National Employment Policies: Lessons from the UK

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National Employment PoliciesLessons from the
UKs experience

• Professor Ivan Turok
• UN Expert Group Meeting on
• Full Employment and Decent Work
• 2-4 October 2007, New York

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Preliminaries

• My background
• The UN background notes
• Full employment and decent work is a very
  challenging agenda we shouldnt oversimplify
• Some of the challenges can be understood a more
  positive way
• Very different circumstances in different
  countries and continents make it difficult to
  generalise
• Tensions and trade-offs require tough choices
• Based on a sound analytical evidence base

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Outline

• UK context
• Labour market transformation creating challenges
  of adjustment and economic inclusion
• Changes in welfare system (supply-side)
• Active support to promote economic inclusion
• Changes in spatial policy (demand-side)
• Support for economic regeneration in cities
• Wider policy lessons

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Major unemployment problem in 1980s early
1990sClosely associated with de-industrialisation

• Source Webster, D. (2005)

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Sectoral Composition of Employment
of Total
US
UK
Services Industry Agriculture
Industry Manufacturing, Energy and Water
Utilities, Construction
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• Source
• Rowthorn, R.
• (2004)

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Steady employment growth over the last 14 years
(up 10)
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UK labour market has performed comparatively well
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Economic policy priorities include

• Emphasis on macro-economic stability
  (successful)
• Inflation targeting, independent Bank of England
• Strategic use of public expenditure - borrowing
  taxation
• Increased productivity (less successful)
• Innovation, science and technology, creative
  industries
• Increased cost competitiveness (successful)
• Flexible labour market (deregulation dating
  back to 1980s)
• Immigration
• Higher employment (successful)
• Above openness to foreign investment low
  minimum wage
• Strong supply side emphasis employability and
  skills

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Treasurys Analytical Framework
Living Standards
GDP per capita
Productivity
Employment rate
Demographic structure
Participation
Key drivers of performance
Investment
Innovation
Enterprise
Competition
Skills
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Challenges of adjustment and inclusion

• Deindustrialisation had the biggest impact on
• Former industrial cities in north of UK
• Male manual workers with low qualifications
• Shift from unemployment to worklessness
• Discouraged effect health
• policy supported move to sickness benefits
• Resulting employment rates vary greatly by
  qualifications, age, health, family status,
  region, ethnicity

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Shift from unemployment to worklessness
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Multiple barriers to work

• Ethnic minorities 60 employment rate
• As above and lone parents 42
• As above and no qualifications 11
• People over 50 - 70
• As above and disabled - 43
• As above and no qualifications - 24
• As above and from an ethnic minority - 17

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People were written off and are now stuck
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1. Changes in the welfare system Reasons

• Inclusion work is the best route out of
  poverty
• (income, morale, stress, health, self-esteem,
  family situation, social networks, childrens
  education behaviour)
• Child poverty the children of workless lone
  parents are at the greatest risk of being poor
• Emp. rate in 15 poorest areas 56 (79 rest
  of UK)
• Economic enlarge the labour supply and help to
  keep down wage inflation (welfare - drag on
  competitiveness)
• Financial ageing population and cost of
  pensions ( other inactive benefits) help to
  keep down taxes

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And also perhaps

• Public attitudes to inequality
• 55 of people think there is quite a lot of
  poverty in UK
• 75 think inequality is too high
• But public attitudes to redistribution
• 30 think the government should redistribute
  income
• 45 support a more conditional welfare state
  (effort)
• 25 prefer self-reliance resist redistribution
• And public attitudes to unemployed disabled
• 16 favour spending more on the unemployed (44
  less)
• 65 favour spending more on the disabled who
  cant work

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How?

• Rights and responsibilities from passive,
  unconditional, entitlement (welfare) to
  conditional and work-focused (active enabling
  system)
• Tailored support to help people back into work
• Outreach, interviews, action plans, skills, other
  specialised support for specific barriers
  (childcare, addictions, literacy)
• Long way to go before a high quality,
  personalised system with integrated and
  responsive support services
• Matched by obligation for people to help
  themselves
• Making work pay work/tax credits
• A hand-up not a hand-out

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E.g. New Deal

• Mandatory work focused interviews benefit
  payments are conditional on attendance
• Personal Advisers
• Choices package range of employability options
• Mainly focused on young people
• Limited support for older people, lone parents
• Has it worked? Large volumes, but doubts about
  quantity and quality of jobs (40 of New Deal
  jobs last lt 13 weeks) hence issue of job
  retention and progression, employer engagement,
  relevant skills

