Memorandum from the Trades Union Congress
1. This document presents the TUC's submission
to the House of Commons Employment Sub-Committee's inquiry into
"Recruiting the Unemployed". This submission looks at
why the TUC agrees that encouraging employers to recruit unemployed
people is a good idea, and some of the implications for policy
of such an emphasis.
2. Representing seven million working people
in 78 unions, the TUC is Britain's largest voluntary organisation.
We campaign for fairness at work, and support unemployed people
through our network of more than 80 Unemployed Workers' Centres.
We have a long-standing concern with policies designed to reduce
unemployment, and have for some years been arguing for active
labour market programmes designed to meet employers' needs.
3. The simplest answer to the question is
"they're the people who've got the jobs". Ultimately,
we have a choice with policies designed to help unemployed people:
Either we can provide alternatives
to the open labour market, so it doesn't matter whether or not
employers want to recruit them or not;
or we can increase the chances that
open market employers will want to recruit them.
4. There is a place for alternatives to
open employment. People with severe and/or multiple problems,
who would be unlikely to get jobs even in tight labour markets
may best be served by sheltered employment, and such schemes can
also act as a "buffer", soaking up cyclical increases
in unemployment. Job creation schemes can help keep unemployed
people in touch with the world of work, and can also help ensure
that there is an effective availability for work test for Jobseeker's
Allowance even during periods of high unemployment when such tests
are otherwise difficult to operate.
5. But there is a problem using these schemes
as a springboard into employment. The Community Programme, for
instance, (until the advent of the New Deal, Britain's largest-ever
programme) played a useful role as an alternative to open employment
for people who simply didn't have much chance of getting a job,
but it was not successful at helping people back into jobs. Just
19 per cent of the people who left the CP left for full-time employment
and 51 per cent of participants were still unemployed eight months
6. If we want labour market policy to be
pro-active, and to help people back into employment, then we also
need to design programmes that increase unemployed people's chances
of being recruited. Once again, there are basically two ways of
looking at this problemeither there is something about
unemployed people that makes them less likely to get jobs, or
there is something about what employers are doing which makes
them less likely to recruit unemployed people.
7. It is certainly true that unemployed
people do, on average have different characteristics from the
labour force generally. People without skills or qualifications,
for instance, are more likely to be unemployed, and this is why
training schemes are common government responses to unemployment.
8. Programmes designed to address employers'
behaviour have been slower to develop. The TUC has been very influenced
by a major study (Atkinson, Giles & Meager, 1996) of employers'
attitudes to unemployed people. This study found that, while few
recruiters believed unemployed people to be intrinsically less
employable, they did take applicants' unemployment seriously:
They tried to find out early on whether
an applicant was unemployed,
They asked unemployed applicants
why they became/how often they had been unemployed, and what they
had done while unemployed.
They took long/repeated spells of
unemployment particularly seriously: 56 per cent believed that
skills, and 54 per cent that work attitudes deteriorated during
9. This study reinforced lessons from other
Some employers simply reject all
long-term unemployed people at the start of their selection. (Meager
and Metcalf, 1987)
Many employers view long-term unemployment
as being associated with poor motivation, attitudinal problems
and declining skills
(James, 1997, quoted in Hasluck, 1999)
10. Some employers, especially line-managers,
believe that people made redundant may have been selected for
redundancy on the basis of poor performance, lack of work discipline
or other misdemeanours. (Crowley-Bainton, 1987a and 1987b, quoted
in Hasluck, 1999).
11. Given this evidence about employers'
attitudes, two approaches to persuading employers to recruit unemployed
people have developed:
Creating an incentive to recruit
unemployed people, usually some form of subsidy.
Providing unemployed people with
work experience so that employers will be persuaded that motivation
and skillsespecially "soft skills" have
12. Unsurprisingly, there are problems with
both approaches. We now know that employer subsidies have to be
very carefully designed:
One danger is that subsidies may
have no effect. Employers' first concern when recruiting is to
get the right person for job, and to minimise the risk of recruiting
the wrong person. Subsidies, which are complicated, obscure, or
wrapped in red tape, are often ignored. A good example of this
was the National Insurance Contribution holiday introduced in
April 1996. Employers were offered the ability to reclaim 12 months'
NI contributions if they recruited someone out of work for more
than two years. Take-up of 130,000 places a year was expected,
but by January 1997 there had been only 2,700 applications. Funding
for the scheme was first cut back by 94 per cent from 28 million
to 1.5 million, and the holiday has now been abolished.
