Select Committee on Work and Pensions Minutes of Evidence

Memorandum submitted by the Work Foundation and the Wise Group (EDP 23)


Part 1: What has caused this problem?

  1.  Unemployment is at its lowest since the 1970s, employment has never been higher and yet there are continuing concerns about some long term structural problems within the UK labour market. Firstly, although claimant count is dropping relatively steadily, the Government's preferred ILO definition has been rising equally steadily and now stands at over 1.5 million. Secondly, there are people and places that have persistently failed to benefit from the UK's booming labour market. The "hardest to help" are now a feature of the welfare to work policy debate—an acknowledgement that unemployment is proving a stubborn problem amongst certain groups of people. Finally, there is widespread concern amongst policymakers about one such group—the dramatic rise in the numbers of people claiming incapacity benefits[7] since the 1970s. This is a concern that underpins all attempts to offer a better deal in the workplace for people with any kind of disability.

  2.  A series of predominantly structural changes in the nature of employment have created this paradoxical position of high employment rates and levels of job creation but with severe labour market failure at the same time. These changes in the structure of the labour market have included a significant change in the balance of manufacturing and service sector jobs, more part time and temporary work and more working women. There have also been changes in the nature of unemployment with the collapse of male employment (especially in particular parts of the country), a rise in the number of people on incapacity benefit and a greater coincidence of low skills and unemployment.

  3.  There have also been other equally dramatic changes; the geography of work has changed; places of work have moved, fleeing inner city areas to outer suburban areas—from inner industrial areas to outlying retail and business parks. This has had a massive impact on towns, cities and communities and on the local labour markets therein. There has also been a growing intensification of work, with longer hours, increased job tasks and responsibilities, a greater use of technology and greater levels of insecurity.

  4.  The number of people receiving incapacity benefits (and disability benefits) has risen significantly since 1981 (see table 1). There are now more people on incapacity benefits than there are claimant unemployed. The number of incapacity benefits recipients tripled between 1979-2002. In 1994-5 25% of men between 60 and 64 received incapacity benefits. 18% were claiming for mental disorders and the highest increase between 1980 and 1994 was for depressive disorder.

  5.  90% of the increase in incapacity benefits receipt occurred before the mid-90s. Nevertheless, numbers have not fallen after this point, and have even risen slightly since 1997, when there was a substantial change in active labour market policy. This suggests that policy to date has had little impact on groups receiving incapacity benefits. Government figures confirm this: once someone has received these benefits for 12 months, the average duration of their claim will be eight years.[8]

  6.  Table 1 indicates that the large shifts have been from the short term receipt of incapacity (and related) benefits to the long term and also the large increase in the number of recipients of short term disabled living allowance.

Table 1:Recipients of Incapacity and Disability Benefits (Thousands)

1981-821991-92 1999-00
Long term sick and disability
Incapacity Benefit and Severe Disability
One of the above + Income Support103 240402
Short Term Sick
Incapacity Benefit393 13891
Incapacity Benefit + Income Support24 2827
Disabled Living Allowance582 17583353

  Source: DSS

  7.  However, it must be remembered that these claimants (like others both inside and outside of the formal labour market) are operating in substantially different local labour market conditions, with varying levels of local labour demand. Dickens, Gregg and Wadsworth, for example, point out that although regional unemployment differentials are lower than for many years, they do not capture the real patterns of geographical divergence:

  8.  "The proportion of working age men not in work varies from 13% to 26% across the 10 standard regions. At county levels this spread nearly doubles from 8% to 31%. At finer levels of dis-aggregation this dispersion is greater still, highlighting the plight of many coastal towns and the former coal mining districts alongside major urban areas. . . by far the worst geographical concentrations of joblessness are in our social housing estates."[9]

  9.  This analysis is explained in much greater detail in the Work Foundation's previous submission to the Select Committee in April 2002 and we believe that it is equally appropriate to consider the variation in local and regional labour markets in the context of Incapacity Benefit issues.

10.   Incapacity Benefits, Disability and the changing geography of work

  11.  We argue that one of the primary reasons for the growth of the number of recipients of long term incapacity benefits (including short term disability allowance) since the 1980s has been the direct effects of structural unemployment in particular (usually urban) areas of the UK. The emergence of mass unemployment, de-industrialisation and the changing geography of UK economic activity all took place at more or less the same time as the rise in incapacity benefit receipt: and it is difficult to deny a connection between these phenomena.

  12.  The growth in incapacity benefit receipt is partly geographical, partly psychological and partly institutional. As the recent Government paper makes clear, real and perceived rules of benefit receipt, and the lack of support for recipients in finding work, are important reasons why people who move onto these benefits tend to stay there.

  13.  At the same time, this reason is partly geographical and partly psychological. It remains true that the main reason for involuntary inactivity and the receipt of incapacity benefits in particular, is the belief, whether true or not, that there are either no jobs or no suitable jobs available. For this reason, there is a direct correlation between the level of employment and the levels of economic inactivity (and incapacity benefit claims)—where the unemployment rate is higher, so too is the level on inactivity.

  14.  It also follows that people with a long-term disability who wish to work find it easier to do so in areas with lower unemployment. This is also true for older workers who are also shortly to receive statutory protection from age discriminatory employment practices.

