APPENDIX 22
Memorandum from the TUC (JG 28)
INTRODUCTION
1.1. This Memorandum sets out the TUC's
response to the Employment Sub-Committee inquiry Employability
and Jobs: Is There a Jobs Gap? and focuses on the specific areas
set out in the press notice announcing the Committee's inquiry:
— the extent and causes of any geographical
jobs gap and which groups might be affected;
— the success of statistical measures,
such as the claimant count and Labour Force Survey, in picking
up these geographical differences;
— the impact of jobs gaps on the effectiveness
of supply side policies such as New Deal;
— the extent of local and national
Government and European sponsored initiatives aimed at creating
a better balance between the supply and demand for jobs at the
local level and whether these are sufficient.
1.2. The traditional focus of policy has
been on the "North-South" divide. As the TUC's recent
reports The New Regional Divide (September 1998) and Jobs in Jeopardy
(April 1999) show the "new divide" is between prosperous,
low unemployment suburban middle Britain and the high unemployment
inner cities and older metropolitan and industrial areas. The
analysis presented in this report builds on this approach by looking
at employment change across the 44 local authority districts identified
by the Government's Social Exclusion Unit as including areas of
greatest economic and social deprivation in England.
1.3. The report draws mainly on the employer
based Census of Employment for the period Autumn 1991 to 1997;
and the household sample Labour Force Survey for the period Spring
1992-1999. The 44 districts included in "deprived England"
cover just over 20 per cent of the working age population either
in work or seeking work. For the most part they cover the high
unemployment inner cities and older industrial areas, but there
are some localities where unemployment is relatively low yet highly
localised pockets of economic deprivation persist. A similar "mapping"
exercise is not yet available for Scotland and Wales, but there
are many local areas in these countries with very similar problems—for
example claimant count unemployment is between 10 and 12 per cent
in Cynon Valley and the Rhondda and even higher in some of the
Glasgow Parliamentary constituencies.
THE JOBS
GAP
2.1. The persistence of a significant difference
in labour market performance, despite nearly seven years of economic
recovery, is shown by the latest figures from the Labour Force
Survey for Spring 1999. The ILO unemployment rate among those
of working age in deprived England was nearly 9 per cent, compared
with just over 4 per cent in non-metropolitan Southern England
(the South East, South West and Eastern regions excluding London).
For the under 25s the unemployment rate in deprived England was
over 16 per cent compared with 8.5 per cent in Southern England.
2.2. As the Social Exclusion Unit report
clearly shows, there is a racial dimension to these figures. Many
of the most deprived local authority areas have a disproportionate
share of black people—over 15 per cent of the population
of 16 or more against just over 6 per cent across England as a
whole. As previous TUC reports have shown, black people have much
higher unemployment rates and lower rates of participation in
the active labour market than white people. Latest figures show
that the ILO unemployment rate nationally in Spring 1999 for all
black workers was 13.1 per cent compared with a white average
of 5.6 per cent.
2.3 Statistical measures of unemployment
do not fully capture the extent of worklessness and social exclusion.
At the national level there are now more people outside the ILO
definition of unemployment who say they want to work. In May-July
1999 there were 2.3 million people classified as inactive but
who wanted work, and 1.7 million unemployed by ILO definitions.
Recent research has concluded that "the greater the degree
of labour market disadvantage in an area, the smaller the proportion
of people who would like work who are included with conventional
definitions of unemployment" (Anne Green and David Owen,
Where are the jobless? 1998). In Southern England on average about
18 per cent of the working age population is inactive. Compared
with 33 per cent in the North East and between 25 and 30 per cent
in the deprived areas of Northern England, the West Midlands,
and Wales.
SKILLS AND
QUALIFICATIONS
2.4 The Social Exclusion Unit found above
average concentrations of adults with numeracy and literacy problems
and lower than average educational attainment and participation
across the 44 local authorities. Latest figures confirm that the
share of the population with qualifications at least at NVQ level
3 is lower in some of the deprived areas than the national average
and much lower than in full employment Southern England. The national
targets for NVQ level 3 or the equivalent is now set at 50 per
cent of the population by end 2002. The Labour Force Survey estimates
show that in Spring 1999 about 42 per cent of the working age
population in Southern England had qualifications of NVQ level
3 or above, the figure was much lower in many of the deprived
areas—32 per cent in the West Midlands, and around 35 per
cent in the North West and North East and in Wales.
2.5 As the chart shows, the link between
qualification levels and unemployment rates is not straight-forward.
Scotland and inner London both have above average skill levels
measured by the share of the population with at least NVQ level
3. However, these averages say nothing about who gets access to
jobs, training or qualifications. Many local labour markets in
deprived areas will also include many well qualified white collar
jobs filled by those from outside the worst affected areas. It
is of small comfort to an unemployed black teenager without qualifications
that plenty of jobs exist for accountants or computer analysts.
