INTRODUCTION

  1.  This document presents the TUC's submission to the House of Commons Employment Sub-Committee's inquiry into "Recruiting the Unemployed". This submission looks at why the TUC agrees that encouraging employers to recruit unemployed people is a good idea, and some of the implications for policy of such an emphasis.

  2.  Representing seven million working people in 78 unions, the TUC is Britain's largest voluntary organisation. We campaign for fairness at work, and support unemployed people through our network of more than 80 Unemployed Workers' Centres. We have a long-standing concern with policies designed to reduce unemployment, and have for some years been arguing for active labour market programmes designed to meet employers' needs.

WHY DO LABOUR MARKET POLICIES NEED TO MEET EMPLOYERS' NEEDS?

  3.  The simplest answer to the question is "they're the people who've got the jobs". Ultimately, we have a choice with policies designed to help unemployed people:

—  Either we can provide alternatives to the open labour market, so it doesn't matter whether or not employers want to recruit them or not;

—  or we can increase the chances that open market employers will want to recruit them.

  4.  There is a place for alternatives to open employment. People with severe and/or multiple problems, who would be unlikely to get jobs even in tight labour markets may best be served by sheltered employment, and such schemes can also act as a "buffer", soaking up cyclical increases in unemployment. Job creation schemes can help keep unemployed people in touch with the world of work, and can also help ensure that there is an effective availability for work test for Jobseeker's Allowance even during periods of high unemployment when such tests are otherwise difficult to operate.

  5.  But there is a problem using these schemes as a springboard into employment. The Community Programme, for instance, (until the advent of the New Deal, Britain's largest-ever programme) played a useful role as an alternative to open employment for people who simply didn't have much chance of getting a job, but it was not successful at helping people back into jobs. Just 19 per cent of the people who left the CP left for full-time employment and 51 per cent of participants were still unemployed eight months later.[14] (Turner, 1984).

HOW CAN UNEMPLOYED PEOPLE'S CHANCES BE IMPROVED?

  6.  If we want labour market policy to be pro-active, and to help people back into employment, then we also need to design programmes that increase unemployed people's chances of being recruited. Once again, there are basically two ways of looking at this problem—either there is something about unemployed people that makes them less likely to get jobs, or there is something about what employers are doing which makes them less likely to recruit unemployed people.

  7.  It is certainly true that unemployed people do, on average have different characteristics from the labour force generally. People without skills or qualifications, for instance, are more likely to be unemployed, and this is why training schemes are common government responses to unemployment.

WHAT ARE EMPLOYERS' ATTITUDES TO UNEMPLOYED PEOPLE?

  8.  Programmes designed to address employers' behaviour have been slower to develop. The TUC has been very influenced by a major study (Atkinson, Giles & Meager, 1996) of employers' attitudes to unemployed people. This study found that, while few recruiters believed unemployed people to be intrinsically less employable, they did take applicants' unemployment seriously:

—  They tried to find out early on whether an applicant was unemployed,

—  They asked unemployed applicants why they became/how often they had been unemployed, and what they had done while unemployed.

—  They took long/repeated spells of unemployment particularly seriously: 56 per cent believed that skills, and 54 per cent that work attitudes deteriorated during employment.

  9.  This study reinforced lessons from other research:

—  Some employers simply reject all long-term unemployed people at the start of their selection. (Meager and Metcalf, 1987)

—  Many employers view long-term unemployment as being associated with poor motivation, attitudinal problems and declining skills[15] (James, 1997, quoted in Hasluck, 1999)

  10.  Some employers, especially line-managers, believe that people made redundant may have been selected for redundancy on the basis of poor performance, lack of work discipline or other misdemeanours. (Crowley-Bainton, 1987a and 1987b, quoted in Hasluck, 1999).

CAN WORK EXPERIENCE PROGRAMMES PERSUADE EMPLOYERS TO RECRUIT UNEMPLOYED PEOPLE?

  11.  Given this evidence about employers' attitudes, two approaches to persuading employers to recruit unemployed people have developed:

—  Creating an incentive to recruit unemployed people, usually some form of subsidy.

—  Providing unemployed people with work experience so that employers will be persuaded that motivation and skills—especially "soft skills" —have not declined.

  12.  Unsurprisingly, there are problems with both approaches. We now know that employer subsidies have to be very carefully designed:

—  One danger is that subsidies may have no effect. Employers' first concern when recruiting is to get the right person for job, and to minimise the risk of recruiting the wrong person. Subsidies, which are complicated, obscure, or wrapped in red tape, are often ignored. A good example of this was the National Insurance Contribution holiday introduced in April 1996. Employers were offered the ability to reclaim 12 months' NI contributions if they recruited someone out of work for more than two years. Take-up of 130,000 places a year was expected, but by January 1997 there had been only 2,700 applications. Funding for the scheme was first cut back by 94 per cent from 28 million to 1.5 million, and the holiday has now been abolished.

—  The opposite danger is that a programme will be all too attractive, and used by employers to subsidise recruitment decisions they would have made in any case. Good examples of this substitution were provided by the Temporary Employment Subsidy, introduced in 1975 for potentially redundant employees, replaced in 1979 by the Temporary Short Time Working Compensation scheme. These programmes had massive deadweight—61 per cent of the jobs covered by TES—and they tended to delay redundancies, rather than prevent them (Hasluck, 1999, quoting Deakin & Pratten, 1982, and Metcalf, 1986).

