House of Commons - Education and Employment

Select Committee on Education and Employment Third Report

RECRUITING UNEMPLOYED PEOPLE

Employers' Recruitment Practices

8. Much of the research and debate concerned with the development and evaluation of training, placement and other labour market interventions aimed at recruiting the unemployed has concentrated on the motivation and job-readiness of job-seekers.[7] So too has research on the development and assessment of public job-matching and broking provision. The corollary is that the significance of the employer's role has often been overlooked. Of the few studies or surveys which have been aimed specifically at developing an understanding of employers' recruitment methods, the benchmark research in the UK comes from analysis of the national Survey of Employers' Recruitment Practices which took place in 1992. Inevitably both the labour market and the nature of Government intervention in it have altered significantly, particularly as the survey was completed in the depths of the last economic recession. Moreover, research suggests that employers' recruitment practices are cyclical in nature.[8] It would therefore be unwise to assume that the 1992 Survey presents an accurate reflection of current recruitment practices on the part of employers.

9. Mr Chris Hasluck of the Institute for Employment Research suggested that a repeat of the 1992 survey was overdue.[9] Although there has been much valuable employer-related research undertaken since 1992, much of it commissioned by the Department for Education and Employment (DfEE) or the Employment Service, this has tended to consist of smaller, single studies narrowly focussed on particular kinds of employer or on particular aspects of recruitment practice. The evaluations of the New Deal also involve much employer-based research, but again these tend to examine those employers participating in the New Deal programme, and reveal much less about other employers. Mr John Atkinson of the Institute for Employment Studies supported Mr Hasluck, arguing that "it is a long time since we had a large-scale study and one is certainly, I think, due again".[10]

10. There is growing evidence that employers' recruitment practices have a significant impact on job-seekers' employment prospects. The 1996 study by Atkinson, Giles and Meager, Employers, Recruitment and the Unemployed: A Review of Research, drew out many of the attitudinal aspects of recruitment procedures.[11] It reported that "the mere fact of being unemployed is not something which employers say they hold against applicants".[12] But the same research also noted that employers typically wanted to establish applicants' present employment status and that 50 per cent of recruiters believed a history of unemployment was a relevant selection criterion. As Mr Atkinson and Mr Meager stated, "if there is strong competition for vacancies, even a modest demur on the recruiter's part means that the unemployed job seeker will be disadvantaged".[13]

11. The 1996 study found that the three most common grounds on which recruiters rejected unemployed applicants were:

(a) poor motivation on the part of the applicant: 44 per cent of employers surveyed had rejected unemployed candidates citing shortcomings in motivation, attitude or keenness;

(b) insufficient previous job experience: 43 per cent claimed to have rejected unemployed applicants because they lacked experience in a similar position; and

12. Evidence such as this has led to an increasing recognition on the part of the Government, the Employment Service and other labour market intermediaries of the impact of recruitment practices on job-seekers' employment prospects. Mr Chris Humphries, Director General of the British Chambers of Commerce and chairman of the Skills Task Force, argued that poor recruitment practices on the part of employers were often the real reason behind reports of skills shortages. He said the Skills Task Force had found that "skills shortages" were often "not, in fact, true shortages in the labour market but in fact simply evidence of poor recruitment practice, of not recruiting widely enough and perhaps using 1970s and 1980s recruitment practices rather than 21st century recruitment practices" and, in respect of vacancies for lower skilled jobs in particular "using word of mouth in the local neighbourhood is because of an almost complete lack of understanding of how to recruit professionally ... only one in five businesses have any form of internal personnel or training support".[15] Set against this background the lack of up-to-date data on employers' recruitment practices at a national level seems unfortunate. We recommend that the Government should commission a national survey of employers' recruitment practices.