Table 2:Labour Market Regional Inactivity/ILO Unemployment (% seasonally adjusted)
ILO Unemployment     Employment Rate    
Economic Activity
Govt. Office RegionM FAllM FAllAll
North East10.86.7 68.475.3
North West5.84.8 5.477.166.9 72.376.5
Yorks & Humber7.0 69.974.379.2
East Midlands5.14.3 4.881.670.9 76.580.5
West Midlands6.25.3 5.878.468.3 73.678.2
East4.03.4 3.783.973.3 78.982.0
London7.16.8 7.076.864.7 71.076.4
South East2.93.2 3.185.974.7 80.583.1
South West5.54.7 75.479.5
Wales7.45.4 6.573.665.3 69.774.7
Scotland7.36.4 6.977.169.3 73.378.8
N. Ireland6.35.1 5.873.260.2 66.971.1

  Source: LFS Labour Market Trends December 2000

  15.  Economic activity varies between 71.1% and 83.1%, ILO unemployment rates between 9% and 3.2% and the employment rate between 66.9% and 80.5%. The ILO unemployment rates for 1997-98 show that older workers (over 50s) are most likely to be unemployed in the North East (7.9%), London (6.5%) and Northern Ireland (7.6%), whilst they are most likely to be employed in the East Midlands (3.4% unemployment) and the East (4.1% unemployment). These are unlikely to have changed since. Gregg and Wadsworth make the obvious connection that inactivity is concentrated in high unemployment regions, typically urban areas, and like unemployment, has become increasingly concentrated in households where nobody has a job. Even more obviously these concentrations are in regions where heavy industry has declined most dramatically (see table 3).

Table 3:Inactivity and Unemployment Rates by Region—Selected (%)[10]
Unemployment Rate (all)     Inactive rate (all)
19791990 19971979 19901997
Tyne and Wear6.910.0 7.319.923.5 25.8
Rest of North6.07.6 5.621.321.7 22.1
South Yorks3.96.7 7.519.923.6 25.8
West Yorks3.75.5 4.817.118.4 19.5
East Midlands3.35.4 4.419.917.9 17.9
East Anglia3.04.2 4.120.314.8 19.0
London3.25.6 6.417.819.1 20.6
South East2.83.8 3.818.715.6 16.4
South West3.63.9 3.820.317.1 16.8
West Midlands (met)4.1 6.95.317.7 20.623.8
Greater Manchester4.0 6.94.618.9 20.323.4
Merseyside8.47.5 5.718.825.2 26.8
Wales4.96.3 5.222.822.7 24.6
Scotland6.07.1 5.618.520.3 21.7
Northern Ireland7.19.1 5.424.523.8 24.6

  Source: LFS

  16.  Table 4 demonstrates where the claimants of incapacity and disability benefits are to be found when shown as the proportions of the working age population in different parts of the UK:

Table 4:Where are the UK'S Disability/Incapacity Benefit Claimants?
UK average17.9%
North East23.7%
North West19.9%
West Midlands19.2%
Yorks & Humber18.8%
(South East15.4%)

  Source: LFS

  17.  It is surely no surprise that the areas hardest hit by industrial decline (North East, South Yorkshire, Merseyside, Wales and Northern Ireland) are also the ones most likely to see high levels of inactivity. These are the regions where the inactive, discouraged older workers are most likely to reside. They are the areas where jobs (or at the very least desirable jobs) are least likely to be available to the older or disabled worker in particular. In such cases, incapacity benefit or disabled living allowance might seem like a reasonable stopgap between work and retirement.

  18.  There are many parallels between the de-industrialisation of the UK economy (and of large parts of the country) and of the decline in male employment and the rise in incapacity benefit claims over the past three decades. Employment in UK cities fell by more than three times the rate in the rest of Britain during the eighties and nineties, leaving high unemployment and hidden inactivity in places such as Liverpool, Middlesbrough, Manchester, Hull, Birmingham, Glasgow, Newcastle, Nottingham and much of Inner London (Tower Hamlets, Newham, Southwark, Lambeth, Haringey and Islington).[11] Other observers too, have noticed this trend. Richard Rogers, the Chair of the government's recent Urban Task Force easily pinpoints the areas most affected:

  19.  "Manual workers represented three-quarters of all workers in 1911, but only one-third in 1996—yet three quarters of all adults in inner Manchester and Newcastle still class themselves as manual workers, The skills of the people left behind in cities simply do not match the jobs available to them. Older manufacturing areas have been far worse hit than the rest of the country."[12]

  20.  This coincidence of inactivity/incapacity and the decline in the employment of older men in particular, is illustrated in table 5:

Table 5:Reasons for Inactivity by Age and Qualification 1997
SickHome/Caring RetiredDisc. Other
Male by age
Total59.46.5 15.62.310
16-2429.33.4 01.628
25-4963.913.6 0.21.610
Male by Qualification
Total59.46.5 15.72.310
Degree28.43.8 35.62.416
A Level/equiv32.67.3 15.21.913.3
O Level/equiv58.45.4 18.1311.3
Female by age
Total24.457.5 30.89.6
16-2411.464 00.112.7
50+41.232.5 10.81.613.6
Female by Qualification
Total24.457.5 30.89.6
Degree1348.7 8.4114.8
A Level/equiv16.152
O Level/equiv17.664.5 2.20.510.5
CSE/equiv22.161 3110.5
None33.554.3 2.717.9

  Source: Gregg and Wadsworth

21.   New work and old workers

  22.  Whilst considerable deficiencies in the demand for labour are problematic in such parts of the country it does not necessarily follow that there are no new jobs being created at all. In fact, as government statisticians and labour market economists are quick to point out, there are high numbers of vacancies and job creation in every region of the UK. Furthermore, many such jobs and vacancies exist in urban areas (typically city and town centres and new retail locations) close to areas where unemployment, economic inactivity and job loss have all been at their highest.

