APPENDIX 16
Memorandum from David Webster (JG 22)
SUMMARY
This submission is based both on the author's
professional experience and on an extensive programme of research
into unemployment and urban regeneration issues. Drawing on original
analyses and research by other authors, it shows that there is
a serious jobs gap in the former industrial cities and coalfields,
and certain other areas; that the real level of unemployment in
these areas is much higher than indicated by the Labour Force
Survey and claimant count; and that the gap between these areas
and the rest of the country is closing only slowly if at all.
It shows that the jobs gap is mainly due to the loss of manufacturing
and mining jobs. The phenomenon of "urban-rural manufacturing
shift" has played a particularly important role, together
with the difficulty of labour market adjustment through migration
and commuting. The jobs gap is also evident from its effect in
terms of migration, housing abandonment, family breakdown and
homelessness.
The submission shows how inadequate official
statistics have concealed both the jobs gap and its connection
with manual job loss. A range of academic "supply-side"
theories about travel to work, "employability", long-term
unemployment, work incentives and lone parenthood have been constructed
which purport to show that factors other than low labour demand
have caused the problem. These together add up to a portrayal
of the unemployed as an "unemployable" "underclass".
The author's research has shown that each of these theories is
mistaken, usually because evidence on the local availability of
jobs has been ignored in line with the assumptions these academics
started with. Present central government employment policies appear
to be largely based on acceptance of these "supply-side"
theories; the present analysis implies that they will not be successful.
The submission argues that improvement of the
official local unemployment statistics is the essential foundation
for effective policies, in that officials cannot do sensible things
if they do not know what the problem is. The main substantive
policy requirement is a shift of public resources from supply-side
programmes such as the New Deal to programmes which would increase
the availability of manual jobs in the areas of highest unemployment.
In particular, this means spending on derelict land reclamation,
industrial property development and associated road and public
transport infrastructure. There has been a failure at national
level to understand the scale of the costs imposed on the British
economy and society by de-industrialisation and there should therefore
be a reappraisal of policy towards manufacturing in the light
of these costs. It is argued that local government is better placed
to do "joined-up thinking" and organise "cross-cutting"
programmes in its area than is central government. It is suggested
that central government programmes on unemployment and "social
exclusion" should be replaced in high unemployment areas
by a Local Employment Plan prepared by the local authority, in
which all relevant public expenditure in the area would in principle
be available for reallocation in line with local priorities.
INTRODUCTION
1. The author's academic research has developed
in support of his work on housing in Glasgow and on the broader
issues of urban regeneration which are an essential part of that
work. It is not some kind of sideline. Moreover, managers think
differently, use different types of information and have different
goals from academics. Both are nevertheless important. This submission
therefore draws both on the author's research and on his practical
experience as a local authority manager in a high unemployment
area.
THE JOBS
GAP AND
ITS CAUSES
The Geography of Unemployment
2. For the author, the fundamental reason
for believing that there is a jobs gap is simply that it has been
the dominating reality every day in almost 19 years' work in Glasgow.
To ask a local authority housing manager in Glasgow whether there
is a jobs gap in the city is like asking an African famine relief
worker whether people are hungry. Moreover, I started my professional
life 30 years ago, and unlike many younger people, know what full
employment was like. My jobs have also given me an intimate knowledge
of working-class Britain over a long period.
3. However this first-hand evidence has
been backed up by extensive statistical work showing how serious
the problem is in the former industrial cities generally, with
coalfields and some coastal and remote rural areas also affected.
Webster (forthcoming B) is an analysis of the published Labour
Force Survey (LFS) unemployment rates for 73 areas defined in
such a way as to bring out both regional and urban-rural contrasts.
This shows that in winter 1998-99 ILO unemployment rates had a
wide range, from 2.6 per cent to 14 per cent. The highest unemployment
rates (all above 10 per cent) were in urban areas: Sunderland,
Liverpool and Merseyside, Glasgow, Cleveland, Hull and S. Yorkshire
excluding Sheffield—all former industrial areas in the north.
Conversely, the lowest unemployment rates (below 4 per cent) were
in rural or small town areas, mainly in the south.
4. A very similar picture is shown by the
claimant unemployment figures for local authorities. For reasons
explained below, these require corrections, which are published
regularly on the Internet by the author (Webster 1998d, 1999c)
and have been endorsed by academic use (Gordon 1999, p89). The
corrected figures for July 1999 show that 32 local authorities
had claimant unemployment 8 per cent or above, when the GB average
was only 4.3 per cent. Among these 32, the cities had 15 times
as many unemployed claimants as all other types of area combined.
The House of Commons Library figures for constituencies, which
are quite reliable although using 1991 denominators for economically
active population, again give a similar picture. In July1999,
54 constituencies in Britain had claimant unemployment more than
double the GB average of 4.3 per cent; all but three of these
are in cities.
"Real" Unemployment
5. Both the LFS and claimant figures understate
unemployment. Across areas, high unemployment is associated with
low economic activity. In the LFS for Winter 1998-99, the high
unemployment cities of Liverpool, Glasgow and Manchester had economic
activity rates (aged 16 plus) respectively of 50 per cent, 51.5
per cent and 52 per cent, far below the GB average of 62.3 per
cent. The scale of the fall in economic activity since 1981 was
obvious to us in Glasgow as soon as we looked at the 1991 Census
results in 1993. The proportion of the over 16 population permanently
sick had risen from 3.2 per cent to 9 per cent and the proportion
of men aged 16-65 who were retired had more than doubled. The
issue of rising inactivity has since been analysed by many authors
including Anne Green, Gregg & Wadsworth and Beatty et al (1997a),
who showed that between 1981 and 1995 the number of people in
Britain claiming sickness-related benefits for over six months
rose by no less than 1.23 million. The government now accepts
that many people on Incapacity Benefit (ICB) are really unemployed.
But it has not yet drawn the implication that in reckoning the
supply-demand balance in local labour markets, these people must
be added to the tally of those requiring jobs.
