People often complain that it is all very well moaning about politics and politicians,
In this series I'm going to explore some alternative economic ideas.
In this series I'm going to explore some alternative economic ideas.
The case for ... a paid job or training guarantee
It is absolutely clear from the latest shocking long-term and youth unemployment statistics, that the current approach to tackling unemployment simply isn't working.
At the back end of the Labour administration, the jobs market was in turmoil, suffering from the after effects of the 2007-08 global financial crisis. This instability in the labour market was produced dramatic rises in unemployment across all measures. The global economic crisis ensured that Labour left office with the worst unemployment figures since the early days of their regime in 1997.
The incoming Conservative/Lib-Dem coalition inherited a mess but spoke enthusiastically about tackling long-term unemployment and "getting Britain working again". Here's what the newly appointed Secretary of State for Work and Pensions, Iain Duncan Smith had to say in May 2010:
"We must be here to help people improve their lives, not just park them on long-term benefits. Aspiration, it seems, is in danger of becoming the preserve of the wealthy."IDS set about bringing in welfare reforms based on the orthodox neoliberal model of bringing in private sector outsourcing companies on £multi-million contracts. After nearly three years of this approach, the labour statistics make it absolutely clear that this model of corporate outsourcing of social reform has been failing spectacularly. The number of people out of work and claiming benefits for more than a year has risen by 23.1%; the number of people out of work and claiming benefits for more than two years has skyrocketed by 65.3%; and the number of young people out of work and claiming benefits has risen to almost a million.
Of course the right-wing rhetoric has been ratcheted up, with Tory ministers, the right wing press and even the Labour shadow work and pensions secretary falling back on the tactic of scapegoating the unemployed, using words like "scrounger", "idle", "feckless" and "skiver" then accusing people of "gaming the system" at the expense of the taxpayer.
All of this vile rhetoric is designed to do one thing; divert culpability in the public consciousness from those whose job it is to reduce unemployment (Iain Duncan Smith, Mark Hoban, Anthony David Freud, civil servants at the DWP, George Osborne...), to those who find themselves trapped on benefits. It is absolutely shocking that Labour's Liam Byrne has joined in with the chorus of hate (explicitly to court the kind of reactionaries that take their political opinions ad verbum from the pages of the Daily Mail and the Express). Byrne shouldn't be joining in with the Tory scapegoating, he should be spelling out what the Tories are doing wrong in a clear, concise and evidence based way, then proposing alternative strategies.
Since Byrne seems more interested in courting right-wing reactionaries with tough rhetoric than he is in actually doing what I suggested in the previous paragraph. Since he seems to be neglecting his duties in this regard, I think I'll have a stab at doing his job for him.
I don't expect people to think that I've got my proposals "absolutely right" but please bear in mind I don't have a team of ministerial colleagues, assistants paid at the taxpayers' expense, unpaid interns, economic think tank advisers or a team of political volunteers. I'm just a one man operation, who is desperate to see something done about the appalling levels of long-term and youth unemployment.
I've roughly divided my work into two sections, one outlining flaws in the current system, the other outlining my proposals to bring unemployment down.
1. Faults in the system
A The corporate outsourcing model
B Bullying tactics
C Lack of inter-departmental co-operation
2. Proposal - The "back to work" guarantee
A. Target groups
D. Funding of the scheme
4. How you can help
In my view there are three main faults in the current system, the corporate outsourcing model, the bullying tactics and the lack of inter-departmental initiatives to increase employment and training opportunities for the long-term unemployed.
The corporate outsourcing model
The idea that herding the unemployed into de-humanising corporate processes will "help" them would be laughable if it wasn't so harsh and wastefully ineffective. Iain Duncan Smith's favoured DWP outsourcing schemes include:
Workfare - Mandatory unpaid labour for the unemployed, provided for free to corporate interests, which has the consequences of undermining labour rights and the statutory minimum wage, giving corporations a perverse incentive to actually destroy jobs and completely removing the personal financial reward from labour activity, thus further demotivating people about the value of productive labour.
The Atos WCA disability assessment regime - Often called the "disability denial factory" this regime has caused incalculable stress and suffering amongst the disabled and cost the taxpayer an estimated £50 million in appeals, 40% of which are successful, rising to 80% when the appellant has expert legal representation. A system that is so error prone is absolutely unforgivable. Imagine a factory where between 15% - 30% of the total output was totally unfit for sale, that would be terrible for someone who had signed a contract to buy 100% of the output (with no penalty clauses relating to faulty products). The similarly error strewn Atos WCA regime results in a large additional cost to the taxpayer (administering thousands of appeals), but much worse than that, it creates huge levels of stress and suffering for hundreds of thousands of the most needy and vulnerable people in our society.