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E.g. Pathways to work for people on IB

• Mandatory work focused interviews benefit
  payments are conditional on attendance
• Specialist IB Personal Advisers
• Choices package tailored range of employability
  options
• Work Focused condition management delivered by
  health service staff
• Return to Work Credit 40 per week income
  top-up paid for 52 weeks
• Mainly focused on new claimants
• Has it worked? early days

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Pathways to Work
Health Services
Training
Employment pull
Incapacity
Social Care
In work Support
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Stock and flows Incapacity Benefit claimants in
Glasgow

15,000
12,100 (-19)
2000
67,900
2005
61,850 (9)
14,850 ( 2)
14,500
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2. Changes in spatial policy

• Shift in government policy towards cities
• From a view that theyre the source of social
  problems
• To (potential) solution to problems,
  particularly in advanced (service) economies
• engines of economic growth, creative cities,
  knowledge hubs
• Urbanisation economies sharing and matching
• Deep labour pool, proximity to suppliers
  customers
• Scale economies indivisibilities in shared
  infrastructure (e.g. transport gateways)
• Increases choice, lowers costs, adds resilience
• Increasingly important in a fast-changing
  economy, flexibility, outsourcing, adaptability,
  enables rapid business growth ( contraction)

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Cities policy

• Specialised economies (localisation) - learning
• Science and technology human capital
  universities
• Creativity, mutual learning and innovation
• Increasingly important for dynamic
  competitiveness in high cost economies - being
  smarter
• High-end products, processes and services,
  technological superiority, design, reliability,
  quality
• Benefits for consumers
• Cultural amenities, entertainment, retail,
  restaurants, hotels, public realm - experience
  economy
• Demographic changes
• Tourism, business conferences, venues for events
• More domestic sector orientation import
  substitution

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Summary

• UK experienced severe deindustrialisation
  instability
• Followed by a services-based recovery
  macro-economic stability
• job rich not jobless growth low productivity
  growth
• Outstanding changes of adjustment and inclusion
• Quality of jobs at bottom end wages, security,
  conditions
• Former industrial cities derelict land and
  out-dated infrastructure low-skilled men ethnic
  minorities
• Entrenched problems of poverty in some urban
  areas
• Long way to go to get high quality welfare to
  work system with integrated and responsive
  support services connecting health, social care,
  housing employment and training services

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Wider policy lessons

• Macro-economic stability is helpful
• A tighter labour market aids adjustment and
  inclusion
• A spatial perspective is important labour
  markets are local for most people, cities are
  important
• Need to address issues of labour demand and
  supply together (linking opportunities and
  needs)
• Active welfare support is important (
  opportunities)
• Difficult balance - decent welfare and incentives
  to work in a flexible, low paid labour market
• Tension between national policy (universal
  provision and standards) and local flexibilities
  benefits of bottom-up
• Work first versus a broader, more patient
  approach skills, personal development,
  childcare etc

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Wider policy lessons (2)

• Tension between (short-term) competitiveness
  (flexibility, low wages, immigration,
  concentrated growth) and inclusion (decent work,
  welfare to work, balanced growth)
• And between national standards and local
  responsiveness
• Strong evidence base is important

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Thank you!
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Reasons for de-industrialisation

• EXTERNAL
• Changes in international trade - loss of low
  value added industries to low wage countries c.
  30
• INTERNAL
• Out-sourcing of specialised services (catering,
  cleaning, security) c.5
• Shifting patterns of consumer demand from goods
  to services c.15
• Rising productivity in manufacturing and sectoral
  restructuring c. 50

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Differences between countries

• Impacts bigger ( quicker) in some countries than
  others
• Italy/Spain - USA - Britain
• Macro-economic policies
• Exchange rates, interest rates, investment
  allowances
• Financial systems (Germany Britain)
• Cultural factors (Britain anti-manufacturing)

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Glasgows decline

• Deindustrialisation 300,000 to 95,000
  manufacturing jobs (1971-2001)
• Population decline and community decline
  (1,100,000 (1950) -gt 600,000 (2001))
• Physical dereliction (10 of land)
• Extensive unemployment and poverty
• High mortality rates sickness
• Momentum of decline, poor image

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of working age population on welfare benefits
(2005)
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