6. This task has been carried out by Beatty
et al who calculated that in January 1997, when the GB claimant
rate of unemployment was 7.1 per cent and the UK LFS rate 7.6
per cent, the GB "real" rate of unemployment was 14.2
per cent. They estimated that 58 local authority areas had "real"
unemployment more than 50 per cent higher than the GB average,
ie a phenomenally high 21.3 per cent or more. These areas were
mainly in the northern industrial cities, inner east London, and
the former coalfields. The author can confirm the plausibility
of their estimate that in January 1997 real unemployment in Glasgow
was about 30.6 per cent. In 1994 we ourselves estimated Glasgow's
1991 real unemployment at 29 per cent (Webster 1994a). In the
latest analysis by Beatty & Fothergill (1999), Glasgow is
estimated to have over 50 per cent more hidden unemployment among
male ICB claimants than any other local authority in Britain.
These 32,500 men at August 1996 actually outnumbered the male
claimant unemployed.
Aggregate "Real" Unemployment: Historical
and International Comparisons
7. The TUC's LFS-based "Want Work Rate"
(WWR) is a particularly valuable indicator of real unemployment.
The WWR shows the unemployed plus the inactive wanting work as
a percentage of all those working or wanting work (TUC 1998).
It gave almost exactly the same GB figure for January 1997 as
Beatty et al: a little over 14 per cent. The two measures were
also very close in a separate analysis of high and low unemployment
areas. This close correspondence gives credibility to both figures.
8. The government and Bank of England have
started to use claimant unemployment to make favourable comparisons
of the position today with that of the late 1970s. But the coverage
of the claimant unemployment rate has changed too much for it
to be used to make valid historical comparisons. Beatty et al
"Real" unemployment figures are available only for 1997
and 1991. However it is possible approximately to compare the
WWR now with the WWR in 1979 and earlier. The UK WWR computed
by the author from the Eurostat LFS report for 1979 was approximately
5 per cent when the ILO unemployment rate was approximately 3.3
per cent. This compares with a UK WWR of approximately 13.4 per
cent at autumn 1997, two-and-a-half times higher. Even in 1984,
when unemployment was more or less at its peak, the UK's WWR was
only 3.6 percentage points higher than in autumn 1997, at 17 per
cent (Figure 1).
Sources: Eurostat Labour Force Survey;
Employment Policy Institute Employment Audit, Autumn 1998
9. Another way of making a historical comparison
is to look at the proportion of households which are workless.
The EPI (Autumn 1997, p.9) shows that for the UK this was 19.3
per cent in 1996, compared to only 8.4 per cent in 1979. For Tyne
& Wear the rate was 29.5 per cent in 1996, almost three times
the 1979 rate of 10.9 per cent; while for Strathclyde & Central
Clydeside the rise was from 11.5 per cent to 28.1 per cent.
10. Official statisticians usually claim
that LFS (ILO) unemployment rates are comparable between countries,
and that the UK's relatively low LFS rate shows greater labour
market success. As noted by the TUC (1998), neither assertion
is correct. Differing social security systems (and no doubt some
other factors) result in different proportions of the unemployed
being allocated to other statuses. In the 1997 LFS, the UK's unemployment
rate of 7.1 per cent appears to compare well with France's 12.6
per cent and Germany's 9.9 per cent. But the proportion of the
UK's inactive persons who wanted work was the highest in the entire
EU at 12.9 per cent, compared to only 4.7 per cent in Germany
and a mere 1.6 per cent in France. The WWR, which takes this into
account, was higher in the UK at 14 per cent than in France (13.7
per cent) and Germany (12.9 per cent).
11. Apart from the claimant, LFS and "real"
unemployed, there are other groups who often do not want work
themselves but who the government thinks ought to work. Unfortunately,
these groups—long-term sick, lone parents and non-working
partners of the unemployed—are concentrated in the same
areas of high unemployment, indicating that they cannot all be
got into work unless employment in increased in these areas (Turok
& Webster 1998, Webster 1998b).
Has the jobs gap been closing?
12. Since 1993, there has been a modest
reduction in the jobs gap in aggregate, as shown by the TUC's
WWR series, although it remains very large. But the latest evidence
indicates that in the high unemployment areas, it has at best
been closing very slowly, and possibly not at all. The author's
own LFS analysis (Webster forthcoming A) shows that job growth
Winter 1993-94 to Winter 1998-99 has generally not been occurring
in the places where it would have had the most impact on unemployment
and inactivity. While ILO unemployment rates have converged across
areas, activity rates have not, so that many areas have seen increases
or only small reductions in the combined total of unemployment
and inactivity. Of the 16 areas with a fall of 10 per cent or
more in their total of unemployed or inactive people, 11 are county
(non-urban) areas in the south or midlands, while the 19 with
an increase in their total of unemployed or inactive people include
a disproportionate number of the cities and areas in the north
of Britain.
13. The author's analysis of corrected claimant
unemployment by local authorities (Webster 1999c) shows that the
number of local authorities with a corrected claimant unemployment
rate of 8 per cent or more fell from 39 in July 1998 only modestly
to 32 in July 1999 (this series cannot be taken back further).
The mean reduction in unemployment for the 39 local authorities
over the year was 0.86 per cent, better than the (provisional)
fall in the GB average of 0.4 per cent, but reducing the gap only
by 0.46 per cent. It would take a decade of sustained progress
at this rate (until 2008) to bring the average high unemployment
area down to the British mean; this would still leave many areas
worse off. Moreover the ratio of "real" to claimant
unemployment appears to be substantially higher in the high unemployment
areas, so that the claimant figures are underestimating the gap
between the high unemployment areas and the mean.
Causes of Chronic Geographically Concentrated
High Unemployment
14. Why does unemployment have this geographical
pattern, of concentration in the cities and coalfields? Because
manual jobs have been lost in large numbers from these areas,
and labour market adjustment has not occurred to a sufficient
extent to bring it down. The loss of manual jobs has been due
to the loss of manufacturing and mining activity. The loss of
mining is well understood. The loss of manufacturing has been
due to three main factors: general lack of competitiveness; large
scale loss of manufactured exports through sterling overvaluation,
especially in 1979-83; and "urban-rural manufacturing shift".
It is this last factor which has been of special importance for
the cities.
15. Urban-rural manufacturing shift is the
term given to the movement of manufacturing operations to smaller
settlements in response to their reduced dependence on proximity
to railheads, increasing space requirements, and other factors.
The process has been extensively charted for the USA, for instance
by Kasarda (1989, 1995) and Mills & Hamilton (1989), and for
the UK by authors such as Corkindale (1977), Keeble (1980), Fothergill
et al (1985), Townsend (1993) and Gudgin (1995). As a result of
this shift, most big cities have lost two-thirds of their manufacturing
employment since 1979, compared to a national loss of around a
third. By contrast, small towns and rural areas have maintained
or even gained manufacturing employment.
