems together and you get the
worst possible outcome for job creation programmespeople
unable to escape from low-paid work on schemes no-one respects.
64. Despite these problems the Organisation for Economic
Co-operation and Development has suggested, that
one of the lessons to be learned from studying active labour market
programmes around the world is that work programmes may be useful
in keeping unemployed people in contact with the labour market.
What is particularly relevant to the current inquiry is that the
OECD argue that this is especially useful when vacancies are scarce.
Even then, however, it is important for Governments to ensure
that schemes are of limited duration and do not "become a
disguised form of permanent employment."
65. If we want to avoid this danger we have to make sure
that one of the prime objectives of any programme is to make participants
attractive to employers in the open labour market. Any programme
should aim to move participants on as soon as the economy is again
generating jobs locally, and should set aside time and support
for job-search even while participants are working in the programme.
66. A job creation programme may well be ideally placed
to succeed in this task of marketing participants as potential
recruits. A major study
of employers' attitudes to unemployed people, carried out in 1996,
found that employers do not consciously discriminate against unemployed
job applicants, but they do take unemployment into account. In
particular, longer and repeated spells of unemployment were taken
particularly seriously by most recruiters: 56 per cent believed
that skills deteriorated during unemployment, and 54 per cent
believed that the same happened to work attitudes.
67. What this means is that the people we want to help
are most likely to succeed if they apply for jobs as current employees,
rather than unemployed people. Employers are particularly unimpressed
by "make work" schemes, and do not regard participants
in such schemes as current employees. This means that it is really
important that any job creation programme should offer real
jobsand the key component of a real job, the TUC has
always pointed out, is that it pays real wages, not "benefit
68. Last Autumn the Government announced Step Up, a £40
million pilot programme with many of the features the TUC has
advocated for three years:
Participation will be time-limited.
The programme will run in areas with high levels
of long term unemployment.
Participants will be paid the national minimum
wage, not "benefit plus."
Participants will have access to jobsearch support,
including a personal adviser.
69. Unsurprisingly, the TUC has given Step Up a very
strong welcome. In our submission to the Chancellor for this year's
Budget we called for it to be introduced on a much bigger scale.
We called for extra funding to double the original intention of
providing for 5,000 jobs, and for Step Up also to be offered (on
a voluntary basis) to non-JSA claimants who have participated
in other New Deal programmes. If there is an economic slowdown
we would like to see this excellent new initiative in a position
to help even more of the victims.
VIII. REGIONAL EMPLOYMENT
Co-ordination of employment and industrial policies
70. The initial part of this submission highlighted the
fact that the TUC believes that in the short term the key employment
challenges will be sectoral and regional rather than national,
in particular the continuing big job losses from the manufacturing
sector and the impact of this on regional divides and local economies.
The TUC believes that these labour market developments requires
even greater efforts by the Government to develop regional and
local approaches within its overall national employment strategy.
71. In addition, it is increasingly clear that recent
policy measures designed to drive forward the Government's national
productivity strategy and industrial policy at the regional and
sub-regional level will require a more explicit coordination of
employment and industrial policy strategies at this geographical
level. The Government has made it clear that the "RDAs are
the key agents in driving forward this new regional industrial
policy" and also appear open to the question of whether they
(and other regional agencies) "need further flexibilities
or institutional changes to deliver that agenda".
72. In its Pre-Budget Submission the TUC strongly welcomed
the emphasis in the Pre-Budget Report on the regional dimension
to delivering higher productivity and argued that the UK needs
to create coherent regional networks, with RDAs taking a strategic
lead on the implementation of economic and industrial policy.
We also recommended that in the forthcoming Budget the Chancellor
should set aside over £500 million to support industry and
the regions in 2002 and beyond, including a significant increase
in funding for the regional development agencies (RDAs) to maintain
UK capacity in viable manufacturing.
73. There is also increasing evidence that one of the
key factors behind the UK's inability to improve its productivity
levels and to cope with industrial change is the lack of a coordinated
approach at the regional level and the disconnection between employment
and industrial policies at both the national and regional levels.