13. Other research has sought to shed light on employers' use of intermediaries to fill vacancies. Hasluck and Purcell's 1997 report, The Market for Job Placements in the UK, looked in great detail at the job-broking function, noting in particular the increasing importance of private sector agencies as both competitors with, and partners of, the public employment service.[16] It recorded that "such evidence as is available points to a major loss of market share by the public employment service—especially in those areas of employment which it has traditionally served—and a rapid expansion of the private sector" although it accepted that the nature of the data on which the conclusion is based is "somewhat fragmentary".[17] More recently, the Skills Task Force, drawing upon the results of its 1999 skills survey, has suggested that the Employment Service attracts around 44 per cent of all vacancies, but that the occupational distribution of all vacancies differs sharply from that of vacancies reported to the Employment Service. The Employment Service attracts a greater proportion of all vacancies in personal service and manual occupations than in vacancies at the higher end of the labour market.[18]

UNFILLED VACANCIES REPORTED TO THE EMPLOYMENT SERVICE AND ESTIMATED TOTAL VACANCIES
	Employment Service, England, July 1999 Unfilled Vacancies	Total Unfilled Vacancies (Survey-based Estimate)
Total number of vacancies	248,828	560,000
	Percentage
Managerial/senior Administrator	4	7
Professional	1	6
Associate professional/technical	3	11
Clerical/secretarial	14	16
Craft and skilled	10	8
Personal service	24	15
Sales	14	19
Operative and assembly	10	11
Other manual occupations	18	7
Total	100	100

Source: Derived from Skills for All: Research Report from the National Skills Taskforce, Table 5.1, 2000.

Are recruitment practices disadvantaging unemployed job seekers?

14. The Institute of Employment Studies identified three principal means by which employers "inadvertently and routinely screen out potentially suitable, but unemployed, recruits":[19]

(a) by filling vacancies from within the ranks of existing employees;

(b) by advertising vacancies informally, by word of mouth through networks to which unemployed job seekers, and particularly long-term, unemployed job seekers have little or no access; or

This suggests, as the Institute for Employment Studies pointed out, that "while unemployed job seekers naturally cluster around the Jobcentres, most vacancies for which they might be suitable never appear there".[20]

15. The trend over the last decade or so has been towards a greater use of formal selection procedures, particularly in public sector organisations and larger private sector companies, often driven by a desire to implement equal opportunities policies across recruitment practices.[21] Informal methods of recruitment work to the disadvantage of unemployed job seekers but there is no evidence to suggest that greater use of formal selection criteria on the part of employers is likely to work in their favour either. Formal selection procedures are likely to include questions about an applicant's current status and employment history which as many as 80 per cent of employers consider an important selection criterion.[22] Mr Hasluck pointed out that such indirectly discriminatory practices can be exacerbated in periods of high unemployment by a disinclination on the part of employers to advertise vacancies through job centres, fearing a deluge of applicants, many of who may be unsuitable: "that in itself is a form of screening out the unemployed since the most likely way in which unemployed people would get to know about those job opportunities is through the job centre".[23]

16. The effects of the indirect discrimination against unemployed job seekers which arise from employers' recruitment practices can be further exacerbated by direct discrimination, particularly for the long-term unemployed. Ms Candy Munro, Chief Executive of the Gorbals Initiative (a local development company based in the Gorbals area of Glasgow), said that "many employers have a real negative view of people that have come from a background of long-term unemployment".[24] The Sub-committee also heard anecdotal evidence to suggest that, in a tight labour market in particular, employers attribute a period of sustained unemployment to some insuperable deficiency on the part of the unemployed person.[25]

17. We are not suggesting that direct discrimination on the part of employers against the unemployed is widespread or pernicious. Research indicates that 60 per cent of employers who had recruited at all in a specific twelve-month period had recruited from the ranks of the unemployed; the same research indicated that only 20 per cent of employers had never or would never recruit an unemployed person.[26] Moreover, of those unemployed job seekers who are registered for Jobseeker's Allowance, 60 per cent re-enter employment within three months and only 23 per cent remain on the register after six months.[27] This suggests that most job seekers are able to negotiate the system successfully and do not find a period of unemployment, particularly a short period, a significant barrier to gaining employment. It also indicates that the crucial challenge remains to improve the employment opportunities for long-term unemployed people. We strongly urge the Employment Service to improve links between employers and this group of job seekers in order to meet this crucial challenge.