16. There has been a general failure by
the authorities in the UK to trace the effect of employment loss
through to concentrations of unemployment. For Glasgow, no analyses
of the change in employment by socio-economic group existed until
carried out by the author. Having visited devastated areas of
US cities such as South Bronx, Jersey City and St Louis on a DoE
study tour in 1976, the author was led by the emergence of similar
conditions in Glasgow in the later 1980s to think that the causes
were probably similar. After discovering Kasarda's definitive
(but still, in Britain, little known) US work he set out to replicate
it for Glasgow. It did indeed produce similar results. Comparison
of the changes in the employment base of, for instance Glasgow
and Philadelphia shows a virtually identical picture in these
terms (Figures 2 and 3), so it is not surprising that they have
undergone similar social breakdown.
17. In Glasgow, a fall of 37,800 (44 per
cent) in manufacturing employment in 1981-91 was followed by a
further fall (on the new boundary) of 11,500 (27 per cent) between
1991 and 1997. Service employment did virtually nothing to offset
this loss in 1981-91. Services grew apparently more healthily
in 1991-97 by 22,800 (9 per cent), but as the Glasgow Economic
Monitor recently pointed out, these jobs are often female and
part-time. Overall, female part-time jobs rose by 12,800 (21 per
cent) but male full-time jobs—the basis of the traditional
family structure—fell by a further 14,500 (9 per cent) over
these six years.
18. Turok & Edge (1999) have extended
this type of analysis to British cities generally and gone much
further in carrying out full-scale "labour market accounts"
showing what happened to unemployment, inactivity, commuting and
migration as a result of the loss of jobs. This work shows beyond
any doubt that the unemployment problem of the UK cities, like
those of the USA, is due to disproportionate loss of manual jobs,
mainly in manufacturing, to which labour market adjustment by
migration and commuting has been unable to occur to a sufficient
extent. Glasgow's Housing Plan 1996 traced out the same process
for the city in a somewhat different, but equivalent, way.
19. Beatty et al's (1997b) study of the
English and Welsh coalfields in 1981-91 is also very important.
The author has recalculated the findings of this study in a way
relevant to the present discussion (Webster 1998a). The 39 "principal
coalfield Districts" on average lost a net 14.1 per cent
of their male jobs after allowing for labour force growth. On
average there was net outmigration equivalent to 4.2 per cent
of their male workforce and an increase in net outcommuting of
1.4 per cent leading to an increase in "real" male unemployment
(including falling economic activity) of 8.6 per cent. In other
words outmigration compensated for under one third (29.8 per cent)
of job loss and outcommuting for one tenth, leaving most (three-fifths)
of the job loss feeding directly into "real" unemployment.
UNEMPLOYMENT AND
VACANCIES
20. The fact that geographical concentrations
of unemployment are due to shortage of jobs and not to voluntary
worklessness is shown by the job vacancies data available from
ONS. Across TTWAs in July 1999 there was a strong correlation
(0.74) between the U/V ratio (ratio of claimant unemployed to
unfilled vacancies) and the claimant unemployment rate. The higher
the unemployment rate, the more unemployed workers are competing
for each vacancy. The relationship is such that in an area with
9 per cent claimant unemployment there are typically 8.5 per cent
unemployed workers to every vacancy, whereas in an area with the
national average of 4.3 per cent unemployment there are only half
as many (4.3). In an area with 2 per cent unemployment an unemployed
worker has almost a 50-50 chance of getting a job at least in
so far as competition with other claimants is concerned. The true
odds are much worse than this, because about half of all vacancies
are taken by people previously economically inactive. (Fuller
details in Webster 1999d)
21. These U/V ratios, because they are correlated
with unemployment, again indicate that in the cities and coalfields
it is much harder to get a job than elsewhere. An earlier examination
of U/V ratios at TTWA level for Winter 1997 produced similar results:
"Insofar as there is an identifiable spatial pattern . .
., it is that buoyant labour markets tend to be semi-urban in
nature while inner cities, old industrial conurbations and remote
rural areas remain depressed" (EPI, Autumn 1998).
The Difficulty of Spatial Labour Market Adjustment
22. Why has labour market adjustment to
spatially concentrated job loss not occurred to an extent sufficient
to eliminate concentrations of unemployment? Because such adjustment
tends to be slow and difficult.
23. It is well-established that inter-regional
net migration falls, often to nothing, during recessions. This
means that migration adjustment has to be carried through during
the brief "windows" offered by booms (Jackman &
Savouri 1992). In relation to job loss since 1979, only during
1985-90 and since 1994 has longer-distance migration adjustment
been occurring on a significant scale. Moreover, it is mainly
younger people at the pre-family stage of their careers who migrate,
since the human and financial cost for families are so great.
This reduces the scope for adjustment still further.
24. Commuting can be adjusted quickly. But
only in rare instances are areas of job growth conveniently juxtaposed
to areas of job loss. Lengthy commuting carries costs which make
it uneconomic for manual workers on low wages. And workers attempting
to commute out of their home area face severe barriers in the
form of employer preferences, lack of information, and sheer competition
for the jobs from those who live closer. Due to travel costs,
residents of the target area will compete much harder for jobs
close to their homes than for jobs in the displaced workers' home
area (Webster 1994b, 1999e).
The jobs gap revealed by its effects
25. Another way of demonstrating the existence
of a serious jobs gap, particularly in the cities, is by considering
its effects, especially population movement, housing abandonment,
family breakdown and homelessness. The jobs gap is not something
that shows up only in labour market analysis. It is a profound
and manifold influence, producing comprehensive neighbourhood
decline and social breakdown.
26. It was mentioned above that migration
out of areas losing jobs is not great enough to re-establish labour
market equilibrium. It is nethertheless large. Population flows
from high unemployment to low unemployment areas and a close correspondence
can be demonstrated between changes in the unemployment differential
and changes in the migration flows (Glasgow City Council 1996;
Webster 1998e)[1].
The effect shows up in housing markets. Low demand for housing
with associated neighbourhood abandonment has been a dominating
problem in Knowsley from the late 1970's, and Glasgow and Dundee
for a decade or so. It has recently been acknowledged as a major
problem in most of the northern English cities and coalfields.