  23.  The service sector has been the largest creator of new jobs in the last 30 years—cushioning the labour market through severe structural change. Retail, hospitality and micro service jobs have been the most numerous. However, popular culture and opinion suggests that such jobs are at the very end of the food chain. Supermarkets, cinemas, fast food restaurants and out of town shopping outlets—these are the UK's biggest engines of economic growth, driving both our labour market and our increasingly consumer dominated economy. We will shop in such places in droves but most of us wouldn't want to work in them. It's a bizarre situation that we seem to hate the work in the places in which we are spending more and more money[13] and time. There is no doubt that the British have a very curious attitude to the service sector.

  24.  This may be a major reason behind some of the more well-known condemnations of UK retailing jobs. The UK's biggest grossing feature film of all time—The Full Monty—deals with the loss of status, dignity and livelihood of a group of ex-steelworkers in Sheffield. Their old traditional jobs have disappeared and the only replacements available appear to be at ASDA[14]. This is where the wives and girlfriends of the steelworkers have found work.


  Gaz follows Dave into the suit section.


  Well come on then Mr Security, do your job.

  Gaz rips a suit off the nearest hanger and heads for the door at speed. Dave goes after him.


  Gaz . . . please don't do it


  You've got a job, do it


  Gazza . . .


  Gaz makes it through the doors with a suit, setting off all the alarms in the process. He laughs manically, shouting and waving the suit in the air, with Dave close behind.[15]

  25.  Working at ASDA seems not only to have less value than the traditional steel working jobs formerly undertaken by these men, but also less value than stealing and stripping.

  26.  Even television news teams get in on the act. When stories about the large-scale loss of older, traditional jobs (usually in manufacturing) are published, they are usually twinned with an announcement about similarly large-scale job creation (usually in the service sector). Supermarkets and large retailers such as ASDA and Tesco have been responsible for some such announcements.[16] But there seems to be a widespread doubt about the quality of these jobs—about their status (part time, not full time), their pay and conditions, whether unions are recognised, their security, access to training and so on.

  27.  Bizarrely, this popular perception is even reinforced by some of the government's own advertising. In television and cinema adverts promoting the government's adult learning service "Learndirect", people in dull, dead-end jobs are implored to take up a course and improve their careers. Unsurprisingly, one advert shows someone stacking supermarket shelves.[17]

  28.  There is another dimension to these criticisms: the suggestion that these jobs are not as "good" as the ones that they are replacing. They are not done by the same people, there is no career structure, they are unskilled, they involve mindless repetition of tasks and they contribute little to the UK's economy.

  29.  Considering these changes it is perhaps notionally easier to see a difference between "new" and "old" work. It is also clear to see why particular groups of men might make this distinction as those working in heavy industry, manual work and those in particular parts of the country have seen their job opportunities fall away. This is the attitude in which The Full Monty is set. Changes in work have been bad for the ex-steelworking men in Sheffield, but what about the women? At the beginning of the film, the black and white publicity shots of an earlier, more prosperous Sheffield show no shots of the city's working women. There would certainly have been far fewer. In this sense the film's narrative touches only momentarily on the impact of new work on women's lives. They have not only become wage earners but sometimes the sole breadwinners in their households; they have disposable income to spend going out; they are stronger in society relative to their unemployed husbands and male peers. Consider Simon Beaufoy's description of the film's setting in his introduction to the printed screenplay:

  30.  "Where were all the women? It appeared that, unlike the men, the women had jobs. Not perhaps good jobs: cashier, packing, shelf-stacking jobs in the monstrous Meadowhall Shopping Centre that replaced the steel rolling mills. But jobs nevertheless. Which meant money. Which meant Friday nights down the pub with the . . . well, it used to be lads. But the lads were out walking their invisible dogs, wondering why people didn't want steel any more, just shopping centres."

  31.  Perceptions of these types of skills and the jobs and the sectors that utilise them are increasingly outdated throughout the UK. Bars, restaurants and shops look very different today than they did in the 1960s and 70s. Jobs have changed as dramatically as those in manufacturing—with completely new service strategies and subsequent job design. Pay, conditions and career structures have all become increasingly more sophisticated—at a rate that far exceeds traditional perceptions of such work.[18]

  32.  But these types of job and the sector as a whole are changing as dramatically as any other occupation. In some workplaces these jobs make up what Chris Warhurst and Dennis Nickson describe as the demand for "aesthetic labour":[19]

  33.  "Aesthetic labour will feature heavily in future job growth; it also raises significant employment issues, and demands a significant policy response. If employees are required to be able to present themselves to customers in ways that engage those customers" senses—in short, if they have to `look good' and `sound right'—this implies major, and to many people, uncomfortable changes in skills and training provision and social inclusion initiatives".

  34.  They are referring to the types of jobs that are dominating the rejuvenated service sector throughout the UK; coffee houses, clubs, shops, restaurants and bars, hotels, public and private fitness clubs and so on. To some extent it is also applying to wider working and recruitment practices amongst more traditional employers such as financial services, sales and parts of the public sector as well as amongst more longstanding retailers such as Marks and Spencers, Tesco and ASDA.

  35.  Employers in each of these sectors are likely to value aesthetic skills and select employees by, among other things, their "aesthetic" ability. Aesthetic labour is about image. Competition in the service economy is now about branding and experience as much as product; employers, therefore, are looking for staff who can embody the image and experience the company is trying to sell—as well as provide great service. This is one of the reasons why it was recently estimated that approximately half of the vacancies in Glasgow—where Warhurst and Nickson based their study—are taken by applicants from outside the city.[20] An individual case study demonstrates the problem perfectly:

  36.  "We tried to get a 50 year old ex-docker from Govan into a job in All Bar One in the city centre. It was difficult enough getting him to consider the job and the travel at all, but imagine what customers thought when they saw `love' and `hate' tattooed between his knuckles."[21]

  37.  It is an inescapable fact that many, but particularly those used to working in other declining sectors, do not see these kinds of jobs as worth doing. There are many varying reasons why this is the case—but the fact remains that it is a reason why many individuals consider it appropriate to stay out of such a labour market by any means possible.

