Select Committee on Work and Pensions Minutes of Evidence


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.


 
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