Why is it so difficult to increase rates of employment participation in deprived urban areas?

The New Labour government, elected in 1997, has seen it as one of their core aims to reduce long term unemployment, particularly in deprived urban areas in the party’s heartlands.  At the forefront of government policy to increase employment participation has been the New Deal.  The Labour government’s policy did not break with the broad ‘workfarist’ thrust of past Conservative policy with its threats to remove benefit if claimants do not actively seek work, New Labour saw this as a key part of their attempt to construct a welfare state based upon citizens’ responsibilities as well as rights.  Layard, a British economist influential in originating the New Deal wrote that ‘where benefits last for a long time, so does unemployment.  Governments and societies get what they pay for- if they pay for inactivity, that’s what they get’ (1998, pp.24-25).  However, the New Deal, as well as actively helping and encouraging the unemployed to find work, provides training, subsidised employment and volunteer placements to those that do not find unsubsidized employment through the scheme.  The New Deal aims to increase the employability of individuals in the eyes of employers, there have been a number of New Deals for various groups in society such as the young, adults over 25, lone parents and others.  The New Deal for Young People was the first to be put into place and receives the most funding.  The government sees the New Deal for Young People as one of the jewels in its policy crown citing 250,000 young people moving into sustained jobs and, according to one Secretary of State for Unemployment, long term youth unemployment has been virtually eliminated (DfEE, 2001).  However, the government has been less willing to acknowledge that the effectiveness of the programme has varied between locations and that there are large numbers of people who do not get jobs after they participate in the programme, of the 854,000 people who started on the NDYP by March 2003 only 36% were known to have entered unsubsidized employment and nearly one in five of those ended their employment within 13 weeks (Finn, 2003).  Sunley, Martin and Nativel (2001) carried out a study mapping the performance of the New Deal at a local level rather than assessing its performance at a national scale as the government has done.  Mapping the problem faced by the government in 1997 Sunley et al. found, as expected, that the areas youth unemployment as a proportion of the total population was more severe were concentrated in the northern conurbations and old industrial areas rather than in the south of England which has been one of the areas to benefit most in employment from the restructuring of the economy (Turok, 1999).  However, when Sunley et al. mapped the number of people who obtained unsubsidized jobs, the number of people remaining employed for a minimum period after gaining a job and the  areas in which youth employment as a proportion of total employment was worst in 2000 it was clear that the performance of the New Deal had been best in the areas in which it was needed less in the deprived northern conurbations and inner cities.  The areas with the most buoyant local labour markets, in Central and Southern England, were the areas in which most people had gained and held jobs and where youth unemployment as a proportion of the total unemployed had been reduced the most.  Sunley et al. point out that a scheme like the New Deal working on improving employability will succeed in areas where there are sufficient jobs for the increased supply of people coming into the labour market, which by definition are not the areas in which unemployment is the most entrenched.  Sunley et al. explain the poor performance of the New Deal in some areas as partly due to the kinds of jobs available in those areas which could be more insecure at the bottom of the skill structure in the service and construction sectors.  Boosting the supply of labour in depressed labour markets could also have the effect of putting downward pressure on wages leading to increased labour turnover.  Also, the target based need for employment services to place the unemployed in jobs they are unsuited to contributing to the recycling of people through the system and the persistence of long term unemployment in deprived urban areas, to combat this Peck and Theodore (2000) recommend that help for the unemployed continues beyond the first job, helping people to move into better jobs.

The importance of flows into and out of joblessness when determining unemployment level has been a controversial topic among economists.  Writers such as Layard (see Layard et al, 1991) influential in developing the New Deal argue that high unemployment in the 1980s was caused by reduced numbers of people leaving the ranks of the jobless leading to a rise in the average duration that individuals spend unemployed.  Others, such as Burgess (1989) argued that the reduced outflows and increased duration of unemployment during the 1980s were consequences of increased inflows to unemployment due to lack of availability of employment or ‘jobs gap’.  The two perspectives lead to different policy prescriptions.  For Layard it is necessary to target the long term unemployed and increase their job search effectiveness in the way that the New Deal aims to do, this can be described as increasing the supply of labour.  On the other hand, Burgess would advocate stemming the inflows into unemployment in the first place by operating on the demand side of the labour market as well as the supply side through provision of jobs.  Peck and Theodore (2000) argue that where the local labour market is not strong enough to accomodate the increased supply of labour appropriate demand side measures should be used, they criticise the New Deal for being almost completely passive with respect to the demand side of the labour market and also not recognising that jobs will go to the most employable unemployed, meaning that the most likely to be unemployed will be least likely to find jobs.  The National Institute of Economic and Social Research in 1999 discovered that of the 145,000 people who entered jobs via the New Deal since April 1998 79% would have found employment anyway due to the cyclical expansion in the economy (Atkinson, 1999).  Treasury economists argue there is wide availability of employment opportunities in most parts of the country and that buoyant labour markets exist next to areas of high unemployment meaning that the issue is employability and physical access to jobs rather than job creation (ESC, 1999).