Vacancies

18. One approach to improving the links between employers and unemployed people would be to increase the proportion of vacancies that are reported to the Employment Service. We have commented before on the need to improve the quality of data on the total number of vacancies in the labour market.[28] Perhaps partly because of the paucity of the data on all vacancies in the labour market, estimates for the Employment Service's current share of the vacancy market vary. The Minister said that the figure was around a third of all vacancies.[29] Analysis of the skills survey conducted for the Skills Task Force points to a higher market share (see table 1).[30] The latest report from the Institute of Personnel and Development suggests that, in contrast to the evidence from 1997, the Employment Service's market share is now increasing. Of the employers surveyed, 68 per cent had used the Employment Service to advertise vacancies in 2000 compared to 62.6 per cent in 1999.[31] We were pleased to note that both the Employment Service and the Minister were keen to see this trend continue.

19. The Sub-committee put to both the Employment Service and the Minister the suggestion that the Employment Service should be given a formal target for increasing its share of the vacancy market. Both were strongly against such a measure, arguing persuasively that it would risk distorting the Employment Service's other activities and deflecting attention away from its primary purpose of helping those who are most disadvantaged in the labour market to find work.[32] We also note that it would be unwise to set a target where the measurement of performance against that target is dependent on data which at present seem far from robust.

20. The Employment Service is responsible for a relatively small proportion of engagements. Professors Urwin and Shackleton of the Education, Training and the Labour Market Research Group at the University of Westminster, use data from the Spring 1998 Labour Force Survey to show that 10 per cent of all engagements are brokered by jobcentres.[33] Taking the range of estimates of its share of the overall vacancies (32 to 44 per cent), this implies that the Employment Service fills between a quarter and a third of the vacancies reported to it. This would make it one of the less effective, and presumably to employers less attractive, routes to filling vacancies. The Employment Service itself disputed this figure, arguing that their success rate was "a little over 50 per cent".[34] Even the latter figure does not compare well with the success rates of private employment agencies (PEAs) which typically fill over 80 per cent of the vacancies they attract, or with press advertisements which on average have a 70 per cent success rate. The Employment Service suggested that such a comparison was flawed because of the differences in the nature of the vacancies involved: some 80 to 90 per cent of the vacancies handled by PEAs relate to short-term, temporary positions whereas around 75 per cent of those handled by the Employment Service are for permanent positions.[35] The Minister also stated that the definition of a successful placement on the part of the Employment Service had been strengthened and now excluded jobs which involved less than eight hours work per week and those for which the successful applicant failed to arrive and start work with the employer in the first day.[36] Given these factors, and the Employment Service's particular focus on helping the most disadvantaged job seekers, filling 50 per cent of vacancies is a creditable but not excellent performance. The Employment Service acknowledged that there was room for improvement in this regard: "we can and we want to do better".[37] We agree.

Working Age Agency

21. In March 2000, the Prime Minister announced plans to create the Working Age Agency as the next step in the Government's welfare reform programme. The Working Age Agency will bring together the Employment Service and those parts of the Benefits Agency which provide services to people of working age with the intention of delivering "a single, integrated and work-focussed service to benefit claimants of working age and employers".[38] The Working Age Agency is intended to have "a clear focus on work, a new culture and new values based on work for those who can and support for those who cannot".[39] In any case of major structural change, there is always the danger that organisations can take their eye off the ball. Both Mr Paul Convery, Director of the Unemployment Unit and YouthAid, and Mr Victor Adebowale, Chief Executive of Centrepoint, highlighted the risks presented by the merger when they gave evidence to the Employment Sub-committee during its inquiry into New Deal: An Evaluation.[40] We are concerned that the process of reorganisation involved in the creation of the Working Age Agency may undermine the Employment Service's efforts to engender a more employer-orientated culture.