UNDERLYING CAUSES
OF THE
JOB GAP
2.6. Independent research on the long run
labour market performance of Britain's major cities shows that
there has been a disproportionate decline in male full time manual
jobs in the major cities linked to the fall in manufacturing employment.
This has not been offset by sufficient job gains in expanding
industries (Ivan Turok and Nicola Edge, The Jobs Gap in Britain's
Cities, 1999). Looking at the employment recovery in the 1990s,
the picture is mixed. The London labour market has recovered strongly,
but in many deprived areas outside London the jobs gap has persisted.
The Labour Force Survey shows that between Spring 1992 and Spring
1999:
— overall jobs growth was weaker in
the deprived areas outside London than the national average;
— outside London almost all the net
growth in jobs was in part time work predominantly filled by women:
in some areas there has been a fall in full time jobs predominantly
held by men;
— a better jobs performance in London
has still seen high levels of economic and social deprivation
persist: the Social Exclusion Unit's index shows that 12 of the
20 worst affected local authorities were in London.
2.7. The Census of Employment shows changes
in employee employment by industrial sector between Autumn 1991
and Autumn 1997 (the latest year available). The key weaknesses
in most of the deprived areas was a bigger than average decline
in manufacturing, energy and water, construction and in public
sector based services such as public administration, education
and health. The pattern of decline is not consistent in all regions—some
areas held their employment in at least one of these sectors while
suffering badly in another.
2.8. In contrast, sectors such as manufacturing,
construction and the public services gained jobs in full employment
Southern Britain between 1991 and 1997. Construction employment
fell by between 10 and 15 per cent in this period in most of the
deprived areas, but rose by nearly 14 per cent in Southern England.
Public service based employment fell by between eight and 10 per
cent in deprived areas of London and the West Midlands but went
up by just over 4 per cent in Southern England.
2.9. It is clear that the impact of public
policy decisions on the overall levels and allocation of public
spending must have had a role in explaining the differences in
employment performance in the public based services. Construction
employment has recovered strongly in areas of prosperity with
booming housing markets and contracted in poorer areas with little
new public investment.
THE POLICY
RESPONSE
3.1. The TUC has strongly endorsed the importance
attributed to the "local picture" in developing active
labour market measures. The Government has given a high priority
to this, both in the design of its national welfare-to-work programmes
(eg the leading role played by New Deal Local Partnerships) and
by increasing investment in smaller scale initiatives targeted
on areas with particularly high levels on unemployment and economic
inactivity (eg Employment Zones). The focus on meeting individual
"employability needs", as epitomised by the New Deal
Gateway, is a crucial factor in maximising the effectiveness of
national programmes at the local level. A similar approach underpins
planned changes to existing regeneration initiatives (eg the Single
Regeneration Budget) and European sponsored area-based programmes
(eg European Social Fund Programmes). In addition, the increasing
role of Regional Development Agencies in the planning and delivery
of these initiatives should further enhance their effectiveness
at the regional and sub-regional levels.
3.2. This policy will help create a better
balance between the supply and demand for jobs at the local level
by matching more individuals to available vacancies, providing
residents with the most appropriate skills to access the local
jobs market, and stimulating job creation in the local economy.
However, more will be needed to stimulate the growth of more full-time
jobs; and to maximise the ability of workless people in these
communities to full take advantage of what jobs growth there is.
3.3. In the TUC's opinion, these two objectives
could best be carried forward by policy developments in the following
areas:
— targeted measures to increase public
investment and strengthen the public services in the deprived
areas;
— more resources in active labour market
and regeneration initiatives being devoted to the creation of
full-time employment (eg jobs created via intermediate labour
markets);
— training programmes for the unemployed
and inactive being targeted more on the needs of the individual
and the local labour market; and
— making the benefit system more flexible
to encourage the take-up of all forms of employment by jobless
people.
Several of these issues are being examined by
the labour market action teams set up under the auspices of the
Social Exclusion Unit.
GENERATING EMPLOYMENT
OPPORTUNITIES—THE
DEMAND SIDE
3.4 The TUC's recent report, "Britain's
Investment Gap", showed the UK's poor record on public investment
and that workers in the public services in Germany, France and
the US had between two and three times more capital investment
per hour worked than in the UK. The Government's new investment
plans do much to start to reverse this legacy, but as a share
of national income public investment will still be very low and
the UK will still be close to the bottom of the European public
investment league. This will require even greater efforts to raise
public investment in the second round of the Comprehensive Spending
Review (CSR2), and to look for opportunities to bring forward
investment plans under the present CSR (CSR1).