The Work Programme - A disastrous scheme that has produced results worse than had nothing been done at all, which is also rife with accusations that private sector WP providers have been abusing their clients and "gaming the system" to maximise profits. I've written about some of the worst failings in this article.In my view the reason for this catalogue of private sector failure is obvious: Private sector corporate interests that take on "social reform" contracts have an over-riding statutory duty to ensure a profit, it doesn't matter how worthy the attempted social reform, the objective of the reform is secondary to ensuring maximum profitability. The actual well being of the unemployed and disabled people these schemes are purportedly designed to "help" seems to be positioned way down on the list of actual priorities.
Attempting to sanction, bully or coerce the long-term unemployed into jobs that simply don't exist in George Osborne's stagnating austerity economy is as futile as it is malicious. Every time a government minister or DWP spokesperson publicly castigates the unemployed for having found themselves without work they undermine faith in the system. Every time they force a person to work unpaid on a Workfare placement stacking shelves or sweeping floors at a place like Poundland they are abusing their position of power and undermining the hard won labour rights of the British public.
The role of the DWP is not to bully the unemployed into work that simply isn't there, neither to provide corporate interests with a steady stream of free labour, nor to assist the government of the day in spreading scapegoat propaganda against the workless.
The evidence is absolutely clear that the vast majority of unemployed people would prefer to work and increase their income, but that they're struggling to find anything at all in these difficult economic circumstances.
The government's own figures show that there are over 8 million economically inactive people, 2.49 million of them registered unemployed and seeking work, yet there are only 80,000 more jobs than there were three months previously, barely enough to keep up with the rate of economic migration (the number of non-UK born workers in the UK economy rose by 67,000 in the same period).
Despite the fact that there are nearly 20 registered unemployed people for every additional job, the rhetoric and "scrounger narratives" continue. the more the leaders of the system castigate the unemployed as "scroungers" and "skivers" for failing to obtain work that doesn't even exist, the more they break people's faith in the welfare system and create the self-fulfilling prophecy of dispirited and uncooperative welfare claimants.
It doesn't matter how hard you try, you can't abuse or impoverish people into getting jobs that simply don't exist.
In order for the welfare state to function efficiently people need to believe that it is there to help and support them at their time of need, not to unfairly castigate them and attempt to set the rest of society against them with appalling rhetoric and divisive legislation like the 1% benefit cap and the bedroom tax.
Lack of "joined-up government"
This lack of joined up government is best illustrated by the contrasting justification narratives emanating from the DWP and the Treasury Department. The Treasury are always keen to "cherry pick" data to spin the narrative that Osborne's austerity experiment isn't failing. One of their favoured sources is the headline rate of unemployment which has fallen ever so slightly since the end of the Labour administration (2.50 million unemployed in April 2010, 2.49 million in January 2013, a fall of just 0.4% in nearly three years).
The problem with this is that people at the DWP like to use the flatlining austerity economy as part of their justification narrative to defend the abject failure of schemes like the Work Programme and the vast rises in long-term unemployment claimants.
That two government departments are churning out mutually contradictory justification narratives suggests that they are not actually working together to solve the unemployment problem and improve the economic situation in any meaningful way.
Now that I've explained some of the problems with the current unemployment system, it is time to explain what I think should be done differently.
Some of my views about how the system should be reformed can be gleaned from my criticisms of the current system: That the over-reliance upon the corporate outsourcing model should be ended, with many of the functions of the state brought back "in-house"; that bullying language and threats of sanctions are utterly counterproductive if the objective is to actually help the unemployed into productive activity rather than to demonise and demoralise them; and that the different departments of state should cooperate a lot more effectively to tackle the unemployment situation and guide people back into productive activity.
I strongly believe that the vast majority of long-term unemployed are actually keen to work: That most people on unemployment benefits are willing workers that simply don't have a job. In terms of pure self-interest, the appeal of a steady salary over the meagre amount afforded by the state to the unemployed is the biggest draw, however most people also recognise that they are happier not only when they have fewer money worries, but also when they are engaged in productive activity. There is also the problem of social isolation, obviously not all jobs provide a decent social environment, however having work colleagues to pass the time with would seem preferable to the isolation of unemployment, interspersed with humiliating interactions with the bureaucracy of the DWP or their array of profit prioritising corporate sub-contractors.
