There are currently more than five people chasing every vacancy in the UK. New analysis by the Institute of Public Policy Research shows that the job market will remain highly competitive until the end of 2011 at least and a ‘jobless’ recovery is likely until 2014, according to the Office for Budget responsibility.
Despite this, the strategy to tackle unemployment remains largely unchanged from the Labour Government’s New Deal schemes. The Coalition Government is about to introduce a flagship back to work scheme known as the Work Programme which, like the New Deal programme that preceded it, will provide services which prepare people for the job market and support them to look for work.
The New Deal programme was conceived in a time of strong economic growth and low unemployment. The main policy assumption behind it was that, for those who were fit and willing to work, finding and progressing in work was solely a matter of self-determination.
But in a new report we present evidence suggesting the link between job availability and employment is stronger than policy assumed. We conclude that too much emphasis was placed on helping people search for work, at the cost of investing in measures to stimulate growth. If the government over-stated its case in the boom years, in the current economic climate this position seems untenable.
Some jobseekers need services that can help them to navigate the demands of employers and overcome personal barriers to work. But jobs matter too. We argue that welfare to work providers can support employers to expand by offering services to improve business planning or to implement training to boost productivity and thus create new jobs.
There are plenty of untapped markets where this approach will work. Small businesses account for over 99 per cent of UK firms and represent the seeds of future growth. Yet while the majority of small businesses would like to expand, most lack the resources to do so.
One idea is that unemployed workers could cover periods of staff training or absence, providing jobseekers with relevant skills and preventing a drop in productivity for employers. This approach was first used in the UK during the recession in the early 1990s. By supporting firms to invest in workforce training, it allows them to adapt to a tough economic climate and take advantage of emerging markets. One recent evaluation of a scheme like this in rural Scotland found that it created 120 new jobs across 41 companies.
Some enterprising community organisations have created new jobs for disadvantaged groups by offering lower-cost solutions to local service delivery. From road maintenance to IT services, these organisations have negotiated with housing associations and local councils to contract them to meet local needs, and either support small companies to deliver the services, or deliver the contract themselves. This covers wages and on-the-job training for people that would otherwise struggle to find work in a competitive job market.
The IMF and the OECD have both called on countries to do more to stimulate job creation. This government is banking on private sector growth to fill the jobs gap without a backup plan. If the private sector is to flourish and provide opportunities for the most disadvantaged in society, back to work schemes need to play an active role in supporting businesses to weather the downturn and grow.
Tess Lanning is a researcher at the Institute for Public Policy Research. An executive summary of the report is available at http://www.ippr.org/publicationsandreports/publication.asp?id=775
