Preventing Disconnection: Recession and Beyond

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Centre for Market and Public Organisation
Preventing DisconnectionRecession and Beyond
Paul Gregg Public Service Reform Seminar, March
2009
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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)

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Numbers on Major Benefits
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Spending on Major Benefits/tax credits
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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

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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

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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

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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

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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

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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

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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

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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

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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

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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
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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

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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

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Wider and Longer-run Issues I

• Adviser Flexibility
• Incentives to Overcome Parking
• Single Working Age Benefit
• Rule Over-ride

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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