Written evidence submitted
by Trades Union Congress (TUC)
INTRODUCTION
1.1 The TUC is grateful for this opportunity
to present evidence to the Select Committee.
1.2 The TUC is the voice of Britain at work.
With 58 affiliated unions representing 6.2 million working people
from all occupations, we campaign for a fair deal at work and
for social justice at home and abroad. We negotiate in Europe,
and in Britain we build links with political parties, business,
local communities and wider society.
SUMMARY
2.1 Youth unemployment rates are significantly
higher than for other groups and have risen more during the recession.
2.2 The gap between unemployment rates for 16
and 17 year olds and other age groups mainly reflects the fact
that, over a long period, the unemployment level for this
group has remained the same, whilst many young people who would
have gone into employment in previous years now stay in education.
Once this is taken into account there is, however, still an increase
in unemployment in this age group, reflecting the decline of manufacturing
and the fact that the New Deal only recruits young people over
the age over 18.
2.3 There is a slight upward trend in the proportion
of 16-18 year olds not in education, employment or training. The
fact that this problem has persisted and that the proportion of
young people in this position has never fallen below 8% is very
worrying.
2.4 Youth unemployment is important because it
has a "scarring" effect: even 20 years later, people
who suffered long-term unemployment in their youth face lower
wages, a greater likelihood of unemployment, worse health and
lower levels of life satisfaction.
2.5 The Future Jobs Fund was based on principles
for the design of employment programmes that have a substantial
consensus behind them. The TUC is very disappointed that the new
government chose to scrap the FJF at a time of high unemployment
and before alternative provision was available.
2.6 The TUC believes that, by offering long-term
unemployed people real jobs with fair pay and normal employment
rights, the Future Jobs Fund offered a model for the future of
active labour market policy. Even at this late dates we hope that
the decision to cancel it will be reversed.
YOUNG PEOPLE
AND THE
LABOUR MARKET
3.1 In April - June 2010 there were 196,000 unemployed
16 and 17 year olds and 724,000 unemployed 18-24 year olds. The
unemployment rate for 16-17 year olds was 33.1% and that for 18-24
year olds was 17.5%, compared with an overall 16-64 rate of 8.0%.
3.2 There has been a gap between the unemployment
rates for young people and adults for some time:
3.3 We would expect the gap between unemployment
rates for young people and the rest of the population to rise
during a recession. This is because they are entering the employment
market for the first time, and come up against the fact that employers
stop hiring before they start firing during the down phase, and
then use up spare capacity before hiring new workers as the recovery
begins. The 18-24 gap has followed this pattern, but for 16 and
17 year olds the picture is of a (nearly) continuously rising
gap:
3.4 The 16-17 gap reflects the fact that young
people under 18 who previously would have entered work have increasingly
been staying on at school and are therefore usually classified
as economically inactive. The level of unemployment in
this age group has been more stable, ranging from 127,000 in November
1994 to 218,000 in June 2009.
3.5 Nonetheless, we should be concerned that
there is a definite upwards trend. The chart below uses a 12 month
moving average to eliminate minor fluctuations:
3.6 This trend does not map easily to other developments,
such as the economic cycle or changes in employment regulation.
An important article in the DWP's Employment and Labour Market
Review last year (Barham et al) suggested that young
people's employment may have been affected by the decline of manufacturing.
The figures may also reflect the fact that this age group does
not qualify for the New Deal for young people.
3.7 Concern about young people not in education
employment or training is entirely reasonable. The DfE's "NEET
statistics" show that about one in six in this group are
"out of scope" - those in custody, on a gap year etc
- but the others are likely to be highly disadvantaged in the
labour market. (DfE, 2010) The number of 16-18 year olds in this
position has rose substantially in the early noughties, from 146,000
in 1999 to 210,000 in 2006. The most recent figure is 183,000
in 2009. The proportion has ranged from eight to 11 %, with
something of an upward trend, probably due to the recession:
Source:
DCSF, 2009; DfE, 2010.
WHY YOUTH
UNEMPLOYMENT IS
IMPORTANT
4.1 There is strong evidence for "scarring"
- people who are unemployed when they are young find it harder
to get jobs and have lower wages for many years. This is especially
so for people who are unemployed straight from leaving school.
Gregg (2001) used data from the National Child Development Study
to show that unemployment before the age of 23 was a driver of
repeated unemployment in later years.
4.2 Using the same source, Gregg and Tominey
found that there was "a large and significant wage penalty,
even after controlling for educational achievement, region of
residence and a wealth of family and individual specific characteristics."
The wage penalty for suffering youth unemployment was substantial
at the age of 23 and still noticeable at the age of 42. At that
age, people who had suffered six months or more of unemployment
in their youth were earning eight to 10% less than those who had
never been unemployed; if they had suffered repeated unemployment
the scar was 12 to 15%.
4.3 Bell and Blanchflower used the NCDS to look
at the impact of being unemployed in youth on life satisfaction
and health when respondents were 46/7:
- People who had been unemployed in youth had lower
reported levels of life satisfaction; what is particularly significant
here is that a spell of unemployment at 33 did not have this effect:
it was youth unemployment that was harmful. (Recent unemployment
at any age is associated with significant unhappiness.).