The opposite danger is that a programme
will be all too attractive, and used by employers to subsidise
recruitment decisions they would have made in any case. Good examples
of this substitution were provided by the Temporary Employment
Subsidy, introduced in 1975 for potentially redundant employees,
replaced in 1979 by the Temporary Short Time Working Compensation
scheme. These programmes had massive deadweight61 per cent
of the jobs covered by TESand they tended to delay redundancies,
rather than prevent them (Hasluck, 1999, quoting Deakin &
Pratten, 1982, and Metcalf, 1986).
At the worst, subsidies can encourage
employers to make existing workers redundant so that they can
recruit subsidised employees. An associated problem is "churning"where
employers dismiss subsidised staff as soon as the subsidy ends,
and replace them with fresh subsidised recruits.
13. On the other hand, carefully designed
subsidies can have a positive impact. A 1997 OECD report argued
that subsidies could increase unemployed people's chances of getting
jobs, given this proviso (OECD, 1997) the OECD was particularly
impressed by two countries' experienced:
In Finland employers laid off workers
when the subsidy came to an end, and hired new subsidised workers,
leading to reforms so that the subsidy was only available for
The United States had found that
combining subsidies with training increased the employability
of workers who would otherwise find it very difficult to get jobs.
14. Substitution can be a desirable result
of subsidy programmes. Workstart was a subsidy programme, which
ran from 1993 to 1998. The programme had severe displacement problemsthe
long-term unemployed people recruited through Workstart took jobs
that would otherwise have gone to short-term unemployed people.
But it has been pointed out that cutting the proportion of unemployed
people who are long-term unemployed is an important goal in itself.
In other words, subsidies might help change employers' recruitment
decisions in favour of long-term unemployed people. (Layard, 1997).
15. Furthermore, one unambiguously positive
result of Workstart was the fact that Workstart employers 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. Employers with this positive
experience of a subsidy programme are likely in future to have
a much more positive attitude to recruiting unemployed people,
even when no subsidy is on offer.
16. One reason why the TUC is such a strong
supporter of the New Deal for young people is that these lessons
of previous British programmes and experiences from other countries
were taken into account when the subsidised employment option
was designed: the option includes a guarantee of training, and
employers who abuse the programme are banned from further participation.
17. The main policy alternative to subsidies
has been to offer work experience, and a key conclusion of the
IES survey was that it is important for unemployed people to stay
in touch with a "workplace-like culture" as employers
are particularly likely to be concerned about the loss of general
18. Employers are not easily impressed by
work experience programmes, which they tend to regard as "make
work schemes", unless persuaded otherwise. It is noticeable,
for instance, that the New Deal for young people's work experience
options have been much less effective at moving participants into
jobs than the Gateway or the subsidised employment option:
|Left during the Gateway, having had at least one interview
|Left from subsidised employment||42.4
|Left from voluntary sector work experience option
|Left from the full-time education and training option
|Left from the Environmental Task Force work experience option
19. Designing work experience which employers respect
enough to recruit people who have taken part in it is therefore
an objective for policy reforms. We already know that employers
are cautious about recruiting unemployed people because they fear
that key employment disciplines and soft skills deteriorate during
unemployment. Plainly, employers are sceptical about whether work
experience does anything to halt this deterioration.
20. The TUC believes that the failure to pay a realistic
wage to participants in the New Deal's work experience options
is one cause of this low valuation of work experience. At present,
participants in the Voluntary Sector and Environmental Task Force
options are paid their benefits, plus an extra grant worth about
£15 per week. Like trades unionists and unemployed people,
employers assume that real jobs pay real wages, and that schemes
which pay "benefit plus" are not realistic work experience.
In particular, providers who do not pay at least the minimum wage
will be unable to demand from participants the employment discipline
employers see as vital.
21. The TUC strongly supports all the New Deal programmes,
but we continue to believe that the failure to pay the rate for
the job to work experience participants is a major error.
22. Work Trials have been found to be particularly effective
at changing employers' behaviour. Work Trials offer employers
and unemployed people a "trial run" at employment for
three weeks, during which time both parties can decide whether
they are suited to each otherand there is no benefit penalty
for the claimant who returns to Jobseeker's Allowance.