The author's research has shown that low demand can be directly
related to real unemployment (Webster 1998e; Wilcox 1999). Abandonment
of housing in the high unemployment areas of Britain has its direct
counterpart in the excessive pressure for housebuilding in the
exurban south, which is currently such a fiercely contested issue.
27. There is also a large volume or research
showing that high unemployment has led to a rise in lone parenthood,
in both Britain and the USA (Webster forthcoming B; also Webster
1997d). There is a strikingly close relationship across areas
between the level of male unemployment in 1981-91 and the scale
of the increase in lone parenthood in the area. A similar analysis
has been made independently by other British authors, Professors
Ian Gordon and Jonathan Bradshaw.
28. The problem of homelessness in areas
of manual job loss such as Glasgow (which has more than double
the average Scottish incidence of homelessness) is also demonstrably
the result of high unemployment. In more prosperous areas, there
tends to be a shortage of housing due to population inflow, and
the homeless include a high proportion of couple families. But
in Glasgow and areas like it, there is no housing shortage yet
homelessness is greater, while the homeless are mainly single
people and lone parents. What happens is that the stress of unemployment
breaks up the families who then present as lone parents, separated
single men, and young people disadvantaged by the combination
of family breakdown and youth unemployment. This analysis is supported
by work on homelessness in US cities (Burt 1991).
CONCEALMENT OF
THE JOBS
GAP BY
OFFICIAL UNEMPLOYMENT
STATISTICS
29. Britain has an out of date, underfunded
system of local unemployment statistics which is getting worse,
not better.
"Travel to Work Areas" (TTWAs)
30. The primary official local unemployment
rate figures since 1961 have been those for "Travel to Work
Areas" (TTWAs). These are a perpetuation of a cheap, crude
system invented in 1953 and are seriously misleading (Webster
1998c, 1997c; Webster & Turok 1997; Green & Coombes 1985).
They reflect the lengthy commutes of higher paid white collar
workers, not those of the manual workers who endure almost all
the unemployment. They conceal the cities' high unemployment by
averaging it out with that of their prosperous commuter hinterlands
and were never going to disclose the emerging urban employment
crisis. They also contain systematic errors. Out of the 297 new
(1998) TTWAs, one quarter have proportional errors in their unemployment
rates of 10 per cent or more, and at July 1998, 60 had their unemployment
rate misstated by 0.5 percentage points or more (Webster 1999a);
generally, it is urban areas whose rates are understated. ONS
has inherited from the former Department of Employment the practice
of not disclosing to users the errors in its TTWA unemployment
rates.
31. Together, TTWAs' concealment of area
concentrations of unemployment and undisclosed errors have made
nonsense of a great deal of academic research, much of it paid
for by central government. They have also done a great deal of
practical damage to Glasgow. Central government officials have
not understood the basis on which TTWAs are designed and have
assumed that the Glasgow TTWA realistically describes the zone
over which Glasgow workers ought to commute. This has led to the
assumption that continuing to develop the Glasgow New Towns (which
are within the TTWA) rather than the city, using RSA and EU funds,
ought to have taken care of Glasgow's unemployment problem, even
though very few people from Glasgow actually work there. The further
conclusion has been drawn that the fact that Glasgow workers do
not work in the New Towns shows that they are uncompetitive or
not trying.
"Workforce" Unemployment "Rates"
32. Since 1996, ONS has made matters worse
by publishing "workforce unemployment rates", showing
resident unemployment as a percentage of people with a workplace
in the area plus the resident unemployed. In cities, in-commuters
outnumber resident workers, so that this procedure often hugely
understates their unemployment rates. For Birmingham Ladywood,
for instance, ONS gave the rate as 3.7 per cent in May 1999 compared
to the true 17.7 per cent (Briscoe 1999). It has also now emerged
that the supposedly up-to-date "workforce" denominators
are of doubtful reliability (Webster 1999c). Newspapers regularly
quote these misleading rates as if they were properly residence-based,
with the result that the public are given an extremely confusing
picture of the spatial pattern of unemployment. ONS has taken
no steps to advise press or public of the correct position. Glasgow
City Council has formally requested ONS not to publish its misleading
"workforce" claimant rate for the city (currently shown
as 6.5 per cent when it is really 9.3 per cent), but has been
ignored.
33. From a management point of view this
makes no sense. Every competent manager knows that staff in an
organization can only be expected to do sensible things if they
have an accurate awareness of the problems and issues. By disseminating
misleading information about unemployment throughout the administrative
machine and to the public, the Government is ensuring that foolish
decisions will be made and public money wasted.
34. In particular, ONS unemployment statistics
have obscured the close spatial correspondence of unemployment
with manual job losses and therefore have reduced the perceive
salience of these losses. Use of the "workforce" unemployment
rates also appears to have led to a failure in at least some cases
to designate important areas of high unemployment in the new Assisted
Areas map (Webster 1999e).
ACADEMIC THEORIES
DENYING THE
EXISTENCE OF
A JOBS
GAP AND
POLICIES DERIVING
FROM THEM
35. A whole range of "supply-side"
labour market theories has been developed which deny the reality
of the jobs gap. All of them are individually contradicted by
the empirical evidence, but they have acquired credibility because
they form a mutually supporting framework.
Ignoring the Spatial Dimension
36. The most pervasive and probably most
effective way in which supply-side theories have gained apparent
empirical support has been through research designed in such a
way that no evidence could emerge which would contradict them.
This is usually because no spatial dimension is included; as shown
earlier, the jobs gap is a feature of particular areas within
regions of Britain, so that national or regional level analyses
do not correctly register it. Since the reason why no spatial
dimension is included is usually because a supply-side perspective
has led the researchers to believe that none is needed, the supply-side
view is in a very real sense circular and self-sustaining. A striking
recent example is HM Treasury's document on poverty and inequality
(March 1999). Although correctly identifying work as the best
route out of poverty, neither it nor its supporting LSE papers
contain any analysis of what has happened to the availability
of work in different areas. The DSS's programme of research into
low income families (PRILIF) has had the same weakness and has
helped to send policy on lone parenthood off in the wrong direction
(Webster forthcoming A).