3.5 The TUC believes a key priority for
public investment, both in the short and medium term, should be
targeted measures on urban and regional regeneration and active
labour market measures in the high unemployment localities. The
creation of more full time jobs in sectors such as construction
and the public based services would go some way to remedying the
jobs gap in the worst hit areas, and by raising local incomes
would help stimulate more growth in consumer service industries.
However, it is vital that the new job opportunities created are
not, as too often in the past, filled by inward commuters rather
than local residents, the unemployed and socially excluded. London
Docklands stands as the classic example of a huge public and private
investment project which created many thousands of jobs but made
very little difference to local unemployment rates.
3.6 The TUC believes that the Government
should draw on the experience of the rest of Europe when considering
new innovative "demand-side" approaches to active labour
market policy, as these countries have a wealth of experience
in developing such initiatives. The use of job subsidies in the
New Deal already shows how the Government has drawn on one legacy
of the European "demand-side" approach and the launch
of fully fledged Employment Zones and new "intermediate labour
market" initiatives from April 2000 shows a degree of commitment
to direct job creation measures. In addition, the TUC welcomes
the remit given to the Jobs Action Team to investigate the potential
for expanding job generation in these communities via intermediate
labour markets (ILMs). Although there has been much debate on
the potential of ILMs in recent years, there remains a chasm between
the amount of rhetoric on this issue and the need for policy guidelines
setting out "best practice" in implementing job creation
measures of this kind at the local level.
3.7 In a recent report ("Reinforcing
the New Deal", March 1999) the TUC described how some other
European countries are underpinning their supply-side active labour
market programmes with demand-side initiatives designed to create
new jobs in deprived areas through a variety of innovative approaches.
For example, while the Netherlands has a comprehensive and structured
supply-side approach for young unemployed people along the lines
of the New Deal, it also provides a large job creation initiative
to meet the needs of the adult long-term unemployed in deprived
areas, with plans to create 60,000 jobs by 2002. In the short
term, the TUC believes that any new measures targeted on these
deprived communities to directly improve job generation should
initially focus on the adult long-term unemployed.
THE SKILLS
ELEMENT—NEED
FOR AN
INTEGRATED, TARGETED
APPROACH
3.8 The TUC report "Britain's Skills
Gap" shows that the UK undoubtedly does have a serious medium
term problem of under-investment in skills, and skill shortages
in specialist areas and in parts of the economy with strong local
demand. However, as the report also shows some of these problems
have been greatly aggravated by poor employment conditions and
lack of security which makes it difficult for industries like
construction to retain skilled workers or to attract young people
in sufficient numbers to become the skilled workers of tomorrow.
Making sure that the unemployed and others who want to work who
need skills updating and development of skills to cope with the
latest technologies have access to training must be a vital part
of any strategy for medium term regeneration of these areas.
3.9 Previous schemes have generally been
low cost and poor quality, leading to the stigmatisation of participants
and resulted in poor long-term job outcome rates. However, experience
suggests job-creation schemes are much more effective when combined
with relevant training provision and that training measures work
best not only when targeted on specific groups, but also when
the training is targeted to local labour market skill needs (Policy
Research Institute at Leeds Metropolitan University Local Responses
to Long-term Unemployment, 1998; and, Local Action on Unemployment,
1999). A recent DfEE policy report would, if implemented, extend
this targeted approach significantly in relation to the vocational
training currently offered to the adult unemployed. The report
suggested unemployed people should qualify for training programmes
as soon as their needs are identified, rather than them having
to wait until they have been unemployed for a certain period of
time; and that there should be much greater flexibility to tailor
the training programme to the needs of the local labour market
(DfEE Quality & Performance Improvement Division (1999) Leaving
TfW—trainees who do not achieve a payable positive outcome,
QPID report, no 72).
3.10 While the TUC supports the general
thrust of these suggested reforms, it also believes that this
must be linked with a wider review of active labour market measures
for the adult unemployed. The TUC believes that there is great
potential for reforming the New Deal for the Adult Unemployed
along these lines so that it can effectively address both supply
side issues (ie the "skills gap") and demand issues
(ie the "jobs gap") at the local level. The TUC will
be developing proposals for the strengthening, extension and continuation
of the New Deal as part of the preparations for the 2000 Budget
and CSR debates. The Employment Service has demonstrated that
it can deliver public employment programmes such as New Deal effectively.
There is always scope to develop flexible delivery systems in
partnership with the private sector and others, but the TUC would
have reservations about private sector only led initiatives.
