From the TUC

Evidence based blogging: a response

21 Jun 2010, by in Labour market

Charlotte Gore has taken issue with a recent post I have written for Left Foot Forward. In her view:

  • a cut of £290 million to the Future Jobs Fund does not constitute a loss of 94,000 jobs, and;
  • there is no evidence to support the proposition that “demand-led employment schemes are the most effective means to prevent long-term unemployment when vacancies are limited.”

As I set out below – she is wrong.

The Future Jobs Fund is, in the words of the DWP:

“a fund of around £1 billion to support the creation of jobs for long term unemployed young people and others who face significant disadvantage in the labour market.”

These jobs, which are funded at minimum wage for six-months, provide real employment for young people. They are intended to provide at least half a year’s worth of real work experience, as well as access to additional training and support to find permanent jobs on the open labour market. Importantly, these jobs have to be additional to existing employment opportunities, and must demonstrate that they provide social value – the scheme is designed to provide work for unemployed people without those already in work, or other unemployed people looking for jobs on the open labour market, being undercut. This is why there are few private sector positions.

There was going to be 205,000 jobs – now there are 111,000. Therefore, there are 94,000 fewer than before – these jobs have been lost.

As well as disagreeing with the DWP’s definition, Charlotte appears to disagree with the findings of Paul Gregg (described by Charlotte as ‘New Labour’s Go To Professor’ but also Senior Research Fellow at the LSE and Professor of Economics in the Centre for Market and Public Organisation at the University of Bristol) that, of the interventions available, a Job Guarantee is the best means to prevent long-term unemployment. But it is not just Paul Gregg who advocates (and he does, along with Professor Richard Layard, advocate) this approach.

In a recently published evidence review, DWP concluded (against the Government’s policies at the time – which were moving towards a workfare approach) that:

The success of these subsidised job programmes compares
well with the less favourable outcomes for conventional workfare programmes

The Brookings Institutewidely seen as an independent and authoritative source – also conclude that employment outcomes from subsidised job programmes are better than those from other employment programmes, describing transitional jobs as:

an especially promising policy response to the needs of hard-pressed urban and rural communities, and unemployed people facing barriers to work.

And the UK Commission on Employment and Skills has recently concluded that:

“In terms of getting into work, subsidised jobs have proved to be the most successful approach and more successful than education and training.”

Last year, The Work Foundation, The Resolution Foundation and Demos worked with the TUC to support Job Guarantee policies.

No one has ever claimed that a welfare to work programme can eliminate unemployment – but, although not everyone chooses to acknowledge it, the evidence does show that subsidised employment programmes can significantly improve unemployed people’s chances of remaining in touch with the labour market and moving back into work. When demand is limited, there is no evidence of another approach more successfully reducing long-term unemployment.

There are over 90,000 young unemployed people in the UK today. Doing nothing is not an option, and cutting support for them is wrong – as David Blanchflower wrote this weekend:

“These are your kids and grandkids. Stand up and say no.”

10 Responses to Evidence based blogging: a response

  1. Charlotte Gore
    Jun 21st 2010, 4:42 pm

    Again you’re comparing apples with oranges. The academic work suggests that the structure of these programs is somehow better than other programmes of the same time.

    There’s no proof at all that these schemes are a net benefit to anyone. In reality most of these schemes make things worse.

    That’s what the reports said that I read. Whether or not this particular version might have slightly higher odds of not being a complete disaster doesn’t mean there’s evidence it will have any impact on long term youth unemployment. It could still make it worse.

    The Government regards this particular scheme as being ineffective. I wonder whether you can prove that it is not.

  2. Charlotte Gore
    Jun 21st 2010, 4:42 pm

    of the same type I mean. Doh.

  3. Nicola Smith

    Nicola Smith
    Jun 21st 2010, 4:54 pm

    Charlotte,

    There is plenty of evidence that welfare to work schemes are of net benefit to everyone – they lead to reduced unemployment. On this, both the old Government and new Government agree, why is a new ‘Work Progamme’ being introduced if it’s a waste of time? The OECD support active labour market policies, nearly every developed ecomomy in the world has them – there is a consensus.

    Within the evidence base on the important role that welfare to work programmes play, there is strong support for demand led interventions during recessions and when dealing with their aftermath. I have outlined it above.

    There is at yet no evidence with which to assess the effectiveness of the FJF – it has only been operational for 7 months. This adds support to the view that it has been cut becuase it is expensive not becuase it doesn’t work. What we do know is that evidence tells us – as I posted on Left Foot Forward – that it has the best chance of any scheme of being successful. That is why cutting it is bad news for unemployed young people.

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  5. Aled
    Jun 21st 2010, 9:31 pm

    Whilst I am open to ideas from both sides, the sheer economics of this policy does appear to be poor value for money.

    Over the course of the project, how much in total was spent (including administration?), creating how many jobs?

    If £1B was set aside for the project, which was scrapped “saving £290M”, and numbers seemingly indicate less than 30,000 part time jobs, it would appear that the cost would be upwards of £24K per head, to get a 6 month job at a council. I would be interested to see official figures for this, but considering most government depts run with front-line efficiency rates of 30-40%, it seems in the right ballpark.

    Never mind the consideration that you could be accused of a) massaging unemployment before an election, and b) subsidising council and quango budgets.