Travel to Work
37. It was the assumptions about travel
to work underlying supply-side theories which I first investigated
empirically myself. This was due to circumstances in Glasgow and
Scotland. Since 1988, Scottish Office urban regeneration policy
has been based on the assumption that it is not necessary to promote
additional jobs anywhere near the target area. Employment can
supposedly be taken care of by helping residents to compete in
the "wider labour market", which in practice appears
to mean the TTWA. I did not challenge this at the time, but when
the Scottish Office launched a consultation in 1993 I decided
to investigate it. As a result I was able to show, using Census
commuting data, that in fact residents had very little chance
of getting any new jobs unless they were located nearby—within
about three miles (Webster 1994b; 1999e). Within a conurbation,
the share of jobs in each area held by the residents of a given
area declines exponentially with distance, in other words very
fast indeed. In Glasgow in 1991, for instance, residents would
typically hold a fifth of the jobs in their own area but only
2 per cent of those as little as three miles away. These commuting
patterns conform to the well known "gravity model".
38. This debate has a long history. The
initial response of academics to job loss from the cities was
a realistic one. John Kain (1968) in the USA formulated the "spatial
mismatch hypothesis" which attributed urban unemployment
to the decentralisation of blue collar jobs to suburbs and exurban
areas which low income inner city residents could not reach. This
at first secured a considerable degree of official acceptance
in the USA and has been vindicated there by recent research, reviewed
by Kain himself (1992), Ihlanfeldt and Sjoquist (1998) and Pugh
(1998).
39. In Britain the official Inner Area studies
of the late 1970s took the same approach. But they were challenged
by a group of mainly London-based economists. Reflecting a general
"neoclassical" belief in the speed and smoothness of
adjustment processes in a market economy, they argued that commuting
within urban areas is so convenient and extensive that loss of
jobs from a particular area, such as the London docklands, would
quickly lead to the displaced workers themselves displacing other
workers further away, who would in turn displace yet others, so
that within a couple of years unemployment would be equalised
across the whole conurbation for each type of worker. Any remaining
area concentrations of unemployment would be due solely to the
characteristics of the areas residents, which in turn would be
due to housing factors such as the presence of large council estates,
and not to the labour market. According to this "characteristics
approach", nothing should be done to replace the lost jobs
at their original location or indeed anywhere in particular. Advocates
of the "characteristics approach" however neglected
to examine empirical evidence on commuting patterns (Webster 1994b,
1999e). Their analysis is also contradicted by the "labour
market accounts" of Turok & Edge and Beatty et al., which
have shown that the loss of jobs from the cities and coalfields
was so great that little adjustment has been possible through
commuting or migration.
40. There is one economists' argument based
on ignorance of the spatial nature of urban labour markets which
has done particular damage. This is that because the share of
jobs in a particular area held by the area's residents is so much
less than 100 per cent, creating local jobs is too inefficient
to be worth doing. This was said for instance of Tyneside and
also in the official evaluation of Glasgow's East Area Renewal
(GEAR) project (1976-86). What these authors did not realise is
that if jobs are not created locally, residents will get even
less of them—by a huge factor. Nevertheless, on the basis
of this "employment leakage" argument, the Scottish
Office and Scottish Development Agency abandoned employment-focused
urban renewal and in the "Urban Partnerships" launched
in 1988 adopted the "characteristics approach" model
advocated by the London group. Housing, environment, training
and job placement were to be addressed but there was to be no
significant local employment promotion or transport investment.
41. English policy is now moving in the
same direction. It appears that central government has still not
recovered a knowledge of the spatial structure of labour markets.
The Observer (7/12/97) attributed to "Downing Street"
the view that "Labour rejects the argument that jobs in the
areas around problem estates have disappeared, entrenching long-term
unemployment. Something like 90 per cent of Britain's long-term
unemployed live within 45 minutes of a jobs growth area".
It would be impossible, were the government to try, to produce
evidence that jobs had not disappeared in the areas around problem
estates. The Social Exclusion Unit's report on deprived neighbourhoods
(1998) did not provide any such evidence or even pose the question.
The claim about jobs growth areas within 45 minutes travel time
is also misleading. It raises not only the issues of mode of transport
and cost, but also what kind of jobs are growing and how many
other people are competing for them. This is particularly important
in city centres, which not only tend to produce disproportionate
growth in white collar and female jobs, but are also super-accessible
so that their jobs are effectively available to commuters from
a huge area.
"Employability", Education and Training
42. I wrote up my commuting analysis and
its implications for employment policy for Glasgow in a detailed
paper (Webster 1994b) which was made available to all the key
officials in the Scottish Office. Alf Young of the Glasgow Herald
noted at the time (Young 1995) that in spite of the cogency of
the analysis, it fell on deaf ears. I also spoke about it to the
then Chairman of Scottish Enterprise who arranged a discussion
with a senior official. This was useful in revealing what Scottish
Enterprise really thought was Glasgow's problem. In their view,
it was not shortage of jobs but simply that Glasgow had too many
"unemployable" people. As I know the city well, and
had also spent most of my life in London, I did not find this
realistic. However the discussion stimulated me into analysing
all the available statistical information about comparative labour
force quality in Glasgow. The evidence indicated that Glasgow
actually has a better quality labour force than areas with lower
unemployment, but that its higher unemployment is by contrast
readily explained by its worse performance in terms of jobs (Webster
1994c). I was delighted later to encounter the paper by McCormick
(1991) using LFS data which shows the same in relation to the
British conurbations generally.
43. The difficulty of implementing "supply-side"
labour market policies in the labour demand conditions of the
British industrial cities is easily seen from Figure 2. In 1981-91,
Glasgow lost junior non-manual jobs as well as manual jobs, so
that upskilling would have had to shift substantial numbers of
blue collar workers into the managerial and professional category—a
tall order. This kind of analysis is rarely done. Generally, there
is a serious weakness in official evaluations of training policy,
which are almost always made in terms of "positive outcomes"
such as placements into work. These indicators may be suitable
for performance monitoring of the organizations concerned, but
do not show the extent to which workers in aggregate are actually
shifted into the required skill categories.
44. Current official assumptions also lack
historical perspective. It is assumed that there are very large
numbers of people—many hundreds of thousands, if not millions—who
are "unemployable". The International Labour Review
(1942, p58) showed the number of unemployed "classified as
unsuitable for ordinary industrial employment" falling from
38,000 to 31,000 in March-November 1941. It is implausible to
suggest that there are hundreds of thousands, let alone millions,
of people like this in Britain today when there were only 31,000
in 1941.
