Joining the dots on unemployment and welfare reform

There’s a contradiction lurking behind the good news about falling unemployment: we seem to be succeeding in getting people back into work who don’t want to be and failing with people who do.

The headline numbers in the labour market statistics are that unemployment fell by 50,000 in the three months to August to 2.5 million and the number of people in employment rose by 212,000 to 29.6 million. The latter figure is up by 462,000 since the 2010 election and is the highest total since records began in 1971.

Part of the reason why the number of people in work rose faster than unemployment fell is that the proportion of people between 16 and 64 defined as economically inactive is also falling. The total is down by 243,000 since the election to just over nine million and more than half of that fall (138,000) happened in the last three months.

This is where the anomaly comes in that I first saw tweeted by blogger Brian Green of Brickonomics. The biggest economically inactive groups are students, people looking after the home or family, the long-term sick and people who are retired. The change in two groups is especially marked. The number of people classified as long-term sick fell by 103,000 over the last three months. The number of retired women fell by 32,000 over the last three months and 102,000 over the last year.

The economically inactive are also broken down by whether people want a job or not. The total of inactive men who do not want a job has fallen by 39,000 over the last three months and 163,000 over the last year. However, the fall in the number of inactive men who do want a job is much less (25,000 over the quarter and 1,000 over the year).

The contrast is even more marked for economically inactive women. The number who do not want a job is down by 79,000 over the quarter and 212,000 over the year but the number who do want a job is up by 5,000 over the quarter and 63,000 over the year.

There is also an anomaly in the unemployment figures. The overall story is a successful one of falling joblessness, except when it comes to the group that everyone agrees is one of the most crucial of all: the young long-term unemployed. While the number of people aged between 18 and 24 unemployed for shorter spells has fallen in line with the general fall in people out of work, the number unemployed for more than 12 months rose by 2,000 over the quarter and 13,000 over the year to a total of 241,000. This is precisely the group targeted by successive government initiatives because of strong evidence from previous recessions that a long spell of unemployment when you are young has a continuing impact on you in later life.

So what’s going on here? I don’t pretend to be a labour market expert and it’s important to be cautious with the data so I will confine myself to joining a few dots:

  • First, there’s the increase in mini-jobs and self-employment noted elsewhere. Over the last year, the number of full-time employees is up just 46,0000 whereas there are 195,000 more part-time employees. Total self-employment (full and part-time) is up by 125,000.
  • Second, there is the big picture of the continuing economic mess and the fear and uncertainty that generates, especially among people with low incomes.
  • Third, there is the continuing increase in the number of people being judged fit to work under the government’s controversial work capability assessments and denied the new employment and support allowance that is replacing disability benefit. The National Audit Office reported this week on the high number of substandard assessments and successful appeals against assessments by the contractor Atos Healthcare.
  • Fourth, there are the continuing problems with the work programme, the government scheme designed to get the long-term unemployed back into work through payment by results to private contractors.

To sum up, how much are these figures down to the success or failure of the government’s welfare policies, and the performance of contractors like Atos and A4e, rather than an improvement in the state of the economy?

If that is a factor, then what are the implications when the next big wave of welfare reform hits next year? In April 2013, the benefit cap will affect at least 56,000 households who currently get more than £26,000 in benefits (mainly housing benefit). However, anyone who qualifies for working tax credit will not be affected. The threshold for this varies from working at least 30 hours a week for someone 25 or over to at least 16 hours a weeks for those 16 or over and disabled, 60 or over and single people with one or more children. At the same time the bedroom tax will deprive 660,000 households in social housing an average of £14 a week. It’s not hard to predict that tens of thousands of people are going to be desperate for part-time jobs or that it will be a buyers’ market for unscrupulous employers.

In October 2013, the phased introduction of the universal credit begins. An alliance of charities warned this week that 450,000 disabled people and their families will be worse off if current plans go ahead. They include up to 116,000 people who could lose £40 a week in support to help them work. That is the number of people working 16 hours or more a week who get the disability element of working tax credit but will lose it under universal credit if they are found fully ‘fit for work’ under a work capability assessment. The research asked people working less than 30 hours a week were asked why they could not work more hours and the most common answer was that their health or impairment would suffer if they worked longer.

Meanwhile anyone on universal credit working less than 35 hours a week will face new in-work conditionality requirements that will force them to prepare, look for and be available for more or better paid work.

On Monday the DWP announced stringent new rules for jobseekers. Previously anyone who failed to actively seek work could lose their jobseekers allowance for up to six months. There are now three levels of sanctions from four weeks for a ‘minor offence’ to three years ‘for repeat offenders who refuse to accept jobs or voluntarily leave a job without good reason’.‪

Again it is not hard to join a few more dots and conclude that, whatever happens to the economy as a whole, things are about to get even tougher for people caught between welfare reform and the part-time labour market.

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