Physical access to jobs could be seen to incorporate many other areas of government policy.  While the New Deal is an important part of broader government strategy to reduce unemployment it does not operate in isolation.  A minimum wage has been introduced to ensure that the jobs the long term unemployed are likely to go into have acceptable rates of pay, there have also been policies such as tax credits which aim to make work more attractive and reduce barriers to finding work for those on the lower levels of the jobs market.  Peck and Theodore (2000) point out that employers participating in programmes to increases employment participation do so in accordance with their already existing practices of recruitment, health and safety, and equal opportunities.  The basic rules of labour market entry remain defined on the employers terms and there is a risk of reproducing labour market inequality and discrimination.  Buck and Gordon (1987) write that inner city residents are long term unemployed largely as a reflection of personal characteristics: age, race,  social class, or employment experience- which affect evaluations of their employability.  Certain groups are much more likely to experience employment discrimination than others, for example the relative odds of unemployment for a black person were 2.5 times as great as for those with the most common characteristics and those in unskilled or unclassified jobs had a chance of being unemployed about 80% greater.  These sources of disadvantage are cumulative, so that for an unmarried and unqualified black worker, aged 16-19, in an unskilled manual occupation, living in local authority tenure, the relative odds of unemployment as against employment appear to be 30 times as great as for an individual with the standard characteristics.  Therefore the government have enacted a range of legislation such as the Equality Act of 2006 making discrimination due to race, age, gender, etc. illegal when considering an individual for employment and setting up tribunals to ensure fair employment practices.  This has the effect of removing barriers for some individuals facing unfair disadvantage in the labour market ensuring maximum possible benefit from the government’s employability agenda.  However, despite this there is evidence that ethnic minority youth in the New Deal scheme are less successful in gaining employer based placements and private sector jobs than their white counterparts (Bivand, 1999).

Berthoud (2007) points out that many people who are unemployed choose not to work, for example mothers may choose to stay at home to look after young children, therefore it is important to look at  the family non-employment rate defined as when a single person is unemployed or when a couple has no job between them.  Berthoud finds that the trend in the family unemployment rate rose between 1974 to 2003 despite a trend towards more jobs in this period.  In 2003 the personal non-employment rate was 3% lower than in 1974 but the family non-employment rate was 7% higher.  This is because much of the increase in personal employment rates occurred among families which already had a worker, Berthoud argues that the workforce has been divided into work-rich and work-poor families.  Families with disabled members, those without qualifications, and those without a working partner are more likely to be disadvantaged.  It could be argued that work-poor families with members corresponding with these characteristics are more likely to be concentrated in deprived urban areas.  This highlights the importance of considering the social distribution of unemployment when considering deprived urban areas.

The change in the structure of the economy over the last 30 years has clearly had a profound effect on unemployment in the UK, it is also clear that unemployment increases have occurred at varying rates across the country and affected certain social groups disproportionately.  There has been a strong attempt by the government to improve the employability of the long term unemployed and work on the supply side of the labour market.  It has undoubtedly had an important contribution to make in reducing unemployment among certain social groups in deprived urban areas.  However, it is worth remembering that in an unequal society certain locations, in this case deprived urban areas will always be the places in which problems of unemployment and other social problems are most problematic as those individuals who make the most of the help provided by government programmes and move into sustainable employment are likely to move out of the deprived urban areas concentrating those in long term unemployment in the deprived urban areas.

The flagship New Deal programme has been a good policy for the boom times of the Labour government in which there has been strong and sustained economic growth with steady job creation.  However, the economic situation is changing rapidly and the economy is losing jobs.  In some areas of the south-east there are now 60 job-seekers per vacancy and unemployment is predicted to rise to 2 million (The Observer, 15 March).  It is clear that unemployment policy can no longer be restricted to supply side measures and the government will have to introduce new demand side measures as well as delivering help to businesses, such as promised loans to help liquidity, in order to minimise job loss.

References

Atkinson, M. (1999) New Deal success ‘inflated’, Guardian, 3rd Dec, pp.26

Berthoud, R. (2007) Work-rich and work-poor: Three decades of change, The Policy Press, Bristol

Bivand, P. (1999) Ethnic Inequality in New Deal jobs. Working Brief. October. 8-9

Buck, N. and Gordon, I. (1987) The Beneficiaries of employment growth: an analysis of the experience of disadvantaged groups in expanding labour markets, in Hausner, V. (ed.) Critical Issues in Urban Economic Development vol ii, Oxford University Press, Oxford.

Burgess, S. (1989) How does unemployment change? Department of Economics, University of Bristol, Bristol

Department for Education and Employment (2001) ‘Golden Hellos’ for employers at heart of new, simpler employment drive, press notice 2001/0021, 17 jan

ESC (1999) Employability and Jobs: Is there a jobs gap?  Fourth report of the education and employment committee, Session 1999-2000, vols 1 and 2, HC 60-I&II, London: Stationery Office

Finn, D. (2003) The “Employment First” welfare state: Lessons form the New Deal for young people, Social Policy and Administration, 37, 7, pp.709-724

Layard, R. (1998) Getting people back to work, Centrepiece, Autumn, pp.24-27

Layard, R., Nickell, S. and Jackman, R. (1991) Unemployment: Macroeconomic performance and the labour market, Oxford University Press, Oxford

Painter, J. and Goodwin, M. (2000) Local Governance after Fordism, in Stoker, G. (ed.) The New Politics of British Local Governance, Basingstoke, Macmillan Press.

Peck, J. and Theodore, N. (2000) Beyond ‘Employability’, Cambridge Journal of Economics, 24, pp.729-749

Stewart, H., Helm, T. and Syal, R. (2009) Job centre crisis as ten bid for each vacancy, The Observer, 15 March, pp.1

Sunley, P., Martin, R. and Nativel, C. (2001) Mapping the New Deal: local disparities in the performance of welfare to work, Transactions of the Institute of British Geographers, 26, 4, pp.484-512

Turok, I. And Edge, N. (1999) The Jobs Gap in Britain’s Cities, employment loss and labour market consequences, Bristol, The Policy Press.

About the Author

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