According to a report by the Industrial Society the key policy
foundations required to address this failing is to place "employment
policy front and centre within a UK productivity strategy"
and to ensure that this strategy is coordinated across a wide
range of policy areas and facilitated by developing dynamic networks
of the appropriate institutions at the regional level. 
74. The TUC believes that the remit set out for the RDAs
in the recent Treasury paper, in addition to the increase in funding
and operational flexibility that they have received, offers an
opportunity to coordinate employment and industrial policies at
the regional level and also to develop a more collaborative approach
between the diverse range of regional agencies. Over the past
year there have been some significant developments in establishing
a more coordinated approach between both statutory and non-statutory
agencies with responsibility for some aspect of either economic
or employment development at both the regional and sub-regional
level. The main agencies involved in this policy area are the
RDAs, local Jobcentre Plus offices, local Learning & Skills
Councils, Local Authorities, Government Offices and representative
bodies of both trade unions and employers.
75. One of the new initiatives that the TUC especially
welcomes is the development of Frameworks for Regional Employment
and Skills Action (FRESAs), which have been coordinated by
the RDAs in association with all the relevant agencies. The PIU
report on workforce development is right when it states that "at
regional level workforce development should be linked to economic
planning" and that a possible vehicle for this is the FRESA
model. In addition,
the TUC agrees with the thrust of the argument in the PIU report
that RDAs are the appropriate agencies to take the lead in coordinating
76. The PIU report says that "RDAs are responsible
for economic planning at regional level. Workforce development
is an important component of economic planning. The RDAs will
therefore be responsible for collaborating with partners, in particular
the local LSCs, to ensure that the workforce development and skills
agenda is appropriately reflected in economic planning, and is
then successfully delivered in their regions." Of course,
at the sub-regional level the PIU report quite rightly says that
LSCs would be responsible for the planning and delivery of the
workforce development agenda.
77. The TUC believes FRESAs are a useful model for giving
RDAs a higher profile in other parts of economic policy that would
benefit from coordinating employment and productivity policies
at the regional level and also from facilitating collaboration
between all the appropriate parties.
78. Another important development over the past year
has been the creation of Local Strategic Partnerships with a remit
to deliver the Government's Neighbourhood Renewal Implementation
Strategy in the most deprived communities in the country. The
DWP has a clear role in delivering certain "employment objectives"
under this initiative
and it is working closely with a number of other agencies at the
regional level to achieve its objectives.
79. The TUC believes that collaborative approaches of
this form at the regional level, with an emphasis on coordinating
employment and industrial strategies, is an approach that should
be developed further in the years to come. There must also be
an emphasis on including the social partners in these networks
in order to build on recent initiatives at the national level
such as the joint productivity initiative undertaken by the TUC
and CBI. In addition, the TUC believes that there is a case for
further strengthening the role of the RDAs in facilitating a partnership
approach of this kind at the regional level and meshing together
the various policy strands and initiatives in order to set them
within a wider economic strategy for the regions.
Co-ordinating employment programmes
80. In the rest of the submission we focus on the evidence
about the regional and local impact of particular employment programmes
that are the responsibility of DWP and also what can be done to
ensure that they better meet the needs of different groups of
unemployed people. However, another key theme is the need for
linkages between these programmes and related initiatives that
are the direct responsibility of different government departments.
81. The TUC believes that there is, more than ever, a
pressing need for more "joined up Government" when it
comes to the vast range of government initiatives designed to
improve the economies and labour markets of the UK regions. For
example, it is not clear to us that the FRESAs are adequately
influencing the direction of skills training of the New Deals
in each region in order to build a highly productive workforce
of the future.
82. For example, the emphasis now on getting New Deal
participants into employment as quickly as possible may, in some
cases, be contradicting the longer-term objectives of the FRESAs
to build a highly skilled workforce. In addition, there often
appears to be little linkage between programmes run by different
departments aimed at fairly similar client groups, a case in point
being the New Deal for Young People (responsibility of DWP and
Jobcentre Plus) and the Modern Apprenticeship (MA) programme (responsibility
of DfES, LSC and local LSCs).