I back this assertion with the economic evidence that for every one new job in the economy, there are 20 people on unemployment benefits. Even if we accept the absurd "scrounger narratives" of the Tory party and the right-wing press for a moment and use an utterly ridiculous estimate that 50% of unemployed people are "idle, feckless scroungers" intent on "gaming the system", that still leaves us 9 willing workers for every 1 person that managed to find work!
It is impossible to say how many people are actually "scroungers" intent on "gaming the system", however in my opinion it is no more than 10%, with another, significantly higher percentage willing and able to work, but utterly demoralised at going through the routine of searching for work that simply isn't there.
One way to establish how many people are actually determined not to work would be to introduce a new "right to work or training". If a person remains unable to find work for a set amount of time, the DWP would have a statutory obligation to intervene and ensure that the unemployed person either has access to a job that pays at least the minimum wage, or to an accredited training scheme.
If people are still trying to "game the system" when they have the offer of paid work or a decent training scheme, then these are the real hardcore "scroungers" that would then be pretty much "fair game" for criticism in the right-wing press and coercion and sanctions from the DWP.
One of the very fist things that an unemployed person should be encouraged to do when they become unemployed is to work on their CV and to define their "skill-set". If they struggle to find work for several months, the next step should be to identify which jobs on the DWP "back to work" guarantee scheme would be most appropriate to their skill-set, or if their skill-set is limited, which DWP backed and funded training schemes they should consider in order to improve their employability.
The obvious place to start is with the long-term unemployed. There are over 400,000 people that have been in receipt of unemployment benefits for more than two years. The DWP should introduce a statutory right to a job that pays at least the minimum wage or provides a place on a properly accredited training scheme to anyone that has been out of work for two years, then gradually bring the qualification criteria down to make eligible anyone that has been out of work for six months.
Of course, with this new right, would come responsibilities. There would have to be rules to prevent people from "gaming the system". For those with DWP "back to work" jobs, there would have to be no skiving, no turning up late or in other ways attempting to get fired. Anyone on DWP guaranteed training schemes would have to have a "work plan" to demonstrate how they believe that their training would lead into employment, and there would have to be limitations to prevent people from doing endless training schemes in order to avoid work.
Another target group should be young people. Studies have shown that people that suffer long-term inactivity at a young age are much more likely to suffer poverty and further stints of unemployment later in life than others in their age group and ability range that remain in productive activity like work, education or training.
Even if there wasn't strong evidence to suggest that young people's life chances are adversely effected by long periods of inactivity, it seems like a matter of common sense that a society that invests in its young people faces more future prosperity than one that neglects them to long-term unemployment. However common sense thinking seems to have gone out of the window in the UK, with almost one million young people (18-24) out of work and claiming benefits.
There are obviously legitimate concerns about where these new jobs might come from, and how the creation of such jobs might impact on people already that are already employed in the sectors of the economy where this "new job growth" would occur.
Lets start with the highly predictable tabloid criticism that these jobs would all be "non-jobs" like "regional sensitivity awareness training administrator" or "pet counsellor". The objective would be to get people into real productive jobs in the state or the private sector. The state sector is an obvious place to start, with across-the-board cuts to public services there is a lot of potential to bring unemployed people in to relieve some of the growing pressure on public services. I believe that suitably qualified people should be given supporting roles in a wide range of state services, with full-time permanent job offers available to exceptional candidates, and valuable work experience and a good CV entry to most of the rest.
Here are some of the potential areas to consider:
- NHS - Admin roles, cleaners, porters, building maintenance, even some professional positions for those that are suitably qualified.
- Emergency services: Admin and support roles.
- Local government: Basic admin, parks and recreation, leisure facilities, libraries, property maintenance...
- Childcare: Nursery staff (after appropriate training and vetting), support staff.
- Schools: Basic admin and classroom assistant roles (after training and vetting).
- Military: Admin roles, cleaning, property maintenance.
- DWP: People could even be offered roles within the DWP "back to work" scheme.
There is also a case to be made for the DWP providing fully funded placements with the voluntary sector, as long as the recipient organisation can demonstrate that they have a structured plan to improve the paid employment prospects of the people they take on.