  38.  Other characteristics of older inactive workers are similarly striking. Educational achievement is a strong predictor of activity as demonstrated by Campbell and Gregg and Wadsworth. Amongst older men, the level of education is related to employment rate, with those with say a degree are more likely to be employed than those with no qualifications or below level two. It is also evident that as the age groups get younger, more are achieving higher levels of education. This is significant in that much of the argument made against older workers at the moment is that they are not familiar with ICT and other developments, that argument will become almost obsolete when the current batch of "fortysomethings" become "older workers" as their rates of education, training, ICT awareness etc are much higher than that of the age cohort above them.[22] This follows a trend demonstrated by Campbell in which successive age cohorts have found their levels of employment higher than that of the cohort born before them. This has been an upward spiral for eighty years though older workers still find their levels of employment dropping significantly with each generation.

  39.  It is commonly pointed out that industrial and technological change is now a constant factor affecting the labour force, rather than a distinct move from a static point in, say 1970, to a similar point today. Although industrial change will indeed continue, it is unlikely that change will prove to be as catastrophic among particular age groups as the size of industries and spread of employment is much more varied amongst all workers. It should also be pointed out that workforce development policies will help to "insure" individuals against change. As a result of these interventions, even constant technological change should have considerably less effect than in the large scale de-industrialising of the 1970's, 1980's and 1990's.

  40.  Not surprisingly, inactivity is more likely for people with lower or no qualifications. From achievement at level two[23] downwards, inactivity is most likely—and again more pronounced for older men. It seems highly convincing that these are likely to have been employees in declining industries doing semi or low skilled work. The young and middle aged men of the 1970s became the older men of the 1990s whose industries declined, disappeared or were downsized in the 1980s, making it much less likely for these individuals to be in the same job that they were in 1979. This is a significant difference to those who would have been older in 1979 and were probably still working in the same sectors (and for a significant number of men that meant heavy industry).[24] This inevitably suggests that there is a skills shortage amongst older workers for employment in growth sectors, especially ICT which appears to exaggerate the perceived skill gap both for employers and for older people themselves.

  41.  There are other theories of inactivity/incapacity that are also appealing. Richard Scase and Jonathan Scales agree on the majority of reasons, but add a new cause[25]. They see older workers in the UK as part of a generation that have been "worked out"[26] a group of inactive workers who simply have had enough of work. They see this as an issue across social and occupational groups and even across the spectrum of financial health in later life.

  42.  "Few of the economically inactive say that they would like a job. This holds true across all occupational categories. Only 20% of inactive men and 15% of inactive women in their fifties say they would like to have a full-time job. A sizeable minority of those aged 50-59 and currently employed say they would like to give up working if they could. About 25-30% of men and women aged 50-59 in `white-collar' jobs and about 40 % of those in manual jobs say they would give up their job if they could afford to."[27]

  43.  More appropriately perhaps, Scase referred to this group as "generation knackered" during his comments at the launch of the "Fit and Fifty?" paper. Scase and Scales' theory is that there should be a recognition that the high economic inactivity rates among those in their 50s are primarily a result of choice or, among manual employees, ill health rather than age discrimination by employers. They point to the inevitable physical and mental consequences of the UK's long hours working culture as a determinant more than discrimination. In this sense they see an effect including the decline of traditional industry but also encompassing other areas of work.

  44.  The cumulative psychological effects of working life are matched by a growing disenchantment with work as retirement approaches. Jackson and Taylor chart this accelerating disinterest in work and all its trappings (including training and development).[28] This is also remarked upon by Donovan and Street in a recent study for the Joseph Rowntree Trust:[29]

  45.  "Once an older person is out of work, the chances of ever re-entering employment are slim and this situation worsens with age. These diminishing employment chances do not go unnoticed by older individuals who are looking for work. It is thought that there is a gradual withdrawal from the labour market by older people—the first experience of life without a job is disillusioning and every rejected job application detaches the individual still further from the labour market."

  46.  Age discrimination (a concern of many policy makers and campaign groups) is still curiously absent from most useful data, although this might explain why some older individuals are keen to use incapacity benefit as an alternative to experiencing such problems in the labour market.

47.   Conclusions

  48.  There are then a number of interrelated causes of the large number of people claiming incapacity benefits in the UK. De-industrialisation and the subsequent creation of many enduring local jobs gaps in many parts of the UK are without doubt the primary cause. The large scale upheaval in the labour market and the growth of new types of work and worker have left many (especially older men) marginalized. Mismatches of skill, age discrimination and the long term effects of long hours and manual labour are also important factors.

Part 2: What can be done about these problems?

  1.  Given the extreme nature of the UK's labour market change over the past three decades and the subsequent problems experienced by many former members of the workforce who have since exited on to incapacity benefits, the reality is that there is only so much that can be done. This is particularly true with those individuals who are already claiming incapacity benefits and even more so for those who have been doing so for long periods of time. Statistics are against both them and against policymakers who wish to see them return to the economically active workforce; the current flow of new incapacity benefits claimants number approximately 3,000 each week, with less than a few % ever likely to return.[30]

  2.  Problematically, there are substantial causes on both the demand and supply sides. As existing welfare to work policy has tended to concentrate on the supply side this does suggest that a range of different approaches may be required. Principal among these may be the need to raise demand for labour in particular parts of the country. Increasingly this is being seen as an economic priority, with attempts to boost enterprise and employment in deprived parts of the country.[31]

  3.  In the longer term there are also preventative measures around skills and working hours/intensity that will help to alleviate problems on the supply side. These are perhaps the most important issues for policy makers to face and should be focused at the level of the individual, the firm and the economy as a whole. These measures are at least partially in place,[32] but state interventions need to be further supplemented by actions from employers and individuals. Examples of this would include the need for better levels of skills and training throughout the workforce (and flowing into it) as well as measures such as the introduction of anti age discrimination legislation.

