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Flexibility in the UK – the Case of Activation Policies

Professor Ronald McQuaid

Employment Research Institute, Napier University, Edinburgh, Scotland, UK 1

Employment Research

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Structure of the presentation

• Background • Flexibility in different parts of the labour force – the case of those not working • Flexibility in policy implementation 2

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1. Background

• Current high UK labour demand, but productivity still too low (GDP/capita & quasi-fixed exchange rates) • Flexibility of

those in work

– hire/fire; unions (55% in 1979 – 29% in 2005); wages (collective bargaining and local variation); health provision (does not inhibit labour mobility) • But also some flexibility

by employers

life balance and wider debates – e.g. work 3

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‘Tight’ Labour Market

• High employment and labour market Activity rates • Relatively low unemployment (although high ‘sickness’ rates) • Relatively high level of in-migration from A8 (Eastern Europe) • Demographic ageing of the working population 4

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15 yr Olds % Change 1960 - 2010

USA Japan Canada UK Germany France Italy <15s +4 -36 -15 -20 -31 -7 -42 Total pop +66 +36 +11 +15 +12 +34 +12

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Number 15-29 year olds in Scotland

• • • • •

1927 – 1,369,915 (28% of pop) 1952 – 1,258,378 (25% of pop) 1977 – 1,186,595 (23% of pop) 2002 – 938,223 (18% of pop) 2027 – 770,661 (15% of pop)

• • •

1977-2002 -21%; 2002-27 -18%; 1977-2027 -35% So we have been through high decline in past – BUT that was during working population growth period TOTAL 15-64 YEAR OLDS 1977-2002 +2%; 2002 2027 –12.5%

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How to increase the labour supply (quantity and quality) & flexibility?

• Limited possibilities to change population numbers increase birth rates, retirement ages, migration (too small), ‘Guest Workers’ ….

so… • Increased flexibility of those in ‘working age’, especially those not in work 7

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Activity rates % 1960 & 2010

Age 15-49 USA Japan Canada UK Germany France Italy 64% to 79% 71 to 78 61 to 82 72 to 80 74 to 80 68 to 76 63 to 75 Age 50 64 65 to 65 70 to 70 59 to 61 61 to 59 59 to 57 60 to 50 48 to 41 Age 65+ 21 to 9 36 to 19 18 to 5 14 to 4 14 to 2 16 to 1 15 to 3

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2. Flexibility in policies

• • • UK uses models that are ‘flexible’ in different ways –

‘Work First’ model

- the best way to improve a person’s labour market outcomes is for them to move quickly into work (any work): policy programmes focus mainly on compulsory job search and short term interventions to facilitate a quick return to work

Human Capital Development model

– for long term improvements, and sustainability, in work you need better skills etc.: policy programmes tailor services to promote longer-term skills and personal development 9

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‘Work First’ and Human Capital Development approaches

Work First approaches HCD approaches

Rationale Programme targets Intervention model

Facilitating quick return to labour market by job search and work focused training Improving long-term employability through improved education, skills, health, and personal development Immediate emphasis on job entry; focus on getting people into work quickly Sustainable transitions; improvements in level & range of skill; progression routes once in work Job search central and constant; short-term training; focus on immediate activity Long-term training; integrated with social care, education and health; high quality

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‘Work First’ and Human Capital Development approaches cont.

Work First approaches HCD approaches

Relationship to labour market Relationship with individuals Flexibility

Demand-responsive – seeks to insert job seekers into available opportunities Up-skills job seeker to expand range of opportunities; encourages and supports progression in workplace Use of sanctions and/or financial top ups to encourage job entry Encourages participation by demonstrating benefits of high quality opportunities Increases flexibility for employers (low end of labour market); unemployed people (training in work!) Should improve longer term flexibility of labour market

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UK – background and policy

• Long history of ‘conditionality’ of benefits • 1986-97 – ‘stricter benefits regime’; JSA 1996 • 1987-97 – retreat from investment in training; strong compulsion on job seeking; poor quality (private) services (Contradiction with increased productivity?) • Key policies: central government/PES lead as funder and provider of advisory services • ‘Work First’ emphasis: job search and short training, retreat from Human Capital Development 12

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UK policy since 1997

• • 1997: New government: concern over young and long-term unemployment • 1998 Government policy called the ‘New Deal’: ‘Gateway’/Personal Adviser - client-centred approach; choice of training options; employment option/subsidy - more flexibility in support and in choice for unemployed (within limits!)

With both ‘Work First’ and Human Capital Development, but mostly ‘Work First’

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Pathways to Work – Flexibility & HCD

• Targeting 2.5M people (2003) on ‘incapacity’ benefits • Piloted 22 areas 2003-6; 30 further areas from 2007 • Combines Personal Adviser services, training and health services • ‘Condition Management Programme’ (Cognitive Behavioural Therapy elements) developed with National Health Service • Credibility, expertise and capacity of health service • Flexible funding rather than payment for ‘quick wins’ • Shared governance/ownership not rigid contracts • However, main streaming different?

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3. Flexibility in policy delivery

• Governments increasingly deploying inter-agency approaches to activation • Problem of persistent unemployment/inactivity in certain areas and among particular groups (the ‘easy to employ’ people are increasing in work, so those left often have multiple issues) • Multi-dimensional problems = multi-agency response Wider agenda – • Policy makers seeking efficiency/dynamism of private sector • European Employment Strategy focus on local partnerships and Public Employment Service reform 15

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European Employment Strategy and flexibility in the implementation of policies

• Guidelines since 2000: modernisation of Public Employment Services (PES); inclusion of a range of actors, social partners • EES 2001: Strengthening the local dimension • EES 2003: strengthening of PES institutions and partnerships to combat Long Term Unemployed and promote activation • EU/EEA PES Network statement 2006: greater efficiency in systems, partnership with providers 16

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Summary of European Employment Strategy themes – flexibility?

• ‘Progressive de-monopolisation’ and liberalisation of service market: add to service quality and range • Contracting out of services and Public Employment Services (PES) functions • ‘Closer links between the management of (welfare) benefits and the delivery of employability services’ • Co-ordinating service delivery and policy – drive to an ‘integrated jobcentre’ model in many countries 17 • ‘Flexibility’ in PES staff

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UK – models of co-operation

• Amalgamation of jobs and benefits in one agency – personal advisers and work-focused interviews • Contracting out of training services to local authorities and private, public and voluntary sector • Rigid contractual model; focus on job entries • Unions marginalised; employer voluntarism • 2003: Pathways to Work: partnership with National Health Service/others to assist inactive groups • Pathways: more flexible funding and governance 18

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Conclusions

• UK shows some • Flexibility – in work • Flexibility – those out of work • Flexibility – policy development and delivery But there are pros and cons with each ….

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