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)
Caseload (thousands)
19
1,000
2,000
3,000
4,000
5,000
6,000
7,000
0
79
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
Unemployment benefits
19
90
19
91
19
92
19
93
19
94
Year
19
95
19
96
19
97
Sickness and disability benefits
19
98
19
99
20
00
20
01
20
02
20
Lone parent benefits
03
20
04
20
05
20
06
Numbers on Major Benefits
20
07
20
08
Spending on Major Benefits/tax
credits
6.0
5.0
4.0
Per cent of GDP
3.0
2.0
1.0
0.0
1978/79 1982/83 1986/87 1990/91 1994/95 1998/99 2002/03 2006/07
Year
Unemployment benefit Income Support Sickness and disabilty benefits Housing benefit 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
1. Reduce disconnection from work during
recession
2. Prevent build up/concentration of Unemp
on a small minority
3. Reduce drift on to less active benefits
4. 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
Self-help
based on
Client
0-3
months Work
Group
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