  4.  There are other positives on the demand side that should also be acknowledged. First is the likelihood that the structural changes experienced by particular sectors, geographical areas and individuals during the 70s, 80s and 90s are unlikely ever to be repeated to the same scale again. There are simply not as many large employers and not as many unskilled or semi-skilled workers in the economy. Heavy industry of that size and importance can only decline once. More people in households now work, more people are used to changing jobs and more organisations have learned how to cope with job loss. None of these were the case when jobs were disappearing hand over fist from the rapidly de-industrialising Britain of this period.

  5.  Second there is a demographic effect of the ageing population and the realisation by both employers and individuals that working lives will be longer. Employers will want more older employees (indeed they already do in some sectors—see case study 2) and they will have little choice as particular skills shortages begin to bite. Inevitably they will also have to provide more of the skills and other incentives too if they are to realise their organisational goals. This is equally true of both the public and private sectors and already we are seeing advertising campaigns aimed at older workers from the likes of B & Q, ASDA, the NHS and from schools and colleges. Individuals too will realise that they have to work longer than they may have envisaged. We have already seen the end of many early retirement incentives that were widely prevalent during the 80s and 90s and recent pension problems are driving this realisation home.

  6.  The supply side has though to face up to new ways of connecting with the types of demand that do exist in today's labour market. Inevitably, this is a more complex process than a "one size fits all" approach to welfare to work policy would suggest.

  7.  The good news is that there are examples across the country where such an approach to complex problems is working.

8.   Case Study: The Wise Group—Blending New and Existing Approaches

  9.  The Wise Group has worked since 1983 with the long-term unemployed and economically inactive. Operating across Scotland and the North East of England, the Wise Group have over the last 19 years been at the forefront of developing the concept of the Intermediate Labour Market (ILM)[33] and its applicability to various disadvantaged groups. The primary aim of the Wise Group is to ensure that its temporary workers, which now number some 1,300 per year, enter sustainable employment at the earliest possible stage.

  10.  The Wise Group, based on their extensive experience, believe that many people claiming incapacity benefits today display similar characteristics to those long-term unemployed clients with whom we have worked with over the years. In fact it is realistic to see many such clients as simply the long-term unemployed by another name. Based on this premise Wise believe in the continuing validity of the ILM as a tool for assisting such disadvantaged clients in making the transition from benefits to work.

  11.  ILM's are an expanding labour market activity in the UK typically operated within the social economy sector. According to a recent study by the Joseph Rowentree Trust, there were 5,300 ILM places on 65 programmes in 1999. These programmes involved approximately 9,000 people per year and are clustered in the big cities and older industrial areas of the North, Midlands and Scotland. These programmes demonstrate that the best way to prepare people for and move them into work is to create as real a work experience as possible.

  12.  It is clear that over the last few years the definition of what constitutes an Intermediate Labour Market programme has changed. This is perhaps as a natural consequence of the interest in ILM programmes across the country—indeed the government's own adoption of ILM's under the auspices of the "Transitional Work" programme has added further to the number and variety of ILM type programmes in existence.

  13.  Wise themselves have suggested that an ILM programme should at least do the following:

    —  Integrate live work experience, deliver both job specific training and general employability skills. Have built-in support and guidance targeted at the individuals needs, and finally provide strong links to the labour market through engagement with employers. All of these elements should come together to form a period of "temporary work". This period is designed and managed to progressively increase the individuals awareness of the world of work, its disciplines and advantages.

    —  All ILM programmes should be geared in general to three things—the raising of individual employability levels, the delivery of high quality products and services, and the movement of unemployed people back into work.

    —  ILM's have been historically defined by the payment of "wages" to participants. Whilst important in the creation of an individual's sense of work it should no longer be seen as a defining characteristic, especially when considering how ILM's can be developed to assist those furthest from the labour market who exist on higher rate benefits.

    —  Characteristically ILM's have also tended to demonstrate the ability to combine several sources of funding to deliver multiple outputs across complimentary constituencies. Links to policy priorities in employment (Welfare to Work), social inclusion, benefit reduction and economic regeneration—all of which are crucial when considering the question of good and added value in ILM's.

    —    To be truly effective ILM's should be delivered at scale in order to maximise the economies of scale. The ability to work at scale across a number of locations often creates the necessary forward momentum, which in turn allows greater innovation inn service and project delivery.

14.   New Deal for Disabled People—A Possible Approach

  15.  The City of Glasgow has around 118,000 long-term unemployed and economically inactive people resident within its boundaries. Of these only 18,000 are registered as unemployed, the remaining 100,000 are all in receipt of one or other of the key benefits. Conservatively, the annual cost associated with direct benefit payments to these 100,000 inactive people is around £442 million per year excluding housing, council tax and direct benefit administration costs. To include these could increase the figure to around £900 million per annum.

  16.  At the end of 2001 Wise began to deliver the New Deal for Disabled programme in Scotland as one of several contracted job brokers. This project is known as WORKABLE. Our initial findings are that those coming forward to WorkAble are those with higher levels of motivation. However, our experience on the programme shows that many of these voluntary self-referrals still have real physical or psychological health problems that prevent them from moving quickly into work. Wise also contend that there is a second significant group who are not coming forward but might perhaps be more physically and mentally able to work.