45. There is a strong body of research contesting
the view that education and training can do much to improve Britain's
employment performance. This is summarised for instance in Shackleton
(1995) and there is a brief review of the literature in Webster
(1996, pp64-69). In essence, the point is that much, if not most
"human capital" formation has always been through "on
the job" training. For those who do not have a job, off the
job education and training are usually a poor substitute. For
the same reason it is difficult to promote entrepreneurship directly
in areas of high unemployment, since potential entrepreneurs need
to get experience and contacts in a particular trade before they
can set up on their own.
"Employability" and Long-Term Unemployment
46. In Webster (1994c), even more important
than the data on labour force quality was the finding that across
areas, there was a constant relationship between the level of
long-term unemployment and the level of total unemployment. This
was a dramatic discovery because according to the dominant theory,
Glasgow, with particularly high unemployment, ought to have had
a disproportionate number of long-term unemployed.
47. The New Deal programme is based on the
ideas of Professor Richard Layard of the LSE (Layard 1997), who
is one of several authors who have elaborated the theory that
being unemployed makes people less employable, so that after a
period of high unemployment, a pool of "unemployables"
is formed which is difficult to reabsorb into the labour force.
My discovery contradicted this theory. As time permitted, I went
on to extend my research both historically and geographically
into a comprehensive refutation (Webster 1996, 1997a, 1997b).
In essence, what had happened was that Layard and his associates
had misinterpreted the early 1980s rise in the proportion of unemployed
who are long-term. In doing so, they were following in the footsteps
of earlier writers going back to Pigou in 1933 (The Theory of
Unemployment, p16) and even the Webbs in 1909 (Minority Report
of the Poor Law Commission, Part II, p.237). In fact the view
of Pigou and the Webbs was never based on any objective evidence.
The empirical evidence for the 1930s, for Britain since 1979,
and across countries, actually shows that as the economy recovers
from recession, long-term unemployment tracks back down in relation
to total unemployment in exactly the same way as it tracked up.
The evidence I myself produced on this was exhaustive and conclusive.
It has since been backed up by other authors (Machin & Manning
1998; Robinson 1999). Furthermore, the whole econometric model
into which Layard built his assumptions about long-term unemployment
(Layard et al 1991) has since been shown not to work on later
data (Madsen 1998).
48. I sent my analysis to Richard Layard
(who is a former colleague of mine) in 1996. His defence was not
to address my criticisms directly, but to point to a new international
cross-section multiple regression analysis, published as Jackman
et al (1996) and as Nickell (1997). This purported to show that
"active labour market policies" such as the New Deal
reduce long-term unemployment. There are many technical weaknesses
in this analysis, which I pointed out in a letter to Richard.
However, the most critical weakness was one which I could not
know about at the time. The Jackman et al/Nickell findings depend
almost wholly on the role of active labour market policy in Sweden;
but this summer (1999), the OECD has drastically revised the ILO
unemployment statistics for Sweden, so as to remove the supposed
effect (Webster 1999b). In my view their case has thus collapsed.
49. It is worth noting that the failure
to consider spatial data mentioned earlier has played a key role
in producing spurious findings about long-term unemployment which
have directly affected policy. For instance, the econometric evidence
which appears to show that long-term unemployment has less effect
on wage inflation than short-term unemployment (cited in evidence
to this Committee by Mr Andrew Smith on 15 June 1999 at Qu 237)
is actually explained simply by the fact that the long-term unemployed
are disproportionately concentrated in the areas of highest unemployment
where wage pressure is lowest anyway.
50. At the time I wrote my 1996 and 1997
papers on long-term unemployment, there was an unresolved question
whether the disproof of the "unemployment makes people less
employable" theory by the empirical evidence on claimant
and LFS unemployment also applies to the hidden unemployed, who
are mostly long-term sick. Beatty & Fothergill (1999) have
now shown that most of this group are very experienced and relatively
skilled workers, who had held down jobs for many years. It is
not plausible to suggest that being unemployed is going to cause
many of them to lose the habits of a lifetime and degenerate into
"unemployability".
51. The recent work of the Nobel prize-winning
economist Robert Solow (1998) is also a serious blow to the credibility
of supply-side labour market programmes. Solow criticises the
"Panglossian error" that all the problems lie on the
supply side of the labour market: the belief that "kennel
dogs need merely act like bird dogs, and birds will come".
He has pointed out that US welfare to work programmes, while placing
a lot of people in jobs, have only tiny effects on their subsequent
employment probabilities—the true measure of success. In
evaluation studies, typically, 57 per cent of the "experimentals"
had some employment during the subsequent three years compared
to 51 per cent of the controls.
Youth Unemployment
52. Most New Deal money has been focused
on the young. This is a result of Layard's view that unemployment
is caused by long-term unemployment, from which he drew the inference
that the best way to cut unemployment is to prevent people becoming
long-term unemployed in the first place. The existing long-term
unemployed are seen as, comparatively speaking, a lost cause.
In fact both parts of this thesis are false. Robinson, Machin
& Manning, Meager & Evans and the present author have
all shown that the existing long-term unemployed are in no way
a lost cause but get back into employment as unemployment falls
in exactly the same way as the short-term unemployed. The level
of youth unemployment across areas and over time also behaves
exactly in line with total unemployment, so that no special action
is necessary towards the young (unless of course they have demonstrable
particular needs). This was shown by Turok & Webster (1998).
53. The OECD (1999) has now endorsed this
view: "(young people's) employment and unemployment rates
are highly responsive to the overall state of the labour market
. . . few remedial or employment-insertion programmes targeted
at disadvantaged young people appear to have resulted in significant
gains in employment or earnings after they have participated in
the programmes".
Work Incentives
54. Layard, the OECD and other have argued
that the so-called "replacement ratio" (net income including
benefits out of work as a proportion of net income in work) is
a major determinant of the duration of unemployment. The work
by the present author shows that this cannot be correct. The function
relating long-term to total unemployment in Britain has remained
approximately the same throughout the whole post-war period since
1948, although there have been many changes in benefits systems
(Webster 1997a). Webster (1996, pp46-48) also cites a very large
amount of research contradicting the theory.
