Way to Work - a first step, but we can and must do better
28 Jan 2022
Tony Wilson, Institute Director
They say that the first step in recovery is to admit that you have a problem. So we should at least welcome yesterday's ‘Way to Work’ campaign as a first step. The trouble, though, is that admitting there’s a problem and then doing something about it are very different things, and unfortunately the new campaign will fall far short of meeting the challenges that we now face.
First, the problem. If you only ever looked at the headlines or read the press releases, you could be forgiven for thinking that the labour market was in rude health – with payroll jobs at their highest ever level, unemployment close to its lowest since the early 1970s and record numbers of vacancies. Indeed the turnaround compared with this time last year is extraordinary – we entered 2021 with half as many job openings as now, in the grip of a full lockdown and with official forecasts predicting that unemployment would top 2.5 million as the furlough scheme unwound. In the event, it is clear now that the Plan for Jobs worked – it prevented an unemployment catastrophe, protected incomes and helped firms get through the worst of the crisis.
However you do not have to scratch too far beneath the surface to see that while we’ve averted mass unemployment, we are now in the grip of two very different crises – of falling participation and of growing labour shortages. Our monthly labour market briefing spells these out in detail, but to summarise: there are still 600 thousand fewer people in work than before the pandemic, and more than a million fewer than if the pre-crisis trend (of rising labour force participation) had continued. Three fifths of this ‘participation gap’ is explained by fewer older people in the labour force, with perhaps a quarter explained by lower migration. This is the biggest reversal in participation in at least thirty years. There are many factors driving this – occupational changes, post-furlough effects, fears of returning to work, worsening health, Brexit – but one common thread is that hundreds of thousands of people have found themselves out of work, without the right support to find or keep work, and have now left the labour force entirely. And many of those outside the labour force – an estimated 1.7 million people – say that they do still want to work, even though they are not currently looking.
At the same time, firms are facing labour shortages and recruitment problems on a scale that we have not witnessed in modern times. There are now fewer unemployed people chasing each vacancy than at any point in at least fifty years, and job openings are above pre-pandemic levels in every industry and every region and nation of the UK. Again, there are a number of reasons for this: the need to fill jobs as industries reopened, new demand as the economy recovers (and changes), inefficiencies as people leave one job to start another. But whichever way you cut it, labour supply just cannot keep up with labour demand and these shortages – in both labour and skills, as the REC points out – are now holding back the recovery and could in turn start to push up inflation. Furthermore, in a particularly vicious circle, by far the hardest hit by rising costs of living will be people who are out of work.
So, if those are the problems, it should be fairly obvious why the centrepiece of yesterday’s ‘Ways to Work’ announcement – of widening job search requirements for the newly unemployed – will not be the solution. Just 7% of all of those out of work are short-term unemployed, and with short-term unemployment already at its lowest ever level trying to drive this down even further could actually risk more harm than good - if it contributes to even higher turnover for employers, or if it pushes people into jobs that will be a worse fit for them (or into precarious work, as my colleague Stephen Bevan has pointed out). The framing of the announcement too, in getting people “off welfare”, is also deeply unhelpful – it risks stigmatising the unemployed, it will alienate employers (as this research makes clear) and it wilfully ignores that most of those out of work are not “on welfare” and nearly half of those “on welfare” are already in work.
Beyond that headline grabbing proposal however, there are things that we should welcome today – a clearer offer for employers, which is both needed and overdue, and a commitment of more time with work coaches for those who are seeking work. But as a meaningful plan to address the challenges that we now face, we have a long way still to go.
So we should recognise that the Plan for Jobs worked in preventing mass unemployment, but now we need a new plan for participation and growth. At its heart should be a modern employment service that is open to everyone – in and out of work, on any benefit and none – who want help to find their next job; and open to employers who want help to find and develop their staff. This should bring together our public service – Jobcentre Plus – with contracted services like Restart and Job Entry Targeted Support (JETS), alongside locally-funded employment services, careers services and access to skills and business support. It would be locally rooted, to support local priorities and needs; and would work in communities and across services to help those further from work but who want to work to start to take steps towards doing so - especially those with health conditions, older people, parents and young people outside education.
Critically, this modern employment service needs to offer much more to employers too – to speak with one voice, and offer not just help with recruitment but support on job design, flexibility, workplace support and training. Our own work with employers shows that this is possible, and we set out proposals for how to do this in practice (through local Good Work Partnerships) this time last year, in our research into the impacts of the pandemic on the low paid. It is even clearer now, given the tightness of the labour market, that this this should be a business and economic imperative as well as a social one.
If this sounds ambitious, that’s because it is – at least starting from where we are now. But in reality it’s not that different to how public employment services work in many other countries, nor how they have worked in the UK in the past. And there are any number of examples of locally led initiatives that are already working to raise participation and support decent work. The good news too is that for once, we actually have the resources to do something like this – with nearly £10 billion already committed for employment services and support, including 27,000 work coaches in Jobcentre Plus (double the number that we had pre-pandemic), more than £3 billion allocated to Restart and JETS, and likely around £1 billion that will be underspent on the Kickstart scheme.
Way to Work is a first step. But we face a way to go in our recovery, and as I said last year our ambition shouldn’t be to get back to where we were before the pandemic hit – it should be for a society where everyone can access good quality, secure and meaningful work with a decent wage. We have a way to go yet, but we should seize the opportunity.
Any views expressed are those of the author and not necessarily those of the Institute as a whole.