  17.  It is these claimants that Wise feel would benefit from a sustained work-based intervention that would look to increased self-confidence, improve and update work skills and offer a wider view of the labour market opportunities which exist today.

  18.  Essentially NDDP is a "light touch" approach to getting incapacity benefits claimants back to work. The approach is similar to that of Employment Zones in that those nearest the labour market are the most likely to succeed and move into work. Employment Zones are currently hitting around the "35%-40% people into jobs" mark by targeting the better clients in this way. Given that the savings from moving even a relatively low number of inactive clients back to work would be substantial, the approach is by no means wrong—it just does not go deep enough. The light touch for some people will work. For the rest we need to develop approaches which allow them to realise the benefits of work whilst feeling financially and psychologically secure. This is where we feel an ILM or transitional work strand to NDDP could be further developed.

  19.  Many people will take part in either full or part-time activity if we can show them that they will not lose out. The transition to work is often a complex journey and as such we need a vehicle that can get them there. For the majority it is rarely about jumping from point A directly to point D—typically they need to go through points B and C before they understand and are able to deal with the issues and options open to them. The ILM/Transitional work element could provide this supported vehicle that whilst having a clear mission to move people off benefit and into work, will also do so in a socially useful and economically sustainable way.

  20.  During 2002 Wise worked with 500 voluntary referral to the WorkAble project within the NDDP format, the majority of whom were in receipt of incapacity benefits. Of these only half were thought to be able to consider work or ILM options. The remaining 50% had some physical or mental ailment, which in the short to medium term would prevent rapid progression.

  21.  Of the remaining 250 registered clients just under half opted to join an existing ILM programme personally citing the need to update and refresh both work skills and confidence prior to seeking full-time jobs. These clients consistently demonstrate that the transition to work ideally entails a staged process. As such the menu of options available to intermediaries dealing with disadvantaged clients can only be improved through the introduction and use of the ILM as such a process.

  22.  Nationally, the performance of NDDP as a purely job outcome orientated New Deal has been disappointing. Wise would argue that looking at the existing ILM approach and utilising some of the underspend within NDDP to pump-prime a work-based transitional model would improve on all aspects of performance.

23.   What other lessons are the Wise Group learning ?

    —  Big Issues surrounding benefit (income) security.

    —  Lack of understanding around the Tax and Benefit system.

    —  Clients not thinking in work terms—Longer journey for people.

    —  Employers are interested in whether the person can do the job—not their ailment.

    —  Requirement for people to be reintegrated at a pace appropriate to their individual motivation and or physical/mental abilities.

    —  The NDDP programme will take longer than at first anticipated to make a significant impact.

    —  Those coming forward tend to be more motivated but less able.

    —  That there are significant numbers of people who are less motivated but perhaps more able—and these are the ones that we need want to reach.

    —  The NDDP programme has been designed as a "light touch" approach—which will work for some, but not for significant numbers of others.

    —  We could reach and attract additional participants by offering them meaningful work based activity which uses their latent skills and abilities.

24.   What would the Wise Group want the Government to do?

    —  Look at how they/we could utilise the existing benefit rules to encourage participation:

    —  Broaden the definition of "Work" within the welfare to work agenda to include active participation as an acceptable outcome.

    —  Extend the use of benefit or part benefit transfer to support and encourage ILM participation rates.

    —  Make it easier for benefit recipients to participate in relation to working hour rules.

    —  Better investment in the fabric of social economy organisations tasked with tackling the issues,

    —  Encourage better linkage between public/private and not-for profit sectors.

25.   Case Study: Tesco—reversing jobs gaps and employing the disabled

  26.  Tesco have a well publicised Regeneration Stores programme in which large new stores in deprived parts of the UK are staffed with long term unemployed people. The Tesco Regeneration Partnership Programme has already been launched in thirteen very different parts of the UK:

    —  Dragonville (in Durham)

    —  St Rollox (in Glasgow)

    —  Seacroft (in Leeds)

    —  Alloa

    —  Leyland (near Preston)

    —  Beckton (in East London)

    —  Shettleston (near Glasgow)

    —  Stockport

    —  Batley (West Yorkshire)

    —  Litherland (on Merseyside)

    —  Staffordshire (Rugeley)

    —  Bradford

    —  West Dunbartonshire

  27.  The first six stores are now open. The rest will follow by the end of 2003. Eight more are planned for the coming year. So far the statistics are impressive:

    —  Six regeneration partnership stores opened.

    —  2,200 new jobs created.

    —  1,300 employed through the jobs guarantee, many for long-term unemployed people.

    —  Seven other partnerships announced, creating another 6,600 jobs.

    —  Another eight new partnerships to be announced in the coming months.

28.   How have Tesco gone about investing in deprived communities and the residents of these communities?

  29.  Understanding clearly that they must engage people properly if they are to meet the challenge of work. They have realised that advertising jobs or organising a few courses is not enough. Local leaflets and newsletters explaining their approach typically begin the process. Tesco makes sure that recruitment centres are approachable and accessible. Open days explain the partnership programme clearly with staff explaining what it's like to work in our stores.

  30.  Tesco then offer a basic skills assessment so that they can identify the training needed to bring candidates up to nationally accredited standards in reading, writing, numeracy and fluency in English. Before interviewing candidates they also provide a seminar in interview techniques, so that people know that they are assessing aptitudes and not existing qualifications.

  31.  When candidates are interviewed, Tesco ensure that their aspirations (eg on working hours) are matched as closely as possible to the store's needs.

