Examination of Witnesses (Questions 210
- 219)
WEDNESDAY 22 NOVEMBER 2006
MR DAVE
SIMMONDS AND
MR WAYNE
SHAND
Q210 Chairman: Good morning everybody,
welcome to our fourth evidence session on our employment inquiry.
Good morning to our witnesses, again to Dave Simmonds, and it
is very good to have you with us, Mr Shand. Can I start by asking—because
it does seem to cause controversy—how should the 80% rate
be calculated?
Mr Simmonds: There is a nice technical
question for 9.30 in the morning! If I can deal with this first?
First of all, we believe that a rate should be a rate and therefore
the present definition that we have for working age should be
the denominator that is used for calculating the rate, and that
of course is defined from school leaving age to state pension
age. Whilst there are suggestions of other denominators we still
believe that the rate should be expressed as a percentage of all
of those people who at present are deemed to be within the labour
market and available to work. At either end of the age spectrum
there are going to be debates. At the lower end the Government
has targets for increasing the number of young people in higher
education, quite properly. But at the same time young people still
have choices; they have choices as to whether or not they do go
into higher education—and it is not suitable for all and
maximising work for them is important—and making sure that
they are either in education, employment or training. Of course,
even if you are in higher education as a young person many of
them want the opportunity to earn money—indeed, many need
to earn money to support themselves through their higher education.
And we have to remember, further, that the definition of working
used is only one hour of work per week, so that does incorporate
all of those people at work, the younger age groups, who are both
in higher education but also can sustain their casual work in
bars or supermarket odd shifts and so forth. So we still believe
that certainly in using the one-hour criteria that younger people
should still be kept in. Patently there is a debate just opened
up as to whether or not school leaving age should move up to 18,
in which case we think the definition should change to reflect
that—it would move up to 18 because it is only at that point
that people become active within the labour market as a whole.
At the other end of the age spectrum we believe that the rate
should be calculated by the state pension age. That is again the
point at which people have a choice in terms of retirement or
carrying on working. Whilst we understand that it is important
that older people have the choice to carry on beyond the state
pension age, still in terms of this country and in terms of overall
productivity and so forth the expectation is that it is up to
the state pension age when people are full members of the working
age population. So we still believe that the definition of working
age rate should reflect the changes in the criteria for the state
pension age. So when it moves up to 65 for women the denominator
will change; when it moves up for men to 67-68 then again the
denominator will change.
Q211 Chairman: Do you think that
the one-hour rule is valid?
Mr Simmonds: It depends which
way you want to look at it. If you are measuring overall economic
activity within the labour market, yes, it is valid. If, on the
other hand, you want to measure the extent of activity for particular
groups of people and their ability to earn a decent living wage
without the need for top-up of benefits and so forth, then probably
no it would not be valid. Certainly if you are trying to measure
the numbers of people that are engaged to one extent or another
within the labour market then that is the biggest measure. If
you have other criteria which you want to measure how work is
distributed across society, then you would look at other measures
underneath.
Q212 Mrs Humble: Two questions. First
of all, a follow on on the one-hour rule. As I am sure you are
aware, there are many young people who are not working officially
when they are supporting themselves in further education, and
so in a way the one-hour rule is a nonsense; they may well be
working five or six hours but doing it unofficially, and so they
are on nobody's radar. Secondly, because the media all too often
just look at raw statistics and headlines, here we seem to have
a statistic on the number of 16 to 19 year olds that can be shown
to be working with regard to the Department for Education, where
we see the number of 16 to 19 year olds in work going down, and
they can argue that that is a success for them because they are
keeping more people in the education and training system rather
than them going into work, but those same statistics drag down
the overall statistics for the Department of Work and Pensions.
So is it really realistic for us to include that group of 16 to
19 year olds in the overall statistics for the 80%, or should
they be considered separately, and then we can have a more nuance
response to them?
