Preventing Disconnection: Recession and Beyond

1. Centre for Market and Public Organisation Preventing Disconnection:Recession and Beyond Paul Gregg Public Service Reform Seminar, March 2009

2. Recession and Beyond • Last Two recessions saw open unemp peaked at around 3 million (rises of 2 and 1.5 million from pre- period) • But rises in inactive IB/IS saw additional 0.75 and 1 million. • Total peaked at 6 million in 1993. (2008 - 4 million)

3. Numbers on Major Benefits

4. Spending on Major Benefits/tax credits

5. Scarring • In 1981 recession – Men under 23 experiencing 12+ months out of work spent another 30 months not in work (18 unemp, 22 non-employed) – compared to 6 months for those 1-6 months unemp • About ½ of this gap is causal rather than due top characteristics (Gregg 2001) • Those in work have long lasting wage penalties – through reduced access to long-tenured jobs/career development • Also evidence of health impact (mental and physical) from long-term worklessness • Drift onto IB draws disproportionately on LTU

6. Scarring • Unlike open unemp rises in active benefits were not reversed (actually rose continually from 1979 to 1998 IS – 2003 IB). • 4 Problems – Initial barriers to employment - Until recently no support - Long-dependency – which has damaging effects - No institutional engagement structure - Poor work incentives

7. Strategy 2009-2012 • Reduce disconnection from work during recession • Prevent build up/concentration of Unemp on a small minority • Reduce drift on to less active benefits • Keep people engaged and supported on all benefits

8. 1. Reduce disconnection from work during recession About Recession will take 5% off GDP – Emp down 0.5% so far, 4.5% to come ≈ 1.5m Jobs • Suspend collection of employer NICs for 6 months but reclaim from late 2010 • Raise EMA to encourage young adults to stay in school • Reduce hours limit in tax credits to 16 hours for 2 years – encourage part-time working • Kick start school rebuilding etc and repair of council houses

9. 2. Prevent build up/concentration of Unemp on a small minority • ½ of all days of male unemployment fall on 6% of men • Severely damages future work and wages • Job Guarantee at 12 months – useful activity • 20 hours per week and min wage • Public and charitable sector • Require 20 hours in job search and support activities • Cost approx. £7bn

10. 3. Reduce drift on to less active benefits • Tighter WCA means fewer getting on to disability benefits • Issue about appropriate support for those no longer getting on to the inactive benefits but have clear barriers to work • Single Working Age Benefit

11. 4. Keeping people engaged and supported on all benefits • JSA operates a shake out model – STU left unsupported till duration reveals problem group. Then invests in support etc. • This is not appropriate for those with clear pre-existing barriers – need support straight away, not ready for job search conditionality and timing uncertain • So We Need Another Approach

12. 4. Keeping people engaged and supported on all benefits • LTU and Lone Ps/Sick disabled and some others all suffer significant barriers for a return to work – prob. Less for LTU than others. • Job Search Conditionality increases entry into work for job ready – McVicar (2008), Manning (2001). • But evidence for those less job ready is more worrying – Blank (2008) highlights how 20% of lone mothers are not in work or on welfare. Petrongolo (2005) – how JSA oushed some onto IB. • So We Need Another Approach

13. Keeping people engaged and supported on all benefits • Dutch Individual Re-Integration Accounts -IROs. • Offer claimant voice in designing welfare support package – co-ownership • Highly Flexible and Persionalised in range of support offered – akin to Personalised Budgets in Social Services. • Agreed Plan becomes conditional • Popular with claimants, reduced conflict/sanctioning, good outcomes. • Is this the other Approach

14. Work Ready Group Flexible New Deal 12+ months Fast track Supported Jobsearch 6 – 9 months Directed Jobsearch 3-6 months Destination based on Client Group Self-help 0-3 months Work Progression to Work Group WFIs Action Plans Work Related Activity Time to Jobsearch is variable No Conditionality Group Full Support

15. Who is in each group? Work-Ready group • JSA claimants • Lone parents and partners with youngest child aged 7 and over • Disadvantaged groups Progression to Work group • ESA claimants • Lone parents and partners with youngest child aged 1-7 No Conditionality group • ESA Support Group • Carers • Lone parents and partners with youngest child aged under 1

16. A new concept: Progression to Work group • Everyone moving towards job search in a flexible co-owned route back to work within a personalised timeline • Adviser/claimant relationship is central • Tailored to their capability and built around their circumstances • Work Focused Interviews, Action Plans and Work Related Activity are fundamental – no required job search if not in plan • Links up with effective support • No requirement to take specific jobs

17. Wider and Longer-run Issues I • Adviser Flexibility • Incentives to Overcome Parking • Single Working Age Benefit • Rule Over-ride

18. Wider and Longer-run Issues II • Mobility- Retention and Advancement • Wider objectives – e.g. homeless, dependence, family support etc. • Contracting models – advocacy, lead professional, personalised budgets