23. A study of Work Trials found (White, Lissenburgh
and Bryson, 1997, 31) that, when compared with a control group,
people who had been on Work Trials were much more likely to have
a job and less likely to be unemployed:
| ||Full-time employment
||Other (mainly unemployment)
24. Plainly, there is a large group of employers willing
to abandon any fears and prejudices about recruiting unemployed
people when they have had a positive experience.
25. This does not mean that there are no possible problems
associated with Work Trials. Where the unemployed person is not
paid for her/his work while on trial unions will obviously be
concerned that this is not fair, and that there is an incentive
for less unscrupulous employers to use the scheme to substitute
for workers paid at the rate for the job. The longer the trial,
the greater the risk of this abuse.
On the other hand, employers may not be willing to recruit
unemployed people even on a trial basis, at the full rate. Social
partner involvement in the screening and monitoring of Work Trial
providers is the best way to reduce the risks associated with
the programmeeven when Work Trials are of extended duration.
Trades Union Congress
Atkinson, J Giles, L & Meager, N (1996) Employers,
Recruitment and the Unemployed, Institute for Employment Studies
Crowley-Bainton, T (1987a) "Bias in Employee Selection:
Selecting the Unemployed", Guidance and Assessment Review
vol 3, No 5 pp 6-7
Crowley-Bainton, T (1987b) "Discriminating Employers",
New Society, 27-11-87, pp 14-16.
Deaking, B & Pratten, C (1982) Effects of the Temporary
Hasluck, C (1999) Employers, Young People and the Unemployed:
a review of research, IER for ES, ESR12.
James, R (1997) Increasing Employability: An Operational
Perspective, ES Occupational Psychology Division, Briefing
Layard, R (1997) "Preventing Long-term Unemployment:
Strategy and Costings", Employment Policy Institute Economic
Report, March 1997.
Meager, N & Metcalf, H (1987) Recruitment of the Long-term
unemployed, IMS report 138.
Metcalf, D (1986) "Employment subsidies and redundancies",
in Unemployment search and labour supply, R Blundell and I
OECD, (1997) Enhancing the Effectiveness of Active Labour
Turner, P (1985) "After the Community Programmeresults
of the first follow-up survey", Employment Gazette, Jan
Robinson, P (1997) Labour Market Studies: United Kingdom,
White, M Lissenburgh, S & Bryson, A (1997) The Impact
of Public Job Placing Programmes, PSI.
There is a good reason why this is:] QL
"An economy which has very high unemployment is one which
is likely to be running a large budget deficit, as in Britain
in the early 1990s. Inevitably then any work programme will need
to have a low cost per place, and in order to avoid displacing
regular work will need to be at the margins of socially useful
activity. Labour market programmes are instituted because of the
shortage of regular employment opportunities. But in order not
to interfere with the regular workings of the labour market, such
programme places must not look or feel like regular jobs. They
have to offer relatively low rates of pay so that the incentive
to obtain a regular job remains. This was the paradox face by
the Community Programme in Britain in the mid-1980s. This kind
of work programme will always represent a stop-gap" (Robinson,
1997, p 74).Back
This is important: the same survey showed that employers recruiting
for unskilled and semi-skilled manual jobs listed as the shortcomings
which led them to reject applicants: lack of motivation or right
attitude (46 per cent), lack of basic skills (42 per cent), lack
of stable job record (34 per cent) lack of previous experience
(33 per cent). Back
Source: DfEE Statistical First Release, 30 March 2000
(SFR 10/2000), Table 11. Back
Participants who had got a job were also inclined to give the
programme the credit: when asked whether they would have got their
job even if they had not gone on a Work Trial, just 38 per cent
said "yes"-44 per cent said "no", and 18 per
cent were uncertain (Ibid, p 32). Furthermore, "there was
no clear tendency for the WT sample to be relatively advantaged
in relation to job gaining characteristics". (p 31) Using
regression analysis to control for personal and household characteristics,
work history, labour market background, job expectations and previous
participation in other programmes, "Work Trials increased
the odds of employment at interview by a factor of about 5."
(Ibid, p 35)
"The typical participants in Work Trials increased their
employment rate by 35-40 percentage points, a result which (to
the best of our knowledge) has no parallel in previous studies
of national labour market programmes." (Ibid, p 123).Back