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“Active Labour Market Policies in the UK - Is the British Success - Story

Coming to an End?”

Shruti Singh, Economist

UK Department for Work and Pensions

CICERO FOUNDATION SEMINAR

PARIS 15 FEBRUARY 2007

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INTRODUCTION

This presentation will cover…

1. What has the UK achieved so far?

2. How has it achieved its success?

3. Future Challenges: can the UK go further?

4. Conclusions

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Perc

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tion (

%)

…One of the highest working age employment rates…

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…And one of the lowest unemployment levels for over 25 years…

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Claimant CountILO Unemployment

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…with major improvement in long-term claimant unemployment..

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200,000

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Aged 18-24 on JSA over 1 year

All on JSA over 1 yr

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The UK has one of the strongest labour markets in the world..

Source: OECD

Employment 2005

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UK Canada US Japan Germany France Italy

Per

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Em

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Employment rates amongst most groups in the UK are above the OECD average…

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Total Men Women Young Prime Age Older

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…While Unemployment and Inactivity Rates are relatively low…

Source: OECD

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Unemployment 2006 Inactivity 2005

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Expenditure on labour market programmes as a percentage of GDP…

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0.6

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1.0

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1.6

1.8

2.0

Source: OECD

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Key elements that have contributed to the success so far…

• Macroeconomic Stability

• Flexibility and Diversity

• Making work pay: National Minimum Wage and tax credits improve incentives to work for low income households

• Active Labour Market Policies:

- Jobcentre Plus: Rights & Responsibility agenda, Assisted job search, continuous labour market

attachment

- New Deals: reduce long term unemployment, Gateway to training/retraining

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Future Challenges: Can the UK do more…?

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The key problem is now economic inactivity not unemployment…

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Economic InactivityILO Unemployment

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…and because the vast majority of claimants of inactive benefits are economically inactive, most are not looking for work…

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JSA 18-24 JSA 25-49 50 and over Incapacity Benefits lone parents any other form of IS

Inactive

ILO unemployed

In employment

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…And other countries face similar problems…

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Other benefitsUnemployment benefitsSickness & DisabilityOld age & early retirement

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What are we doing about it…?

• The UK Government’s long-term aim is to achieve an employment rate equivalent to 80 percent of the working age population

•Including a million less on incapacity benefits, a million more older people in work, 300,000 more lone parents in work

•Which means tackling inactivity and worklessness, particularly in the most deprived areas

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We have begun to make a difference amongst lone parents and those on Incapacity Benefit…

1) Reform Incapacity Benefit, for sick and disabled: - Set up of Pathways to work (PTW)

- PTW includes mandatory WFIs

2) Increase incentives for Lone Parents to enter or re-enter the labour market:- New deals extended to lone parents

- Tax Credits 3) Extending working lives:

- age discrimination legislation - Increase in State Pension Age - Age positive campaign

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Which is reflected in benefit claims and employment rates…

• The number of lone parents on benefits have declined by 235,000 to 775,000 compared to over a million in 1997.

•The number of people on Incapacity benefit have declined by almost 92,000 from May 2003 which was its highest peak since 1997

Employment rates 1999 2006

Sick and Disabled 42.0% 48.0%

Lone Parents 48.1% 56.4%

Older Workers 66.5% 70.8%

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Conclusions: There is more to do..(1)

• UK has done exceptionally well in reducing unemployment

• Has one of the strongest labour markets in the world

• It has achieved this through a number of policy interventions,

However there is still more to do

• Next stage of Welfare Reform - changes in the benefit structure (Incapacity Benefit)

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Conclusions: There is still more to do (2)

Moreover, need to provide support for other disadvantaged groups…

•certain areas, especially major cities

•some minority ethnic groups

•people with low or no qualifications

•transition from school to work

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ANY QUESTIONS?

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Extra

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If people are looking for work, they find work…

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ILO unemployed; actively seeking, wanting work Inactive; actively seeking

Inactive; not seeking, wanting work Inactive; not seeking, not wanting work

Flows from unemployment and inactivity in one quarter into employment in the next quarter (excluding those moving from education and those entering retirement, longitudinal LFS)