83. While some New Deal participants may ultimately find
themselves taking up a place on a MA programme if they get a long-term
job with an employer who is keen on using this training provision,
there does not appear to be any institutional framework that promotes
such transitions. At the same time the DfES is currently implementing
a strategy to expand enormously the number of Modern Apprentices
over the next five years and a key concern is persuading enough
school leavers to apply for an MA place. One obvious solution
would be to divert New Deal participants onto this form of provision
as this would do much more to improve their long-term employability,
especially if they left school with few qualifications. Further
points about the regional and local impact of the New Deal are
Making employment programmes more regionally focused
84. There is little doubt that there has been some significant
progress in making employment programmes more focused on the needs
of regional and local labour markets over the past year and that
this trend is set to continue with the roll-out of the Neighbourhood
Renewal Strategy. More targeted and flexible approaches have been
enhanced by the extension of initiatives such as Action Teams
for Jobs. The TUC is very supportive of this and would like the
Government to build on this approach it in its future development
of active labour market provision.
85. The TUC has also long believed that those parts of
the country most adversely affected by the long-term decline in
manufacturing and with continuing high levels of unemployment
and economic inactivity, require even greater local flexibilities
to address the "jobs gap" in their labour markets. In
addition to the warm welcome we have given to Step Up, we have
strongly welcomed the additional resources allocated to the Rapid
Response Service in the Pre-Budget Report and also the decision
to merge the Job Transition Service and the Rapid Response Fund
into this new unified service.
86. The TUC also believes that it is important that this
service adopts a coordinated approach and involves all the local
agencies in any strategy to deal with redundancies. We are glad
to say that this appears to be the clear intent of current developments
under way and that clear linkages are also being made between
the RRS and appropriate welfare-to-work initiatives. For example,
the DWP contribution to meeting the objectives of the Neighbourhood
Renewal programme states that "where the impact of a redundancy
on a community is severe . . . the RRS is increasingly forging
links with other programmes such as the New Deal and Actions Teams".
The union movement also has a leading role to play in this process
as it often has advance warning of redundancies and will be able
to trigger action by the RRS at an early stage.
Budgeted spending for 2001-04: Back
High deadweight levels are a common problem in active labour market
policy, and have afflicted other countries' programmes, and those
introduced in Britain before 1997. The OECD's assessment of subsidy
programmes found that they "have large deadweight, displacement
and substitution effects and hence small net employment gains,"
with the schemes in Australia, Belgium, Ireland and the Netherlands
achieving levels off additionality of about 10 per cent. (Enhancing
the Effectiveness of Active Labour Market Policies, OECD,
1997, p 11.) A 1994 evaluation of Workstart, a subsidy programme
similar to the New Deal employment option, found that just 17
per cent of all jobs registered under the programme were generated
as a direct result of the subsidy. (Commons Hansard, 13-12-95,
col 695.) Back
Does welfare-to-work policy increase employment?: Evidence
from the UK New Deal for Young People, Rebecca Riley &
Garry Young, National Institute for Economic and Social Research,
Discussion Paper 183, August 2001, p 30. Back
Keeping Track of Welfare Reform: The New Deal Programmes,
Jane Millar, Joseph Rowntree Foundation, 2000, p v. Back
Calculating from table 11 of the April edition of the New Deal
statistical first release shows that 39.7 per cent of the
cumulative total of leavers left for jobs. Back
Working Brief, Unemployment Unit, Feb 1996, p 20. Figures
for Workwise, Jobplan and Restart Courses are for April-September
1995, for Restart Interviews figure is for 1995-96. Back
Taken from table 11 of the April edition of the New Deal statistical