BENEFIT FLEXIBILITY
AND JOB
SEARCH ASSISTANCE
3.11 While the TUC supports the broad thrust
of the Government's welfare-to-work strategy, it is still also
concerned that unresolved work disincentives within the benefit
system may restrict its full potential, especially in the most
deprived communities. For many families, the financial risks involved
in either leaving benefit altogether, or simply working part-time
while on benefit, are often too great to even consider. Addressing
these constraints rather than tightening benefit rules is a more
productive way of helping people into work. There is little potential
for increasing job search activity in deprived areas by any further
intensification of the job seeking rules required of benefit claimants.
Job search activity levels are very high among residents of high
unemployment areas, but job search is limited by financial restrictions
and job application "success rates" are adversely affected
by employer discrimination and a higher number of claimants chasing
fewer vacancies.
3.12 The TUC recognises that the Government's
welfare-to-work strategy is doing much to tackle many of these
disincentives, especially the measures to "make work pay",
and it is also clear that it is willing to consider further flexibilities.
The TUC is continuing to press for additional measures, including
the introduction of extended benefit payments for people moving
into work for groups other than just lone parents (eg long-term
unemployed claimants, workless families claiming JSA) and a major
overhaul of the benefit system in order to create a seamless transition
between benefit receipt and employment (and vice versa) in order
to minimise the financial risks involved in moving off benefit.
3.13 The Social Exclusion report emphasises
that some individuals in the deprived areas "might need a
very gradual return to work: if they could work and earn legally
for a few hours a week this might give them the confidence and
employment record they need to do more". Getting adults in
these families into part-time work may provide the important first
step to them applying for assistance under the Working Families
Tax Credit and progressing to full-time employment. There are
three specific steps the Government could take to make the benefit
system more flexible and aid the transition to work:
— raising earnings disregards (the
amount people can earn before benefits start to be withdrawn):
the value of disregards has not been increased for more than a
decade: lone parent disregard today is £15 a week but would
be over £27 a week had it been increased in line with earnings;
— extending the Jobseeker's Grant (financial
job search assistance currently available under the New Deal for
Young People) to a larger pool of jobless people in areas of high
unemployment; and
— reforming the Employment Service's
Travel to Interview Scheme to enable more jobless people to receive
financial assistance for travelling to job interviews.
STATISTICAL MEASURES
4.1 The ILO unemployment measure (looked
for work in last four weeks, able to start work in two weeks'
time) is more representative than the claimant count, especially
in measuring unemployment among women. However, unemployment rates
alone do not give a full picture and other indicators—such
as the employment rate and the extent of worklessness among households—should
also be used. However, the sample size of the Labour Force Survey
means statistically reliable indicators using ILO definitions
at the individual local authority level are limited.
4.2 The claimant count is an actual count
and so is highly accurate at very local level, but is less representative
of all those seeking work. It has been suggested that the traditional
presentation of the claimant count unemployment rate at local
level gives a misleading picture of unemployment amongst the resident
population because it includes commuters. The House of Commons
Research Library has started to publish unemployment rates for
parliamentary constituencies based only on those who reside in
the local authority area. There are pros and cons in using both
the traditional and residence based claimant count unemployment
rates, and there is little point in engaging in a theological
debate about which is the "better" measure of unemployment.
4.3 However, given the focus of policy is
on helping the residents of high unemployment areas back into
work, it seems reasonable to make greater use of residence based
unemployment rates to target help where it is most needed. The
Office of National Statistics could be asked to build on the House
of Commons Library initiative and provide residence based unemployment
rates by local authority area on a regular basis.
CONCLUSIONS
5.1 There is a major jobs gaps in the most
deprived areas of Britain, with a lack of full time jobs traditionally
filled by male workers. This partly because of long run structural
change in the economy which has badly hit these areas, but in
the 1990s jobs have also been shed from sectors such as construction
and the public based services which in full employment Britain
have been expanding. But past experience, such as London Docklands,
shows that expanding jobs in the local area, while essential,
may not necessarily reduce unemployment among local residents
and those without qualifications or who are otherwise excluded
from the jobs market.
5.2 There are many aspects of the Government's
approach the TUC supports. However, some areas could be developed
further. In particular, there needs to be recognition that in
many areas a full response to the challenge of the jobs gap requires
co-ordinated action on both the demand side and the supply side.
The TUC recommends action in the following areas:
— a targeted increase in public investment
and the strengthening in public based services in the deprived
areas, backed by the selective development of labour market programmes
to directly support local jobs;
— making skills development and training
an integral part of all programmes, tailored to the needs of individuals
and the local labour market;
— reducing the constraints on benefit
claimants taking up part time work and reducing the costs of looking
for work;
— action to reduce discrimination in
the workplace must be a high priority in all areas, deprived or
not, but especially so in those deprived areas where a high proportion
of the local population are black and may face double discrimination.
TUC
October 1999
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