Theories of Lone Parenthood
55. It was noted earlier that the rise of
lone parenthood is mainly a direct consequence of prolonged high
unemployment in particular areas. But although this is the mainstream
academic view in the USA and now has very strong empirical support
in Britain, the dominant view, based on American conservative
ideology, has seen lone parenthood as being produced by perverse
incentives created by the social security system. This view appears
to be driving central government policy (Webster forthcoming A).
This interpretation is closely related to the supply-side work
incentive theories just discussed. It also supports the other
supply-side theories in producing a view of the unemployed and
poor as being so by virtue of immoral behaviour rather than as
a result of objective economic circumstances.
Supply-side theories as a totality
56. The various supply-side theories form
a mutually reinforcing structure. It is important to consider
what picture this presents of the non-working residents of a high
unemployment area such as Glasgow. According to this view, they
do not have basic life skills, let alone specific work skills;
they are lazy (they do not travel far enough); they are irresponsible
in their marital behaviour; and they are welfare dependent by
choice. This adds up to the "underclass" theory of the
American conservative ideologists of the 1980s such as Charles
Murray, and advocated here by their disciples such as Buckingham
(1999). The evidence shows that this is a misrepresentation. Whether
publicly spelled out as such or not, it is however the view which
appears to be driving policy.
POLICIES
Present Policies
57. The last Labour government's Inner Cities
white paper of 1977 accepted that the basic problem was job loss
and spatial mismatch, and set out a programme to attempt as far
as possible to restore the local employment base of the cities.
The present government however appears to have been persuaded
by adherents of the supply-side theories examined above that the
problem is one of concentrations of people of low "employability",
rather than of acute local labour supply-demand imbalances, and
that therefore action to promote relevant local jobs is not required.
Behind the various individual government policies there appears
to lie a "metapolicy" corresponding to this view.
58. The New Deals are purely concerned with
"employability". Urban Development Corporations have
been allowed to die, English Partnerships' funding has been cut,
transport infrastructure investment is at a historic low, and
a combination of fiscal, monetary and taxation (energy tax, fuel
tax escalator) policies is being followed which specifically disadvantages
manufacturing, the main source of manual jobs. Programmes which
are targeted on unemployment black spots do not actually aim to
promote jobs. "Employment Zones", although targeted
at the high unemployment areas with an obvious jobs shortfall,
are yet another "employability" programme. The "New
Deal for Communities" follows the model called for by academic
critics of "property-led" approaches and does not aim
to produce more jobs. The Working Families Tax Credit must bring
comparatively little benefit to the high unemployment areas, widening
still further the gap between them and the prosperous parts of
Britain. According to the UK Employment Action Plan (HM Treasury
1997), if enough jobs are not available in a particular area the
unemployed had better migrate out; there appears to be little
awareness of the damage this does both to the areas they leave
and the areas they move to.
59. The growing prominence of benefit "sanctions"
also stems directly from the "metapolicy". Initially,
"sanctions" played a modest role in the New Deal. But
they are being steadily expanded in scope and severity, now covering
Sure Start, the ONE single gateway and all adult unemployed as
well as the New Deal, and to be extended from one month to six
months. It has emerged that no less than a quarter of all the
young people assigned to the Environmental Taskforce are being
"sanctioned", that sanctions are concentrated in the
areas of highest unemployment and also that men—whose employment
problems are already worse—are over twice as likely to be
"sanctioned" as women (Bivand 1999). To this author
as a housing professional it makes no sense to push the already
poor, many of whom live in a continual state of crisis, further
into destitution. This is also the official view of Glasgow City
Council (5 February 1998). But adherents of the "underclass"
theory presumably see nothing wrong in it: the "unemployable"
must be disciplined into "employability" and they are
bound to be numerous in areas of high unemployment which are seen
as areas not of labour supply/demand imbalance but as concentrations
of "unemployable" people.
60. The government's only genuine demand-side
policy is the programme for the coalfields. With a chair from
English Partnerships and Steve Fothergill, leading analyst of
the local job loss-local unemployment connection, as a member,
the Coalfields Taskforce however has a different intellectual
parentage from the rest. It recommended a strongly property and
transport oriented approach. Unfortunately progress on implementation
appears to be rather slow.
What policies are needed?
61. The whole thrust of this analysis is
that the problem of the jobs gap lies mainly on the demand side
of the labour market rather than on the supply side; and on the
demand side in particular places, namely the former industrial
cities and coalfields together with some other places affected
by local manual employment decline. It follows that the main thrust
of policy needs to be to promote manufacturing employment in these
places, since manufacturing is the main source of manual jobs
and being almost always part of an area's export base, brings
additional jobs in its train.
62. This policy prescription is obviously
unfashionable. It is however perfectly realistic, because the
cities have lost so much more manufacturing than exurban areas.
Even if the general decline of manufacturing is not stemmed, it
is still possible for cities to obtain a much bigger share of
the jobs that remain. The reason why cities have done relatively
so badly is because of the role played by property constraints
(Fothergill et al 1985, 1987). Cities which have been proactive
in providing property in order to maintain their manufacturing
jobs base have been more successful in doing so. A good example
is Leeds. Although widely known for its success in services, this
city has in fact also done comparatively very well in manufacturing
and its relatively low unemployment reflects this (Turok &
Edge 1999). This good performance is not an accident. The city
has a proactive policy of land banking and development to anticipate
local firms' property needs (Leeds City Council 1997). Urban Development
Corporations such as those in Tyne and Wear, Sheffield, the Black
Country and Trafford Park have also been strikingly successful
in bringing derelict sites back into use. By contrast, Glasgow's
comparatively poor record in manufacturing employment is clearly
linked to persistent shortages of quality industrial property
and low levels of expenditure on derelict land reclamation (Glasgow
City Council 1999). Glasgow has a phenomenally high one tenth
of its land area vacant or derelict, twice as much as the next
worst Scottish local authority. This issue has been recognised
by the local authority. Councillor Charles Gordon, Leader of Glasgow's
Administration, recently commented "We have an over emphasis
on getting professional jobs and sending professionals into deprived
areas to look after the poor and I would like to see manufacturing
opportunities which will provide our people with work" (Glasgow
Evening Times, 28 May 1999).
63. The experience of the English UDCs shows
that in order to open up sites for development, substantial investment
in roads and public transport infrastructure is also required.
64. This switch of strategy would require
a switch of resources to achieve it, in particular an increase
in funding for derelict land reclamation and industrial and transport
infrastructure. This could well be achieved by redirecting money
from the labour supply-side programmes including the New Deal,
although some of these are worth maintaining where they address
genuine labour market disadvantages.