first release. Back
Calculated from table 11. Back
Calculated from table 2. Back
New Deal for Young People and long-term Unemployed: Survey
of Employers, Jon Hales et al, National Centre for Social
Research, ES Report 58, September 2000, based on a survey of 3,209
Op cit, table 5.7. Back
Op cit, tables 8.9 and 10. Some employers listed more than
one reason. Back
Calculated from tables 1 and 12 of the April edition of the New
Deal statistical first release. Back
Calculated from table 4 of the April edition of the New Deal
statistical first release Back
Table 12. Back
DfEE press release 182/00, 27 April 2000. Back
Calculated from tables 1 and 12 of the April edition of the New
Deal statistical first release. Back
Calculated from table 4 of the April edition of the New Deal
statistical first release. Back
National Survey of Participants, A Bryson, G Knight and
M White, PSI, ES report ESR44, March 2000. Back
Employment Service 1994 National Customer Satisfaction Survey,
quoted in Desperately Seeking A Job, Iain Murray, Unemployment
Unit, 1995, p 41. Back
The Actively Seeking Work Rule: Awareness, Understanding and Impact,
A Thomas and J Ritchie, SCPR, 1991. Back
Working Brief, Unemployment Unit, August/September 1996,
p 20. Back
JSA Evaluation: Qualitative Research on Disallowed and Disqualified
Claimants, J Vincent and B Dobson, DfEE Research report 15,
The Princes Trust, in What Works: young people and employers
on the New Deal, 1999, found that "many of those on options
other than the employment option, including the full-time education
and training option, would have preferred a subsidised job and
felt that their choices had been constrained". The voluntary
sector and Environmental Taskforce options were "often seen
as `make work', offering short-term jobs with poor quality training
and few long-term prospects." Back
Calculated from table 2. Back
Calculated from table on Analysis of Sector Decision Making,
quarter ending 30 June 2001, Employment Service, p 3. Back
Calculated from ONS press release, 28 March 2002, table LTU. Back
Calculated from ONS press release, 28 March 2002, table LTUE5. Back
Reported in TUC New Deal briefings, passim. Back
Calculated from ONS press release, 28 March 2002, tables LTUE1
and 6. Back
Calculated from ONS press release, 28 Feb 2002, tables LTU1 and
Calculated from ONS press release, 28 March 2002, tables LTUE1
and 6. Back
Taken from the latest DWP monitoring data for each programme:
NDLP-First Release 4 April; NDYP and 25+-First Release
28 March. Back
Commons Hansard, 9 April 2001, Column, 489W. Back
Calculated by the TUC. Back
Calculated from the 4 April 2002 edition of the New Deal statistical
first release for NDLP (ONS) table 4. Back
The assessment of the personal adviser pilots found that, between
September 1998 and November 2000, 275,200 people were sent an
invitation letter. 18,166 disabled people attended an initial
interview, 51 per cent of whom had been referred by other organisations,
and 49 per cent were responding to the letter. 69 per cent of
those attending an interview volunteered to join the programme.
Evaluation of the New Deal for Disabled People Personal Adviser
Service pilot, J Loumidis et al, 2001, DSS research report
144, p 81. Back
Evaluation of the New Deal 50plus: Summary Report, John
Atkinson, IES for ES, report ESR103, December 2001, p 39. Back
Calculated from table A7 of Incapacity Benefit and Severe Disablement
Allowance Quarterly Summary Statistics, DWP, May 2001. Back
Calculated from table 11 of Labour Market Statistics, ONS,
October 2001 and table A7 of Incapacity Benefit and Severe
Disablement Allowance Quarterly Summary Statistics, DWP, May
Enhancing the Effectiveness of Active Labour Market Programmes,
OECD, 1996. Back
Employers, Recruitment and the Unemployed, J Atkinson,
L Giles and N Meager, IES, 1996. Back
Productivity in the UK. No 3-the regional dimension, HM
Treasury and DTI, November 2001. Back
New Jerusalem: productivity, wealth and the UK economy,
Knell, J and Harding, R Industrial Society, 2001. Back
In Demand: adult skills for the 21st Century, PIU, 2001. Back
Neighbourhood Renewal: increasing employment amongst deprived
areas and groups-implementation strategy, DWP, December 2001. Back
Neighbourhood Renewal: increasing employment amongst deprived
areas and groups-implementation strategy, DWP, December 2001. Back