Select Committee on Education and Employment Appendices to the Minutes of Evidence


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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