Mr Simmonds: Yes, an important
question. First of all, they are considered separately in terms
of one of those sub measures, and certainly when it comes to looking
at the numbers of people that are not in education, employment
or training. So the number of "Neets", so-called, is
a persistently asked question at the national level and also the
local level and of course is absolutely central to the aims and
purpose of connexions. I think the more important point is that
we still believe that the 16 to 19 year olds should be within
the employment rate measure, but, yes, of course, the DofE's targets
do drag down the contribution that that age group is making to
the 80%. We actually do not see that as a problem, we actually
see it as a good thing overall because one of the effects should
be, and actually is, to redress, refocus policy makers' attention
on to the other age groups. So if we are going to be taking one
age group increasingly out of the labour market, irrespective
of the one-hour rule, it means we have to put more efforts into
the older age groups. So that tension between those policies is
actually a productive one as long as people are drawing the right
conclusions and redirecting their efforts. I think in part the
reflection of the quite rapid increase in the number of people
over 50 in the labour market has been in part a reflection of
that shift which is happening. So it is still, we would say, a
positive thing as long as policy spotlight switches towards the
older age groups.
Q213 Mrs Humble: So it is a good
thing because it makes the Department work twice as hard for a
different group of people?
Mr Simmonds: Exactly.
Q214 Chairman: However it is defined,
what are the key challenges in achieving the 80%?
Mr Simmonds: First of all, looking
back we have seen a rapid rise in the employment rate since the
early 90s, and of course it has shifted up from around 70 to 75
to date, showing that it is possible to gain a full 5% point,
which is why we do think that the 80% is achievable. However,
since around 2000 we have been on a plateau, so the key challenge—the
key challenge—is how do we kick-start both the supply
side and the demand side of the economy to get us up off that
plateau? As such, certainly from Inclusion's point of view, we
turn the spotlight on in terms of our primary interest of what
needs to happen to close the employment rate gaps for disadvantaged
groups in the economy. If we are going to achieve the 80% it cannot
be done without pulling in more of those disadvantaged groups
into the labour market. Of course, it could be done if we were
pulling in a lot more migrants and it could be done if the work-rich
got even richer, but that of course runs the risk of labour shortages
in some areas of the country, and it will also run risks of skill
shortages in some areas of the country, which is why it is critical
overall in terms of the macroeconomic policies as well to make
sure that there is always sufficient public investment in support
for disadvantaged groups, as well as always asking the question
as to whether or not we have the legislation right as well in
terms of placing increasing requirements upon employers to recruit
those groups.
Mr Shand: If I could just add
to that? I think from the local government perspective and the
cities in particular, I think there are three particular issues
upon which we would focus. Firstly, issues of engagement and about
how we start to attract and involve our residents in employment
support and training services. There are huge numbers of people
on incapacity benefit, particularly within the cities, who have
been disengaged from most mainstream services for, on average,
nine years in Manchester, for example. So it is a huge task of
finding ways to connect with those individuals and to encourage
them to think differently about their future and their lives and
the support that they can gain from working with voluntary groups
from providers and from mainstream agencies. The second issue
that we focus on in the local government sector is that of skills,
and clearly if the overall demands of employers continue to increase
many individuals, particularly those who fell out of the manufacturing
industry 10 to 15 years ago, do not have the right skills to be
able to compete in the modern labour market, and there are real
challenges to ensure that those individuals within our areas are
able to gain skills and compete if we are going to hit the 80%
rates. The third area is the one that was touched on around employer
involvement, about how we get employers, particularly where we
have active labour markets in places like Manchester, to think
positively and have approaches that are going to be open to individuals
that have been on long-term benefits to effectively compete with
other sources of labour for the jobs have been created.
Justine Greening: I just want to pick
up on a point that Dave Simmonds made, about the role of migration
in reaching the 80% target. Would you not agree, though, that
that is an extremely inefficient way of reaching a target, given
that we have by some measures 1.7 million unemployed, 2.7 million
on incapacity benefit, the vast majority of whom want to work?
And that having more migration would mean that in the numerator
and denominator in the 80% we have talked about you have a plus
one on both, whereas if we can get somebody who is currently unemployed
or currently on incapacity benefit into work the denominators
stay the same but the numerator goes up? So do you not think that
increased migration as a way of tackling this is a fundamentally
inefficient strategy that possibly penalises people here who want
to work but cannot find work, and is an easy route out for the
Government to take?
Q215 Chairman: In considering that,
I do not think it is any way declared government policy that you
have migration to achieve the 80% employment target. I think that
is a completely different issue, but you carry on.
Mr Simmonds: The level of migration
certainly since 2000 has been high by all accounts.
Q216 Justine Greening: We do not
know the figure; I think that is part of the problem.