- 34.3% of those who had not suffered youth unemployment
reported that their health was excellent, compared with 27.8%
of those who had. Again, unemployment at 33 did not have a significant
effect.
4.4 The ILO notes US research estimating that
a 1 percentage point increase in unemployment causes college graduates
a 6 to 7% reduction in wages, this gradually falls but is still
statistically significant after 15 years; the impact for young
people with lower qualifications is even more severe (ILO, 2010,
42).
LABOUR MARKET
PROGRAMMES FOR
YOUNG UNEMPLOYED
PEOPLE
5.1 In the 1990s, the international experience
of the operation of active labour market programmes made it possible
for a number of lessons to be learned about what does and does
not work. Gradually a consensus has built up about many of these
lessons.
5.2 Writing for the ILO in 1997, Meager and Evans
found that there was an emerging consensus that "programmes
closely linked to the regular labour market and economy, and which
involve jobs, training initiatives or work placements in regular
workplaces, appear to have greater effectiveness in improving
the employability of disadvantaged groups such as the long-term
unemployed." (73-4)
5.3 The Organisation for Economic Co-operation
and Development has suggested (Martin, 2000) that work
programmes may be useful in keeping unemployed people in contact
with the labour market, and that this may be especially useful
when vacancies are scarce. It is important for Governments to
ensure that schemes are of limited duration and do not "become
a disguised form of permanent employment." The OECD's conclusions
on programmes for young people were rather depressing, as they
found few that had worked well, but John Martin quotes a study
that suggests a number of "precepts for success":
- Close links to the local labour market.
- Target jobs with "relatively high earnings,
strong employment growth and good opportunities for advancement".
- "An an appropriate mix of academic education,
occupational skills and on-the-job training".
- Include "pathways to further education".
- Offer support services for participants and their
families.
- Monitor the results - and act on what is learned.
5.4 Most recently, in their survey of the evidence
for the DWP, Daguerre and Etherington concluded:
- Those most in need benefit from personalised
support and early intervention.
- Staff: client ratios should be adequate.
- Attention should be paid to preventing people
dropping out.
- "Subsidised work placements combined with
on the job training and other appropriate measures achieve sustainable
employment outcomes".
THE FUTURE
JOBS FUND
6.1 On 24 May the government announced that it
planned to save "£320 million from ending ineffective
elements of employment programmes, including ending further rollout
of temporary jobs through the Young Person's Guarantee (the 'Future
Jobs Fund') and removing recruitment subsidies from the 'Six-Month
Offer'." (HMT, 2010)
6.2 The TUC was rather surprised that the government
felt able to describe the Future Jobs Fund as "ineffective".
It is simply far too early to make this sort of judgement - the
programme only recruited its first few workers in October, and
was just beginning to get up to speed when it was cancelled. The
TUC was a strong supporter of the FJF, which we thought was the
most progressive employment programme for a generation, but we
would be much more cautious about describing it as a success or
failure - we need time to see the results and for the independent
evaluations to be carried out.
6.3 The fact that the government described the
programme as a failure in advance of these evaluations strongly
suggests that this judgement was politically determined. The Future
Jobs Fund had provision for 205,000 jobs for young long-term unemployed
people; 118,000 had been confirmed and another 80,000 were being
arranged. (Wintour, 2010) Withdrawing it before any replacement
was available seems particularly short-sighted at a time when
the economy needs all the support it can get.
6.4 Although it is far too early to evaluate
the programme, the prospects were very positive. By the end of
May, there were 40,720 starts to Future Jobs Fund placements (DWP,
2010a), indicating that, after a slow start, it had built up speed.
6.5 The FJF was designed after taking into account
the lessons outlined in section 5. The FJF was created to offer
real jobs. This means that people on the Future Jobs Fund are
workers, not trainees. They have normal employee rights and laws
against discrimination, on health and safety at work, unfair dismissal,
rights to holidays and maximum working time all apply.
6.6 A key feature of FJF jobs is that they pay
a wage (at least the minimum wage), not benefits. This distinguishes
the FJF from workfare and twenty years of work experience schemes:
we object vehemently to schemes that fail to meet this standard.
"Benefit plus" schemes that pay an hourly rate well
below the minimum wage are unfair to participants and threaten
the jobs and pay rates of existing workers. Paying a fair wage
makes FJF jobs a far more realistic preparation for employment
in the open labour market: participants will take the programme
more seriously and prospective employers will know that time spent
on the FJF is more likely than other programmes to have meant
that an applicant was exposed to real work discipline.
6.7 The Future Jobs Fund only provides enough
money to pay for six months' employment. Some critics have objected
to this limited duration, but that was one of the key lessons
listed in section 5 - the point of the Future Jobs Fund is to
give participants experience of a real job that will help them
to get work in the open labour market, not to provide a permanent
subsidised job. The FJF only provides sufficient funding for a
job lasting 25 hours a week; this leaves time for job search,
which we believe should continue all the time someone is working
on the programme.