I believe that there is considerable scope for cooperation between the DWP and the Department for Education and with the private sector.
As a result of huge budget cuts and the tripling of tuition fees, the university sector is under considerable pressure and enrollment numbers are down dramatically. Instead of allowing the excess infrastructure and expertise to go to waste, the DWP and the DoE should consult with British businesses to establish which kind of skills are most in demand and set about introducing education and training programmes to deliver the skills that UK employers say that they want.
I also believe that there is significant economic growth potential in the introduction of high-tech specialist skills training with direct input from the private sector. Take Germany as an example, they have maintained impressive export surpluses thanks in a large part to their focus on high-tech industries and the sale of machine tools. In order to create a strong high-tech economy, it is absolutely vital to invest in the workforce in order to provide the necessary skills.
There is obvious scope for crossover with the Jobs guarantee, with the possibility of part time work / part time funded training schemes.
How could all of this be paid for?
If we add it up crudely, the cost of providing public sector wages, incentives to private sector firms, training costs and associated administration is going to result in a seemingly vast outlay. The cost-to-returns ratio would be especially high in the initial phases, where the consultations are done, the administration is planned, the infrastructure is laid out... However the economic returns from "upskilling" so many people would eventually feed through into the wider economy as British businesses benefit from a more skilled and experienced workforce. Associated productivity increases should feed back into the economy though increased profits and increased tax contributions.
One important consideration is that people in low wage jobs have a very high Marginal Propensity to Consume. This means that they spend the vast majority of what they earn in the local/national economy, thus stimulating aggregate demand. The more people that are in ordinary work (earning more than subsistence benefits but insufficient to hire tax-avoidance specialists or invest in foreign property portfolios) the higher the level of demand in the economy. Higher demand obviously leads to higher consumption and stimulus for economic growth.
Another factor to consider is that unemployment benefits, as they are currently paid, represent a "dead wight cost". It doesn't matter how skilled the recipient, or how willing they are to work, the payment of unemployment benefits does not increase productivity. Paying such a "dead weight cost" to sustain a standing army of 2.5 million workless people is a spectacular waste. Although providing low paid work and training schemes would obviously be more expensive than simply paying subsistence money to the unemployed, this would not actually be a "dead weight cost" because hundreds of thousands of people would be engaged in forms of productive activity, whilst those in training would be adding to their productive potential, resulting in increases in the future productive capacity of the UK workforce.
When we consider that investment in the jobs/training guarantee would begin to create almost immediate gains in national productivity (from the jobs element) and massively improved future potential productivity (via the training element), it becomes clear that there is a strong possibility that the economic returns on investment could actually even render the whole scheme less costly that paying the "dead weight cost" of making subsistence payments to 2.5 million unemployed people anyway. Attaining this "break even" position (where the additional cost of the scheme is completely repaid through increased productivity) could be an ambitious objective for the scheme.
It is undeniable that the jobs/training guarantee would self-fund to a certain extent, whether it would ever be able to "break even" and self-fund enough to reduce the investment cost below that of paying "dead weight cost" of subsistence pay to the unemployed would depend on many factors.
Two of the most important factors in ensuring high returns on investment would be; best utilisation of the available DWP "back to work" workforce (working hard to find the most appropriate jobs for people on the scheme) and the reactiveness of the training element to the short and long term future needs of employers (making sure training schemes are providing the skills that employers actually need to increase productivity).
The chances of success would be massively improved by making sure the administration of the process is as efficient as possible. If such a jobs/training scheme is introduced on an ad-hoc basis, with an emphasis on keeping costs down as a primary concern, instead of a focus on developing a robust yet reactive administration process, efficiency would be lost and potential returns on investment would be severely diminished.
Creating a robust yet reactive administration process would depend strongly upon co-operation between various groups. The most important player would have to be the DWP who would assume the leadership role, but there would be important support roles for the DoE, employers, trade unions, charities and other government departments too. The better the initial consultation process, and the greater the levels of co-operation between the DWP and the various supporting organisations; the greater the chances of ensuring that the "back to work" guarantee scheme actually pays for itself in terms of economic returns on investment.