Mr Simmonds: There are various
guesstimates ranging from 500,000 to 700,000, various figures
coming out pretty much every week around this. What is clear is
that the economy has successfully absorbed those migrants and
certainly what we see—
Q217 Justine Greening: Can I just
ask you what evidence you have to support that? Every week in
my surgery 50% of my casework relates to immigration and a large
number of those people coming to see me because they still have
not been told whether they can stay indefinitely. Many of them
will not be able to work until they get that final decision. If
they are given a final decision to stay it is not clear to me,
based on the fact we do not know how many people are waiting for
indefinite leave to remain, how you can make a statement that
we absorb those people who were already here into the labour market?
Mr Simmonds: I was referring to
those people who were coming in, which is still the largest group,
coming in from the EU and seeking work and finding work and have
actually added to the denominator, and we still have the 75%.
So certainly in terms of ONS figures, in terms of population estimates
and revisions, then they are included, but the employment rate
has actually remained the same. I completely accept that there
is a large group of people as well who have not had their decision
for indefinite leave to remain and that does put them in a very
difficult position when it comes to employment, but the general
point that I was making was that we have had a high level of EU
economic migrants, who have successfully been absorbed into the
labour market, they have found jobs and are successfully contributing
to the UK economy as a whole, and we see that as a good thing
at the macroeconomic level. However, there is no doubt at all
that it does increase the competition at the low end of the labour
market, and so for those people who are benefit claimants now,
who are seeking to get back into the labour market, many of those
migrants are competing for the same sorts of jobs. The big message
there—and I think the big debate and one which still needs
teasing out a lot more—is that there is a key difference
between those economic migrants and our benefit claimants. First
of all, economic migrants are coming and actively seeking work—positively
wanting to find work because that is their purpose in coming here.
But for many of our benefit claimants, especially those people
on incapacity benefit and income support, many of those we class
as inactive claimants, people who are not seeking work. So a fundamental
point is that as soon as you are looking for work you are more
likely to find it; if you are not looking for work you will not
find work.
Chairman: We do have a programme to get
through. Can I bring in Mark Pritchard?
Q218 Mark Pritchard: I wonder how
you factored in language as a way of accessing the work place.
My own view is, if you are a migrant or asylum seeker seeking
a British passport you should undertake and be encouraged to learn
the language. Why? Because you need to know your rights under
the law as well as your responsibilities. Also, I think it is
a no-brainer to say that if you can speak the language it is pretty
helpful in finding a job. Could you comment on that? Secondly,
in relation to the micro level, what evidence there is—and
certainly my area in the West Midlands is anecdotal evidence,
which I find concerning because I think it will undermine social
cohesion and community relations in the medium to long-term—a
sort of no-go area, but nevertheless I speak my mind—and
that is the point of wage deflation, not only people losing out
from people from other countries for a single job, but also the
assumed wage deflation, and with other costs of living going up
wage deflation is not something that most families want to hear
about, certainly the main breadwinner of the family. Finally,
within that overall context, of course unemployment is at a seven-year
high. So if you have unemployment rising and you have wage deflation
and you have more people competing for fewer jobs then I think
there is a recipe for what has been, traditionally, very good
community relations in this country being undermined, unless it
is grasped very quickly, particularly with the accession of Bulgaria
and Romania coming very quickly.
Mr Simmonds: Language is obviously
important and the level of support which Government gives to ESOL
on training we certainly believe it is not sufficient, it should
be increased. Certainly in terms of our anecdotal evidence, again
if you are looking at the majority of economic migrants they want
to learn English, they recognise that it is important for getting
on in work and the vast majority do pick up sufficient English
language skills to be able to maintain sustained employment. But
still there will be some migrant groups that need more support
and that is where ESOL training is incredibly important, and it
is incredibly important that it is actually working within those
migrant communities themselves, which brings us round to making
sure that there is local flexibility and a local ability to make
sure that there are sufficient standards and levels of services
within those communities because otherwise you are right that
cohesion is going to be undermined rather than reinforced. In
terms of the wage deflation point, very briefly, there is no doubt,
as I have already said, that there is increased competition at
the lower end of the labour market for jobs, and that does have
an effect on wages. From our point of view it is one reason why
we think that the minimum wage should continue to increase.
Q219 Chairman: Just for clarification,
since 2000 the level of official vacancies in the economy has
remained constant, has it not?
Mr Simmonds: Yes.
|