    Well intentioned, probably. Value for money? Unlikely.

  6. Nicola Smith

    Nicola
    Jun 22nd 2010, 6:50 am

    Aled – there is some further information on the economics of this in the following link, preventing long-term unemployment creates massive savings: http://cep.lse.ac.uk/textonly/_new/staff/layard/pdf/001JGProposal-16-03-09.pdf. Consider the impact of the 1980s, when long-term worklessness went unaddressed, people were moved onto incapacity benefits and then spent 20 years or more out of work. The economic and social costs (including lost tax, higher ongoing benefit payments, higher costs of social and health problems and reduced demand in local communities) of that model are far more than one that puts up front investment into preventing unemployment taking over.

    Also, the cost per job is far lower than you calculate. The scheme was originally funded for £1 billion to create 150,000 jobs – later additional funding was made available to increase the number of jobs to around 205,000. Before it was scrapped, funds were allocated to ensure that 111,000 jobs will be created. 94,000 have been scrapped at a cost of £290 million. The costs per job so far have been higher (although much lower than you calculate) as the set up costs have been spent but the number of jobs have been reduced. Had the scheme worked as planned, the cost per job would have been around £6600.

  7. R Grey
    Jun 22nd 2010, 8:39 am

    “There is plenty of evidence that welfare to work schemes are of net benefit to everyone – they lead to reduced unemployment.”

    Yes, goverment figures say so.

    If the stats where honest, clear and easy to interpret (IE filter out short term employment soley funded by tax), there would’nt be any disagrement on the matter.

    “why is a new ‘Work Progamme’ being introduced if it’s a waste of time?”

    Because “Something must be done” is why.

    welcome to the new boss, same as the old.

    “nearly every developed ecomomy in the world has them – there is a consensus.”

    Nearly every developed economy wages pointless expensive voilent wars on drugs.

    Nearly every developed economy racks up stupid amounts of debt.

    Nearly every developed economy etc

    That nearly everyone does it doesnt really make much of an argument.

    “Had the scheme worked as planned, the cost per job would have been around £6600.”

    That’s disohonest though.

    Most of these jobs went to goverment funded agencies, and the extra costs would have been hidden in other tax budgets.

    Such schemes should not be open to goverment funded agencies. It makes it extremly difficult if not impossible to know the true cost, and only encourages pointless jobs (which always cause more red tape for someone).

    And if the private sector don’t take it up, we know it to be innefective at creating real long term employment.

  8. Nicola Smith

    Nicola Smith
    Jun 22nd 2010, 9:32 am

    R Grey,

    Again I reiterate, there is strong evidence based from across the world that welfare to work programmes reduce unemployment. This scheme was not aimed at the private sector – it was aimed to jobs that are additional to existing posts, and that create social value. The jobs are transitional, giving young people real work experience to better enable them to compete on the open labour market.

    Nicola

  9. R Grey
    Jun 22nd 2010, 11:04 am

    “Again I reiterate, there is strong evidence based from across the world that welfare to work programmes reduce unemployment.”

    you’ve said that twice now.

    I havent seen it.

    Isnt this a fun merry go round.

    “This scheme was not aimed at the private sector”

    No, it just failed to interest them

    ” – it was aimed to jobs that are additional to existing posts, and that create social value. ”

    Sorry, i thought the point of it was to help unemployment?

    anyway

    It’s important to gauge it’s cost, otherwise how can we know it is worthwhile?

    And that is why i find such a shceme being used in the public sector somewhat insidius, alot of the costs are hidden.

    What if instead of costing 6k per head, it’s costing 12k (or more)? What could we do better for 12k, should we even be spending 12k etc etc.

    I also don’t hold the view that (goverment employee = socially of value), there are many worthwhile public sector jobs. But there are ones that are not, i have concerns that such schemes promote non jobs, and as pointed out some of the jobs went to charaties, i don’t believe the government should be funding charities (for hopefully obvious reasons).

    “The jobs are transitional, giving young people real work experience to better enable them to compete on the open labour market. ”

    The shceme has been cut short, it has however had some time to run, can you not provide any real anylis of the people that it has employed and how it has/ if it has helped them?

    your “work experience” argument is really the only one that holds up to any scrutiny that i can see, but then there are better ways of delivering work experience, namly making hiring and firing of young workers less of a red tape burden, and getting rid of silly ideas such as a minium wage for young workers ( I worked for peanuts to get up on the ladder, why can’t others?).

    After all, i question how valuable work experiance in some goverment quango or a charity really is in the open labour market.

  10. Nicola Smith

    Nicola Smith
    Jun 22nd 2010, 11:15 am

    R Grey,

    You might be interested in this literature review which we published earlier this year: http://www.tuc.org.uk/extras/flexiblewiththetruth.pdf

    Among other findings it states that:
    “An increased emphasis on active labour market policy (ALMP) has been the main
    ‘interventionist’ recommendation that the OECD has been making for the last fifteen years, first in its Job Study (1994) and most recently in its 2009 Employment Outlook, where it argues that countries need to be spending a lot more on ALMP than they currently do to
    reduce the unemployment impact of the current recession.”

    All of the evidence on the benefits of transitional employment is in my earlier piece.

    Nicola