  32.  Successful candidates are given a job guarantee: provided they complete the training, a job with Tesco is guaranteed at the end of it. This is a very powerful signal indeed:

  33.  The job guarantee is fundamental. We all recognise that if you have a job, you are less likely to be ill, less likely to become a victim of crime and more likely to be able to read and write and to be living in decent housing. More importantly, communities will regenerate and if communities regenerate, you promote a whole upward cycle and people feel good about themselves again.[34]

  34.  Most people are used to something far more vague—for example only the possibility of a job at the end of the training. The learning programme is a considerable, long-term commitment, and typically includes the following elements:

    —  Food Hygiene.

    —  First Aid.

    —  Health & Safety.

    —  Retail legislation.

    —  Team working.

    —  Sales skills.

    —  Customer Care.

    —  Complaint Handling.

    —  Stock control.

    —  Assertiveness and Presentation skills.

    —  Project work.

  35.  Nor is this the end of learning at Tesco. There are a lot of jobs to fill in a superstore—specialist positions in catering, bakery, butchery, front-of-house as well as supervisory and section manager roles. At Tesco the promotion record is very strong and this too is a compelling element of the job guarantee. They have been surprised by how quickly the initial commitment and motivation of recruits has been translated into higher positions. At the Seacroft store, recent evidence suggests that up to 19% of partnership recruits are either training for more specialist positions or have now been promoted to more senior jobs.

  36.  The job guarantee is the catalyst, but long-term commitment and perseverance is what makes this approach work. This has been recognised by the Prime Minister:

  37.  "Our task in government is to make sure everyone reaches their fullest potential. That can't be done unless we've got people applying to go on these programmes and stores like Tesco are willing to give them a chance." [35]

38.   Seacroft

  39.  Seacroft, the first Tesco Regeneration Partnership, was once one of the largest council estates in Europe and, despite sell-offs and stock transfer, 53% of the population still live in council-owned accommodation. The resident population of Seacroft in mid-1998 was 18,200 people. But there were only 3,900 jobs in the area. In August 1998 there were 2290 Income Support claimants in Seacroft: 17% of its adult population, compared to 9% for Leeds as a whole, and an average of 8% for the UK overall. Out of 8,414 English wards, Seacroft was ranked the 388th most deprived.[36] Seacroft is four or five miles away from the bustling regenerated heart of Leeds and there is very little travel to work in the city centre from Seacroft residents.

  40.  The Seacroft Partnership in Leeds has been a highly successful venture. It has involved a wide range of major partners; Leeds City Council, the East Leeds Family Learning Centre, the Employment Service and a group of local employers led by Tesco.

  41.  When Tesco announced that they were to open one of their flagship "Extra" stores in Seacroft with the creation of approximately 350 jobs, they knew that the majority of staff were likely to come from within a mile of the store. The resulting partnership involved training of up to a year with guaranteed jobs at the end. When the store opened in November 2000, over 240 previously unemployed local people, many of whom had been out of work for more than two years, formed a key part of the staff.

42.   Dragonville

  43.  Dragonville is a former mining and industrial area situated on the edge of Durham near the A1 motorway. Like Seacroft, it is an area with a high proportion of social housing. The resident population of the Dragonville area in mid-1998 was 2,200 people. But there were only 600 jobs in the area. 16% of the adult population were on Income Support, compared to 7% in Durham as a whole. The area was ranked 332nd most deprived in the country.

  44.  The Tesco Extra opened in November 2001 with 340 new jobs—296 of which went to locally unemployed residents. In Dragonville, 120 of the unemployed recruits were previously classed as "economically inactive" and excluded as registered job seekers. These are people who were categorised as not looking for work, people who had been claiming Incapacity Benefit—in fact, the "very hardest to help" of all. This degree of success with the wider groups of the unemployed is unprecedented.

45.   Beckton

  46.  Beckton is one of the most deprived areas in London. Blighted by job loss in manufacturing and its docks, the area also has a very high number of residents for whom English is not a first language. The resident population of Beckton in mid 1998 was 6,300 people. But there were only 400 jobs. In August 1998 there were 1105 Income Support claimants in Beckton, 25% of the population, compared to 18% in Newham and an average of 8% for the UK overall. Beckton is considered to be the 79th most deprived local authority ward in England.

  47.  Beckton now has a 109,000 sq.ft. Tesco Extra and over 400 new jobs—that is double the number in 1998.

  48.  Colin Cutts, 50, was long-term unemployed, claiming Incapacity Benefit for 13 years, due to arthritis. He used to be an area manager for a dry cleaning firm, but had to give up work when his condition worsened.

  49.  "I was having to work long hours with the majority of the time spent on my feet, which made the arthritis even worse. My new job though will suit me down to the ground as I will be able to work sitting down. I am starting off part-time to see how it goes, but hope to increase my hours gradually. I really wanted to work, but employers didn't seem to understand my condition and the limitations that it put on me. Tesco have made it possible for me to go back to work because of this scheme and more importantly because they have taken into consideration my condition."

50.   Conclusions

  51.  Both case studies show that it is possible to have significant successes in getting people off incapacity benefits or disability living allowance and into work. Perhaps most intriguing is that both have managed this in areas that are believed to have major jobs gaps. This though may be the major lesson of these examples. We might expect intense support, new skills, good advice and guidance and the prospect of doing something useful to be an influence on the economically inactive. However, where these are directly coupled with real working opportunities such as those now available in places like Glasgow and the North East, the effects are deeply impressive.

