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Centre for Market and Public Organisation. Preventing Disconnection: Recession and Beyond. Paul Gregg Public Service Reform Seminar, March 2009. Recession and Beyond. Last Two recessions saw open unemp peaked at around 3 million (rises of 2 and 1.5 million from pre- period)

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Preventing Disconnection: Recession and Beyond

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Centre for Market and Public Organisation

Preventing Disconnection:Recession and Beyond

Paul Gregg

Public Service Reform Seminar, March 2009


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)


Numbers on Major Benefits


Spending on Major Benefits/tax credits


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


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


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


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


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


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


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


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


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


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


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


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


Wider and Longer-run Issues I

  • Adviser Flexibility

  • Incentives to Overcome Parking

  • Single Working Age Benefit

  • Rule Over-ride


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


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