Broader recruitment issues

22. Recruitment practices are not the only factor determining the employment and retention of long-term unemployed people; the attitudes of employers to training are also influential and can exacerbate the recruitment difficulties faced by long-term unemployed people. Evidence from the Skills Task Force shows that nearly 50 per cent employers attributed some of their internal skill shortages to a failure to train and develop staff. The study also found that over 30 per cent of employers attributed skills shortages to recruitment difficulties, which included job applicants' lack of desired personal attributes.[41] The first result suggests that employers are not providing adequate training for their own employees and the second that employers are seeking to compensate for in-house skill shortages by recruiting individuals who already have the right mix of skills. Taken together, these two findings indicate that employers are not going to be attracted to unemployed people, especially young unemployed people with little work experience and few marketable skills.[42]

23. This outcome is supported by the evidence from employers presented during our earlier inquiries which have looked at the operation of the New Deal. One of the biggest criticisms that employers have had of the New Deal for Young People (NDYP) is that the people who have emerged from the programme have not been sufficiently employable.[43] Similarly, employers who gave evidence as part of this inquiry stressed the importance of candidates for employment being 'job ready'. (If a person is job ready, they are able to take a position immediately and perform effectively, without the need for additional skills, training or assistance.) Ms Monk, Group Personnel Director of Granada Group plc, said that one of her company's real disappointments with New Deal was a continuing inability to find people who were job ready.[44] Mr Chris Banks, Managing Director of Coca-Cola Great Britain and chair of the London Employers' Coalition, said that employers' desires to find job ready individuals, with both basic and specific skills, was a consistent theme. He also added that there was a "real need to match the expectations of the young people particularly with the opportunities and jobs that are available".[45]

24. Unless those employers who do seek to recruit from the ranks of the unemployed can find candidates with the right mix of skills and who are job ready, improving the links between employers and the long-term unemployed will not on its own lead to greater employment opportunities. Nor is it simply a case of managing down expectations. As the skills survey confirms, employers are often not immersed in a training culture and are simply not equipped or not prepared to provide the level of on-the-job training, in either hard or soft skills, that many unemployed job seekers require. (Soft skills is a term used to cover attributes such as punctuality, presentation and reliability.)

Labour Market Intermediaries

25. There is some confusion over the use of the term 'intermediaries'. As Mr Jonathan Baldrey, Chief Executive of Talent Resourcing Ltd, said, many organisations which work with the unemployed have started to label themselves intermediaries when they may not strictly be so. Labour market intermediaries are those organisations which seek to change the nature of the relationship between employers and job seekers, through improving the supply of labour, for example, by providing training, through matching job seekers to employers' vacancies or by seeking to change employers' demands for labour.[46] The Employment Service is the largest and most commonly recognised intermediary in the UK. PEAs are also intermediaries and there are many voluntary and charitable intermediaries working with specific groups of job seekers, specific business sectors or in particular geographical areas, often in partnership with each other or the Employment Service. Nor should labour market intermediaries be confused with those who manage intermediate labour markets. Intermediate labour markets are initiatives which provide temporary employment opportunities with training for unemployed people. They may be managed by labour market intermediaries, but the two are not synonymous.[47]

26. As Chris Banks and Ms Amelia Fawcett, Chief Administration Officer of Morgan Stanley Dean Witter (Europe), said, labour market intermediaries can play an essential role in bridging the gap between employers and unemployed job seekers, particularly those who are long-term unemployed, by increasing the links between recruiters and job seekers. Ms Fawcett added that in many cases employers would be unable to develop routes for recruiting unemployed people without the assistance of intermediaries, especially those who had contracted-out personnel function and therefore had little in-house knowledge in the required fields.[48] The quality of intermediation, both in terms of the services offered and the manner in which they are delivered, can be a major factor in determining the level and quality of the employment opportunities.

7 Meager and Atkinson, Ev. p. 1; See also Meager N and Evans C, The evaluation of active labour markets for the long-term unemployed, Employment and Training Papers No. 16, International Labour Office, Geneva, 1998. Back

8 Q. 1. Back

9 Q. 1. Back

10 Q. 2. Back

11 Atkinson, J, Giles L, and Meager N, Employers, Recruitment and the Unemployed, IRS Report No. 325, Institute for Employment Studies, 1996. Back

12 Ev. p. 4. Back

13 Ev. p. 4. Back

14 Ev. p. 4. Back

15 Q. 82, 101. Back

16 Hasluck and Purcell, The Market for Job Placements in the United Kingdom, Institute for Employment Research, 1997, p. 78. Back

17 The Market for Job Placements in the United Kingdom, p. 79. Back

18 Skills Task Force, Skills for All: Research Report from the National Skills Task Force, DfEE, 2000, para 5.15. Back