George, let’s talk seriously about Job creation
Today’s budget talked up job growth, but the OBR’s March 2013 Economic and fiscal outlook published alongside the budget lays out the grim job statistics accompanying the Chancellor’s upbeat prognostications: the ILO measured unemployment rate will barely budge from the 7.9% posted in 2012 until 2016, when it’s expected to (finally) start to fall… to 7.4%. Until then, the OBR estimates it will hover just around the 8% mark. The claimant count likewise will float around the 1.6 million mark until 2016.
While talking up job growth, the budget unfortunately failed to actually take any concrete measures to deal with many of the demand-side hurdles facing job seekers, especially those lacking formal skills, those with a severe skills mismatch to the market, or those out of the labour market and finding it difficult to re-enter.
The success, and certain shortcomings, of the cancelled Future Jobs Fund have been well demonstrated by the DWP in multiple reports (such as here and here) and analysed by my colleague Richard Exell, while the government’s miserable Work Programme has been demonstrated as a total flop – famously yielding 6,000 jobs of more than six months for 250,000 young participants.
While I’ve been interning at the TUC I’ve been looking at job creation schemes in various countries, and there are some useful lessons the UK could learn.
While some segments of the population, even in very good economic times, will find maintaining any work difficult, some of the programmes I’ve looked at have shown innovative ways of getting unemployed people into work – especially young people lacking experience.
Flanders, in Belgium, has an interesting system of employment contracts called “IBOs”. When participating in an IBO, someone receiving unemployment benefits gets their regular benefit amount from the government, plus a “productivity bonus” from the employer, which is staggered in increases of 5% until reaching full salary in the last month of the placement. IBOs are regular employees, and if their placement is judged successful, their employer must keep them on after their training for at least as long as their subsidised placement. Many employers often turn the position into a regular full-time position.
The system works: research shows that in 2008, those that participated had a 46.8% higher chance of being in employment one year after the end of their placement than those that did not. It may be because of such performance that the Flemish government has set the goal of raising the number of IBOs in 2013 to 17,000.
As any person knows when trying to find a job, employers want to see relevant experience. IBOs in Flanders, or the new Jobs Growth Wales measure, are a real job, with real wages, come with real expectations of participants and real experience. Such jobs send a clear signal to future employers that participants have real valid work experience – and are not just cheap labour for employers. It’s unfortunate that today’s budget failed to reform the broken work programme based upon evidence from abroad.