Jobs guarantee

4 December 2009

We want to propose a big idea.  The government should guarantee everyone a job, to end long term unemployment.

A pipe dream?  Well, the government is already doing this for young people aged under 25.

When they sign on, they are expected to look for work, with help from the Job Centre, like anyone else. Even in the recession, around nine out of ten find work within a year.

For those who don’t, the government is becoming the employer of last resort.  At the Budget, we created a £1 billion fund for charities, social enterprises and councils to employ these young people, for at least six months, paid at least at National Minimum Wage.  Nearly 100,000 jobs have already been created, in sports, the arts, environment, tourism and care. The TUC describe this as ‘the most progressive jobs programme for a quarter of a century’.

That means that from January, we can say that no young person will be unemployed for more than a year.

As we approach next week’s Pre Budget Report, the government may be tempted to think about how to exit from this investment, as part of demonstrating commitment to reducing the deficit in the medium term.

Unemployment, while still too high, is thankfully much lower than the Treasury and external experts predicted at the start of the year.  The rise in unemployment has been slower than in either the Eighties or Nineties recessions, despite the GDP contraction being greater.

Our labour markets have shown themselves to be flexible. Hiring has continued throughout the recession, albeit at a slower pace.  Companies and unions have moderated wages, as a way of avoiding redundancies.  The Working Tax Credit has been a subsidy for short-time working – part-time employment reached a record high last month.

However, that unemployment is lower than otherwise it would have been, is also because we decided to invest an extra £5 billion in maintaining our active labour market policies. More advisers were hired, more money was given to private back to work providers, extra help was offered.

This time last year, it did feel like we were learning on the job.  Many of the officials in this area had never worked on rising unemployment.  None of the Ministers had.  Search parties were launched for officials who remembered the lessons of the previous recessions – mostly lessons in what to avoid, it has to be said.

But thanks to the extra funding, we were able to reinforce the roof as the rain started falling. The Tories opposed this money.  They would have been in the odd position of cutting the support as demand for it grew.  They would have been dismantling the roof as the water was gushing in.

Lower unemployment means spending less on benefits and raising more in tax. The lesson from the last year is that investing to prevent long term unemployment and worklessness is not just socially just, it’s deficit reducing.

So as the recovery starts, we should be aiming to extend this approach, not unwind it.

Rather than this guarantee just being for young people, we should extend it to all job seekers, of all ages at risk of long term unemployment. Hyman Minsky, whose work has been widely revisited as offering the best analysis of financial crisis, argued that since capitalism was necessarily unstable, governments should plan to be employers of last resort, so that ordinary people don’t pay the price for that uncertainty . Where the market doesn’t provide work for people, government must step in. This is especially true during a recession, but the lesson holds in good economic weather too

In fact, it is the final piece of the puzzle of welfare reform.  It makes the welfare state both more supportive and more demanding.  On the one hand, it is real protection – instead of offering people a life on benefits, it offers them what they really want: a job, and a chance to get their career back on track.  It particularly helps disabled job seekers, who often face hidden discrimination.  Government would have to make sure jobs were suited to their needs.

But a jobs guarantee also becomes a jobs backstop.  Claimants have to take a job when it’s offered.  That exposes those who are working on the side and claiming fraudulently.  It calls the bluff of those who don’t want to work at all.  We know from the New Deals that mandation works in activating people to find work themselves before compulsory options begin.

The Open Left project, based at Demos, will be publishing a report on how such a jobs guarantee policy could work. But the outline is fairly simple. Initially, the guarantee would come into effect for older jobseekers after the Flexible New Deal (once they’d been looking for work for two years). This could be funded from the money allocated to help people back to work at Budget, which is now being underspent due to lower than expected unemployment.

Over time, that 24 months should be brought forward.  The system should be reshaped so that job seekers spend the first year looking for work with the support of Job Centre Plus and private and voluntary providers, with the jobs guarantee kicking in at 12 months.  This could be funded by a combination of some of the money currently spent on the Flexible New Deal and switching resources from the skills budget. Instead of training people when they are unemployed, we would guarantee people a job where they would get real life skills which could be formally accredited. The strong requirement to take a job would also be likely to increase off flows from benefit within the first year.

We call this ‘supportive conditionality’: ensuring the right to work is real, but not letting people refuse the obligation to work.

Strangely, the Conservatives are against this policy.  There is a cross-Party consensus on some aspects of welfare reform, but not on this.  At their Party Conference, they committed to abolishing the Future Jobs Fund, which is at the core of the job guarantee for young people.  Their policy is neither supportive enough, nor tough enough.

At the PBR, the government could commit to ending long term unemployment. It could show that Labour wants to renew the welfare state so that people believe it really will protect them, in the recovery, or in a future recession.

At the Budget earlier in the years, Alistair Darling showed real vision in finding this extra money for the unemployed. He should take the chance to turn the jobs guarantee in to one of the silver linings of this terrible recession.

Comments
  • GuestA
    The worry is that so many ill people are currently being forced off sickness benefits as we speak. Even tougher love is the last thing these people need. I am currently off work sick with a chronic illness. I have worked all my life and paid tax (at a higher rate) and National Insurance - however I am teriffied of what my future will be under ESA. People I know from the MS support group - very sick people - have already been told they have failed the medical and have to work. These are people who see two or three specialists - people who are very ill.

    It is one thing for someone like my step father who is in a wheelchair with a back condition to be helped to find work if he is able to work but quite another for people who are genuinely ill to be thrown off sickness benefits and made to look for work. It is truly wicked what is happening to many people right now under this government and many charities are speaking up. Sick people are already vulnerable and I genuinely fear these current reforms may cause an eventual suicide or death.

    The government must immediately look at why ESA has gone so wrong and why it is so harsh in practice before there can be any real claim at having the higher ground. The ESA test observes if someone can walk across a room and pick up a coin etc etc yet it cannot take into account very real and disabling issues such as extreme fatigue. Because of that this reform is currently a very cruel process for far too many sick and vulnerable people and this needs addressing asap.
  • Reuben_Third_Estate
    A seriously excellent idea. Even from a purely pragmatic perspective, an initiative like this has the potential pay for itself. It is clear from prior economic crises that a significant proportion of those who face unemployment find it incredibly difficult to work again. This was true even of the 'virtuous' unemployed men of the thirties, with whom the unemployed of the 80s were unfavourably compared. Put in a way that even makes sense to Tories, allowing long term unemployment to go unchecked demolishes human capital, undermines the tax base for the future, and leaves people unable to work to an extent that cant simply be cured with 'pull yourself up by your bootstraps' type policies. There is nothing 'prudent' about allowing unemployment to go on unchecked simply to make the budget look prettier now.
  • Caroline Ellis
    I totally support direct job creation and a jobs guarantee, I think we should strongly advocate this in the disability movement BUT I fundamentally disagree you have to frogmarch people into jobs, 1 million (at least) unemployed disabled people would jump at a proper job assuming it is freely chosen, doesn't leave you worse off and assuming you get a guarantee of effective support in the workplace and assuming that there's no punitive sanctions if it doesn't work out. Time too to properly value other contributions like raising kids and running a household (the only problem with these is that resposibility remains highly gendered). Hope the Demos proposals will be coproduced by those at the receiving end of what currently seems to me like a rather nasty disabling wasteful 'welfare' regime that leaves people poor and disempowered.
  • JoshuaGenner
    Jame Purnell prescribes some tough love.

    "Their policy is neither supportive enough, nor tough enough."

    "They would have been dismantling the roof as the water was gushing in."

    Whoever wrote those two lines should be knighted.
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