There is absolutely no way I can see maximum efficiency being achieved through the drawing up of £multi-million pound complex and inflexible corporate outsourcing contracts with the usual band of government outsourcing contractors. The scheme needs strong central leadership and a great deal of flexibility to ensure it manages to deliver the right people to the right jobs and to ensure that the training schemes continue to provide the required knowledge and skills for an ever changing job market. I'm not saying that the private sector should be excluded from the process altogether, in fact, I'm saying exactly the opposite. That in order to provide the skills that the private sector requires there should be rigorous consultation, but that the scheme should remain in-house in order to remain as flexible and reactive as possible, instead of getting bogged down in the process of drawing up private sector outsourcing contracts, then struggling to renegotiate the terms every time a bit of flexibility is required. This approach would allow the flexibility to continue to deliver the skilled workforce that the private sector requires.
There are two potential sources for the large start-up fund that would be required to ensure the maximum chance that the "back to work" scheme would manage to pay for itself through strong administration and reactiveness to the actual future needs of employers.
It must be remembered that the Bank of England Quantitative Easing programmes have driven the cost of government borrowing to all time historic lows. Borrowing "cheap money" now in order to ensure maximum future returns on investment would seem like a wise move. However, there is another alternative, which is to go straight to the source of the low borrowing costs, and fund the scheme directly with another tranche of Quantitative Easing cash.
The current system is failing on what I consider to be two of the most important indicators. Long-term unemployment has skyrocketed, with people out of work for more than two years up 65.3% since the Coalition took over and up an incredible 141.1% (from 180,000 to 434,000) since the last quarter before the global economic crisis began to undermine the Labour market.
The statistics for long term youth unemployment are just as concerning, with the number of 18-24 year olds out of work for more than two years up 55.2% since the Coalition came to power and up an incredible 221.4% since the eve of the global financial crisis.
With horrifying statistics like these giving a true indication of the severity of the long-term and youth unemployment situations, this isn't the time for political rhetoric and myopic tribalism. It is the time for coordinated action to reverse these appalling trends and put an end to this shocking waste of human potential.
I'm sure many people with right-leaning political persuasions may baulk at the ideas of trade union involvement and even more state spending, even though I've done my best to explain that the jobs/training guarantee should be considered an investment in the future, representing a much better option than the "dead weight cost" of paying subsistence benefits to a standing army of 2.5 million economically inactive people.
I'm sure that many people from the left may well object to the high level of private sector involvement and consultation, the idea of state subsidisation of private sector wages and the idea that the long-term unemployed should be compelled to take a low-paid job or enter a training scheme that demonstrably improves their employment potential.
I hope that people can try to see past their ideological objections to some of the elements of the scheme and accept that fundamental changes must be made, because the current system is failing such a huge number of people. I also hope that people recognise that even if my proposals are not perfectly formed, the central theme is a good one; That given that something definitely needs to be done, a spirit of cooperation between as many agencies and organisations as possible would be strongest foundation for success.
As I said in the introduction, I'm just one man with a blog that feels very strongly indeed that it would be to the benefit of almost everybody, especially the unemployed, if the state were to actively help people into employment and to gain the specific skills required by employers, rather than simply paying a vast "dead weight cost" of subsistence unemployment benefits and washing their hands of responsibility for the problem completely by outsourcing the problem to private sector companies.
I believe the best option is to reframe the debate away from "scrounger narratives" and to focus on "rights and responsibilities". The person without a job should have a right to expect that the state helps them to become a productive member of society again with the guarantee of a job or an appropriate training scheme, however they also have the responsibility to take this kind of investment in their future potential very seriously and avoid "gaming the system" by skiving off, turning up late, trying to get sacked or trying to jump between one training scheme and another. I have a lot of faith that the majority of people would take such opportunities to return to productive activity seriously. As for the minority that would steadfastly refuse to cooperate, I don't think there would be many people shedding a tear for them if they had their benefits stopped altogether would there?
If you agree with these proposals, please take the time to make sure your local MP is aware of them. The simplest way to do this is to use one of the two links below (the Parliamentary database or They Work for You) to find their email address, copy the url address of this page into an email and send it to them explaining why you think it is a good idea. If you do write to your local MP, they have a statutory obligation to respond to your message.
Parliamentary database of MPs
They Work For You
url address of this page:
If you would like to send me some feedback on my proposals, the easiest way to do it is to send me a private message via the Facebook account of this blog.
Thank you for taking the time to read this document, and thanks again if you have taken the time to contact your local MP to raise the unemployment issue with them.
Thomas G. Clark (Another Angry Voice)
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