6.8 The TUC believes that, far from being abolished,
the Future Jobs Fund is a model of how to design a programme with
a view to both equity and effectiveness. "Job Guarantees"
like the FJF offer the realisation of an old trade union demand
for unemployed people: "work or full maintenance".
6.9 But, at the same time, they also offer a
model of fair reciprocity. When someone is guaranteed a job that
meets decent minimum standards with any necessary adjustments
to meet their access needs or family/caring responsibilities it
is perfectly reasonable to require them to take up the offer.
6.10 That is why we welcomed the 29 March decision
by the last government that the Future Jobs Fund was to be extended
to all long-term unemployed people. Combined with a substantial
expansion of the Access to Work programme (which we hope the current
government will confirm) this policy prepared the way for an inclusive
labour market that offered employment to all.
CONCLUSION
6.11 Youth unemployment has risen substantially
in this recession and the increase has been greater than for other
age groups. But this is not just a problem that has developed
in the past two years: unemployment among 16 and 17 year olds
has been rising gradually for 20 years. At the same time, the
number of young people not in education, employment or training
is a persistent problem.
6.12 Youth unemployment deserves to be a priority
for all governments because of the serious long-term effects it
has for individuals as well as its potential to undermine social
cohesion by creating a "lost generation".
6.13 The TUC was therefore very disappointed
that the Future Jobs Fund was scrapped before any replacement
was available. The labelling of the FJF as a failure before any
evaluation could possibly be carried out betrays the principle
of evidence-based policy making.
6.14 The FJF had very good prospects for success.
The design was based on widely-accepted principles for active
labour market programmes, this realism was combined with a fair
balance of rights and responsibilities that made it, in our view,
the most progressive employment programme for a generation. We
still hope that it will be a model for future jobs programmes.
REFERENCES
BARHAM C, WALLING A, CLANCY G, HICKS S and CONN S,
(2009) "Young people and the labour market", Economic
& Labour Market Review, Vol 3 No 4,
http://www.statistics.gov.uk/elmr/04_09/downloads/ELMR_Apr09_Barham.pdf
BELL, D and BLANCHFLOWER, D (2009) What Should
Be Done about Rising Unemployment in the UK? IZA Discussion
Paper 4040,
http://www.operationspaix.net/sites/politiquessociales.net/IMG/pdf/dp4040.pdf
DAGUERRE, A and ETHERINGTON, D (2009) Active labour
market policies in international context: what works best? Lessons
for the UK, Middlesex University for DWP, Working Paper 59,
http://campaigns.dwp.gov.uk/asd/asd5/WP59.pdf
DEPARTMENT FOR CHILDREN, SCHOOLS AND FAMILIES (2009)
"NEET Statistics - Quarterly Brief", September 2009,
http://www.dcsf.gov.uk/rsgateway/DB/STR/d000870/NEETQuarterlyBriefQ22009.pdf
DEPARTMENT FOR EDUCATION (2010) "NEET Statistics
- Quarterly Brief", August 2010,
http://www.dcsf.gov.uk/rsgateway/DB/STR/d000950/NEETQB2_2010.pdf
DEPARTMENT FOR WORK AND PENSIONS (2010a) Young
Person's Guarantee Official Statistics, 11-8-10,
http://research.dwp.gov.uk/asd/asd1/jsa/ypg/YPG_Statistical_Release_August_2010.pdf
DEPARTMENT FOR WORK AND PENSIONS (2010b) Building
bridges to work: new approaches to tackling long-term worklessness,
http://www.official-documents.gov.uk/document/cm78/7817/7817.pdf
GREGG, P. (2001). "The impact of youth unemployment
on adult employment in the NCDS", Economic Journal, vol.
111(475).
GREGG, P and TOMINEY, E (2004) The Wage Scar from
Youth Unemployment, CMPO Working Paper 04/097,
http://www.bristol.ac.uk/cmpo/publications/papers/2004/wp97.pdf
HM TREASURY (2010) "Government announces £6.2 billion
of savings in 2010-11", Press Notice 04/10, 24/05/10,
http://www.hm-treasury.gov.uk/d/press_04_10.pdf
INTERNATIONAL LABOUR ORGANISATION (2010) Global
Employment Trends for Youth,
http://www.ilo.org/wcmsp5/groups/public/---ed_emp/---emp_elm/---trends/documents/publication/wcms_143349.pdf
MARTIN, J (2000) "What Works Among Active Labour
Market Policies: Evidence From OECD Countries'
Experiences", OECD Economic Studies, No. 30, 2000/I,
http://www.oecd.org/dataoecd/31/35/2732343.pdf
MEAGER, N with EVANS, C (1997) The evaluation of
active labour market measures for the long-term unemployed, IES
for ILO, Employment and Training Paper 16,
http://www.ilo.org/wcmsp5/groups/public/---ed_emp/documents/publication/wcms_120317.pdf
WINTOUR, P (2010) "Frank Field warns coalition
over Labour jobs guarantee scheme" Guardian, 10 June,
http://www.guardian.co.uk/politics/2010/jun/10/frank-field-labour-jobs-guarantee-coalition
10 September 2010
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