The government’s much-vaunted welfare to work scheme could end up having no effect on the overall numbers of long-term unemployed people
The government is very proud of its Work Programme. It is especially proud of the fact that the programme’s private sector providers are only paid on the basis of individual outcomes – whether the participants get a ‘long-term’ job.
But what is the policy aim here? Is it to get individual long-term unemployed people into employment? Few would disagree that this is a laudable aim, but what are the costs and benefits?
The cost-benefit analysis seems to be currently limited to individuals. Is this a cheaper way of getting people into jobs? But the real issue is systemic – is this a cost-effective way of reducing unemployment, and especially long-term unemployment?
Take a simple example. An individual long-term unemployed person is successfully retrained and placed in a medium-term job. Result. But what if this retraining simply displaces a slightly less well trained existing worker who then becomes …long-term unemployed?
It is entirely possible that the Work Programme could be a 100% success for (current) long-term unemployed participants and have zero effect on long-term unemployment as a whole.
Even if this ‘supply-side’ programme simply raised the level of competitiveness amongst individual workers so that we had a much higher ‘churn rate’ and fewer long-term unemployed this would make little difference to the overall cost of unemployment to the public purse. It might, of course, drive down average wages a bit, but this would have little effect on the economy as a whole.
What will really matter in the long run is the level of employment opportunities, and the Work Programme will make not one jot of difference to that.
This post first appeared on Whitehall Watch
