"Boom Britain" The Evening Standard's headline last night seems a bit premature - whichever way you look at it. And Mark Carney agrees; interest rates will stay at 0.5 per cent until the unemployment rate falls below 7 per cent.
While there were some positive signs of recovery in last month’s labour market figures, the long-term unemployment rate is still the highest recorded since 1997. The proportion of people who’ve been out of work for more than two years has increased more than two-fold since the start of the recession.
So what are we doing about it? A large proportion of the long-term unemployed are being moved onto the Work Programme
The Government’s flagship welfare-to-work programme has come under widespread scrutiny in the last two years. Early figures showed Providers were falling well short of performance targets to get people back into sustainable employment. The latest set show improvement with nearly half of providers meeting the benchmarks set by government.
But the headline figures (as is often the case) mask significant variations across providers, client groups and cities. Underneath, it appears the programme’s not working as well for more disadvantaged groups or places.
There are several ways of measuring outcomes (DWP includes two separate measures in its latest release). A slightly different measure (cumulative job outcomes as a proportion of total referrals) shows that nationally 11 per cent of clients have spent at least three months in employment. But the job outcome rate drops by nearly half in Dundee to 6 per cent and rises to 16 per cent in Crawley.
Even wider variations exist within individual client groups (Figure 1). The difference in the job outcome rate between the two cities increases from 10 to 12 percentage points if you just look at JSA claimants aged over 25.
Figure 1: Job outcome rate (JSA 25 and over), cumulative to March 2013
Source: DWP, 2013
So what explains this variation of performance? One possibility is the performance of different prime contractors. While this is likely to contribute, the performance within Contract Package Areas (CPAs) – the areas split between providers – is greater than between them. For example, there is very little difference (1.2 percentage points) between the two providers in Scotland, Ingeus UK and Working Links, when it comes to job outcome rates. Yet Aberdeen and Dundee stand at either end of the spectrum of outcome rates at city level.
Another possibility is the strength of the local labour market. It’s easier to get people into work in more buoyant economies. Job outcome rates among the ‘JSA 25 and over’ client group correlate with employment rates and average earnings at city level (Figure 2). In other words, the more jobs there are in a local economy, the more people providers get can into work. Wages are 30 per cent higher in Aberdeen than Dundee and the employment rate is 18 per cent higher.
Figure 2: WP job outcomes and average weekly earnings, 2012/13
Source: DWP, 2013; Annual Survey of Hours and Earnings, 2013
In reality the buoyancy of the local economy and the quality of prime contractors will impact on the chances of the long-term unemployed getting back into work. But they aren’t the only two factors at play. Neither seem to explain the differences between Bristol (10 per cent) and Swindon (14 per cent), for example. The same providers operate in both cities, dealing with similar numbers of referrals and achieving similar outcomes, and Bristol is one of the most economically buoyant cities in the country.
There’s a whole host of factors that will impact on the likelihood of getting someone back into sustainable employment. It’s not just about the prime contractors but about their sub-contractors too. It’s also about the quantity and the quality of jobs in the local economy. And skills, transport, planning and access to childcare all matter too.
This is where local partnerships can make a real difference. Tackling any one of the barriers to employment in isolation is likely to be insufficient. The more joined-up services and organisations are at the local level, the better the outcome is likely to be.
In some of our cities, more than two fifths of unemployed people have been looking for a job for more than a year. If we don’t get it right now, the scarring effects associated with people being out of work mean that these cities are likely to feel the knock-on impacts for some years ahead.
Policy and Research Manager
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