65. Although, because of the urban-rural
contrast in manufacturing employment change, a great deal could
be achieved without improving overall British performance in manufacturing,
it is nevertheless necessary to raise the issue of government
policies towards the manufacturing sector. This is not the place
to undertake a discussion of the future of British manufacturing.
What is clear from the present analysis, however, is that advocates
of deindustrialisation in government and academe have underestimated
the costs which the loss of manufacturing has imposed on this
country's economy and society. By the same token, they are overestimating
the prospects for reducing "social exclusion" on the
basis of what they call the "knowledge economy", in
which the continuing decline of manual jobs will be welcomed.
There needs to be a re-evaluation of policy towards manufacturing
taking realistic account of the costs of deindustrialisation.
OUTLINE RECOMMENDATIONS
66. The main contribution of this analysis
is towards the understanding of the jobs gap and of the weaknesses
of official thinking about it. It would be presumptuous and arbitrary
to offer detailed policy prescriptions. The following is a summary
of the basic requirements which follow from the analysis.
Statistics
67. Improvement of the official local unemployment
statistics is the most fundamental requirement. Officials have
to understand what the problem is if they are to do sensible things
about it. In particular, it is important to:
(i) replace "workforce" rates with
rates using residence-based denominators;
(ii) publish TTWA unemployment rates corrected
for commuting errors; and
(iii) commence publication of regular series
showing the components of "real" unemployment for local
areas; as a basis for this, the DSS "cross-benefit analysis"
currently under development could be used.
Property and Infrastructure
68. There needs to be a substantial shift
of public resources from supply-side programmes such as the New
Deal towards programmes which would increase the availability
of manual jobs in the areas of highest unemployment. In particular,
this means spending on derelict land reclamation, industrial property
development and associated road and public transport infrastructure.
Huge sums are going to be spent on infrastructure anyway. If there
is no serious programme of physical renewal of the cities, development
pressures in the exurban south will force government spending
on infrastructure there. It would make sense to head off such
development by spending the same money proactively in the areas
where it would have most benefit in reducing unemployment and
"social exclusion".
Local Employment Plans
69. Local government is intrinsically multidisciplinary
and "cross-cutting". Central government finds it difficult
to do "joined-up thinking" about the way problems relate
to each other at local level, since it has too little direct knowledge.
The readiness with which central government has accepted the whole
complex of academic supply-side and "underclass" theories
is in itself an indication of its remoteness from reality. And
supply-side theories, by ignoring or belittling local differences,
have in themselves led central government to underestimate local
government's importance.
70. As a result of greatly increased control
of budgets and programmes by central government, little genuine
allocation of local resources in the light of local circumstances
now occurs. For instance, although the government has written
with approval of the Glasgow Alliance's local regeneration strategy
(DSS 1999, p 146), the reality is that this strategy is heavily
constrained by prior central government decisions made without
direct knowledge of the city's circumstances. Glasgow City Council
(5 February 1998) recognised "that the success of (the New
Deal) will be dependent on the growth of jobs in Glasgow. . .
(and that) the measures proposed will not address the needs of
70 per cent of Glasgow's unemployed and should therefore be accompanied
by investment in sustainable job creation". But there has
never been any question of any reallocation of New Deal resources
to job creation in line with this view.
71. One way of dealing with this problem
would be to create a new mechanism of local employment planning,
under the control of the local authority, in which all relevant
public spending in areas of high unemployment would in principle
be available for redirection in line with local priorities. Each
local authority's Local Employment Plan would be required to spell
out a credible strategy for reducing "real" unemployment
to the national average within, say, a 15-year period. The programmes
within this Plan would then replace all the specific central government
programmes such as the New Deal or Employment Zones.
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September.
Webster, David (1998d) The Cities' Unemployment Crisis Revealed:
Corrected Claimant Unemployment Rates for Local Authorities, 23
November, at www.mailbase.ac.uk/lists/unemployment-research/.
Webster, David (1998e) "Employment change, housing abandonment
and sustainable development: structural processes and structural
issues", in Stuart Lowe et al (eds) Housing Abandonment in
Britain: Studies in the causes and effects of low demand for housing,
Centre for Housing Policy, University of York, December.
Webster, David (1999a) Corrected Claimant Unemployment Rates
for 1998 TTWAs, 2 February, at www.mailbase.ac.uk/lists/unemployment-research/.
Webster, David (1999b) End of the Swedish Model? 19 August,
at www.mailbase.ac.uk/lists/unemployment-research/.
Webster, David (1999c) Corrected ONS Workforce Unemployment
Rates for July 1999, Unemployment Change 1998-99 and Employment
Change 1997-98, 5 October, at www.mailbase.ac.uk/lists/unemployment-research/.
Webster, David (1999d) U/V Ratios and the "Workshy"
Unemployed: Mr Brown's Mistake, at www.mailbase.ac.uk/lists/unemployment-research/.
Webster, David (1999e) "Targeted local jobs—the
missing element in New Labour's 'social inclusion' policy",
New Economy, December.
Webster, David (forthcoming A) "Lone Parenthood: Two
Views and their Consequences", in Isobel Anderson and Duncan
Sim (eds), Social Exclusion and Housing: Context and Challenges,
Chartered Institute of Housing.
Webster, David (forthcoming B) "Unemployment Convergence
in 1990s Britain: How Real? An Analysis of Changes in LFS Employment,
Unemployment and Economic Activity on the Urban-Rural Dimension
1993-94 to 1998-99", Employment Audit, Issue 12. London,
Employment Policy Institute.
Webster, David & Turok, Ivan (1997) "The Future
of Local Unemployment Statistics: The Case for Replacing TTWAs",
Fraser of Allander Institute Quarterly Economic Commentary,
Vol 22 No 2, University of Strathclyde, March.
Wilcox, Steve (1999) Housing Finance Review 1999-2000, Coventry,
Chartered Institute of Housing and Council of Mortgage Lenders.
Young, Alf (1995) "Wise words and deaf ears", Glasgow
Herald, 19 May.
David Webster
October 1999
1 Further work published on 5 April 2000 as "The
Political Economy of Scotland's Population Decline", Fraser
of Allander Institute Quarterly Economic Commentary, Glasgow,
also refers. Back
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