  52.  350,000 of the out of work disabled enter employment each year—of whom about a third say that they didn't want to work at the start of that year[37]. Give people the glimpse of a proper job and you will get results. It won't be true of all people on such benefits—other factors relating to their cumulative experiences of their working lives will be just too much of a barrier. However, for others such opportunities will strip away the barriers that had existed. And this is true even in the case of jobs that such people might never have ever considered before.

Andy Westwood

Head of Policy Research

6 January 2003

Annex 1


  First coined by the Wise Group in 1990, the concept of the Intermediate Labour Market (ILM) was the notion that there is a market for paid labour intermediate between unemployment and full employment which delivers benefits to disadvantaged individuals and communities. The first Wise Group ILM project started by upgrading poor quality insulation in Council homes in Glasgow. They now offer training programmes as diverse as landscaping, home security, childcare and catering.

  They consider that the primary aim is to offer the long-term unemployed and those furthest from the labour market a bridge back to work. The programmes combine relevant high quality vocational training with a substantial period of work experience and personal development including job search activity creating a realistic work, environment for the long term unemployed with all of the characteristics of normal employment. They therefore include:

    —  a rate for the job wage;

    —  a contract with rights and obligations;

    —  quality management and supervision;

    —  the work carried out is to a high quality and is of real value;

    —  a work reference for future employers.

  It links the long-term unemployed to their communities and the local economy through the provision of useful products and services. This approach also temporarily adds to the supply of jobs particularly in areas where there are weak local opportunities.

  Wise Group ILM Programmes include:

    —  Childcare.

    —  Construction.

    —  Housing Refurbishment.

    —  Landscaping.

    —  Manufacturing.

    —  Call Centre activities.

    —  Advice, Guidance, Training and Support.

Annex 2

Benefit Costs in Glasgow
Type of benefitEst unit cost
Unit cost
Est numbering
Total annual
cost (million)
Income Support/severe disallowance£84 £4,36844,000£192,192
Income support/disibility£77 £4,00428,000£112,112
Income support/lone parent allowance£105 £5,46020,000£109,200
Other income support£70 £3,6408,000£29,120
Sub-total£84£4,368 100,000£442,624
JSA Allowance (contribution based)£55 £2,86018,500£52,910
Total direct benefit £495,534

6   NB This evidence duplicates much of the analysis, argument and policy recommendations contained in the Work Foundation's previous submission to the Work and Pensions Select Committee (April 2002). In this previous evidence we considered that much of the incapacity benefits problem was in fact a consequence of wider worklessness caused by structural change and local jobs gaps. Our suggested solutions therefore still apply now and we refer to them in this document. However, we have tried to separate out those issues that apply predominantly to those people on incapacity benefits and on some instances where policy approaches have proved successful. Back

7   Following Government terminology, we define "incapacity benefits" as "benefits that give working-age people a replacement income when they become sick and disabled and stop working or looking for work as a result." This category includes Incapacity Benefit and Income Support, plus (until April 2001) Severe Disablement Allowance. Under ILO classification (the Government's preferred measure) those in receipt of these benefits are also counted as economically inactive. The economically inactive also include non-benefit recipients who are not working either because they do not want to work, or cannot find a job (around 1/3 of the total). Back

8   CM 5690 (2002): Pathways to Work: Helping people into employment, London: Department of Work and Pensions. Back

9   R Dickens, P Gregg and J Wadsworth (2001): "Non Working Classes-Britain's New Chronic Unemployed", Centrepiece, June. Back

10   Gregg P and Wadsworth J; Unpacking Economic Inactivity, EPI Economic Report 1999. Back

11   Tackling the Regional Jobs Gap-Grieve Smith et al, Employment Policy Institute 2000. Back

12   Rogers, R. and Power, A. Cities for a Small Country. Back

13   See Inconvenience Food, Demos 2002. Back

14   In the original script for The Full Monty, the author Simon Beaufoy based these scenes in Woolworths. Back

15   The Full Monty, 20th Century Fox, 1997. Back

16   ASDA announced 10,000 new jobs nationwide on 18 September 2001. Back

17   Learndirect advertising campaign, 2002. Back

18   See "Is New Work Good Work?" Andy Westwood, The Work Foundation 2002. Back

19   Warhurst C, and Nickson, D; Looking Good, Sounding Right, Industrial Society 2001. Back

20   See Marshall B, Full Employment City?, Industrial Society 2001. Back

21   Alan Sinclair Wise Group 2000. Back

22   Kodz et al, the Fifties Revival, IES. Back

23   Typically the most common level of craft qualifications (City and Guilds etc). Back

24   This point is made variously by Disney and Hawkes, Campbell, Rogers, Gregg and Wadsworth etc. Back

25   Fit and Fifty? Scase R. and Scales J. ESRC 2000. Back

26   Richard Scase at launch of Fit and Fifty? 20.11.2000. Back

27   Scase and Scales. Back

28   Jackson, P. and Taylor P. `Factors associated with employment in later working life' Work, Employment and Society 1994. Back

29   Donovan, N. and Street, C. Older People and Paid Work-in "Life after 50" JRF 2000. Back

30   See ONS (and Bevan 2002). Back

31   See recent announcements by Gordon Brown (PBR 2002) and also self employment options in programmes such as the New Deal for 50+. Back

32   See working time regulations such as working time directive, parental leave etc and also interventions in the skill levels of the workforce such as Skills for Life, Employer Training Pilots, University for Industry etc. Back

33   See Annex 1 for a full explanation of the ILM concept. Back

34   Clare Dodgson-Chief Operating Officer, Jobcentre Plus. Back

35   Tony Blair, speaking at Seacroft in November 2000. Back

36   The Indices of Deprivation (DETLR) 2000. Back

37   Presentation to joint DWP Treasury Seminar by Chris Tracey (DWP) October 2002. Back

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