—  At the worst, subsidies can encourage employers to make existing workers redundant so that they can recruit subsidised employees. An associated problem is "churning"—where employers dismiss subsidised staff as soon as the subsidy ends, and replace them with fresh subsidised recruits.

  13.  On the other hand, carefully designed subsidies can have a positive impact. A 1997 OECD report argued that subsidies could increase unemployed people's chances of getting jobs, given this proviso (OECD, 1997) the OECD was particularly impressed by two countries' experienced:

—   In Finland employers laid off workers when the subsidy came to an end, and hired new subsidised workers, leading to reforms so that the subsidy was only available for permanent hirings.

—  The United States had found that combining subsidies with training increased the employability of workers who would otherwise find it very difficult to get jobs.

  14.  Substitution can be a desirable result of subsidy programmes. Workstart was a subsidy programme, which ran from 1993 to 1998. The programme had severe displacement problems—the long-term unemployed people recruited through Workstart took jobs that would otherwise have gone to short-term unemployed people. But it has been pointed out that cutting the proportion of unemployed people who are long-term unemployed is an important goal in itself. In other words, subsidies might help change employers' recruitment decisions in favour of long-term unemployed people. (Layard, 1997).

  15.  Furthermore, one unambiguously positive result of Workstart was the fact that Workstart employers were very happy with the quality of their recruits: 64 per cent said they were adequately skilled, and 83 per cent planned to keep them on after the subsidy ran out. Employers with this positive experience of a subsidy programme are likely in future to have a much more positive attitude to recruiting unemployed people, even when no subsidy is on offer.

  16.  One reason why the TUC is such a strong supporter of the New Deal for young people is that these lessons of previous British programmes and experiences from other countries were taken into account when the subsidised employment option was designed: the option includes a guarantee of training, and employers who abuse the programme are banned from further participation.

WORK EXPERIENCE

  17.  The main policy alternative to subsidies has been to offer work experience, and a key conclusion of the IES survey was that it is important for unemployed people to stay in touch with a "workplace-like culture" as employers are particularly likely to be concerned about the loss of general work disciplines.

  18.  Employers are not easily impressed by work experience programmes, which they tend to regard as "make work schemes", unless persuaded otherwise. It is noticeable, for instance, that the New Deal for young people's work experience options have been much less effective at moving participants into jobs than the Gateway or the subsidised employment option:

PROPORTION OF PARTICIPANTS LEAVING FOR UNSUBSIDISED EMPLOYMENT[16]

  19.  Designing work experience which employers respect enough to recruit people who have taken part in it is therefore an objective for policy reforms. We already know that employers are cautious about recruiting unemployed people because they fear that key employment disciplines and soft skills deteriorate during unemployment. Plainly, employers are sceptical about whether work experience does anything to halt this deterioration.

LESSONS FOR THE NEW DEAL

  20.  The TUC believes that the failure to pay a realistic wage to participants in the New Deal's work experience options is one cause of this low valuation of work experience. At present, participants in the Voluntary Sector and Environmental Task Force options are paid their benefits, plus an extra grant worth about £15 per week. Like trades unionists and unemployed people, employers assume that real jobs pay real wages, and that schemes which pay "benefit plus" are not realistic work experience. In particular, providers who do not pay at least the minimum wage will be unable to demand from participants the employment discipline employers see as vital.

  21.  The TUC strongly supports all the New Deal programmes, but we continue to believe that the failure to pay the rate for the job to work experience participants is a major error.

WORK TRIALS

  22.  Work Trials have been found to be particularly effective at changing employers' behaviour. Work Trials offer employers and unemployed people a "trial run" at employment for three weeks, during which time both parties can decide whether they are suited to each other—and there is no benefit penalty for the claimant who returns to Jobseeker's Allowance.

  23.  A study of Work Trials found (White, Lissenburgh and Bryson, 1997, 31) that, when compared with a control group, people who had been on Work Trials were much more likely to have a job and less likely to be unemployed:[17]

CURRENT ACTIVITY WHEN INTERVIEWED

  24.  Plainly, there is a large group of employers willing to abandon any fears and prejudices about recruiting unemployed people when they have had a positive experience.

  25.  This does not mean that there are no possible problems associated with Work Trials. Where the unemployed person is not paid for her/his work while on trial unions will obviously be concerned that this is not fair, and that there is an incentive for less unscrupulous employers to use the scheme to substitute for workers paid at the rate for the job. The longer the trial, the greater the risk of this abuse.

  On the other hand, employers may not be willing to recruit unemployed people even on a trial basis, at the full rate. Social partner involvement in the screening and monitoring of Work Trial providers is the best way to reduce the risks associated with the programme—even when Work Trials are of extended duration.

Trades Union Congress

April 2000
REFERENCES

  Atkinson, J Giles, L & Meager, N (1996) Employers, Recruitment and the Unemployed, Institute for Employment Studies

  Crowley-Bainton, T (1987a) "Bias in Employee Selection: Selecting the Unemployed", Guidance and Assessment Review vol 3, No 5 pp 6-7

  Crowley-Bainton, T (1987b) "Discriminating Employers", New Society, 27-11-87, pp 14-16.

  Deaking, B & Pratten, C (1982) Effects of the Temporary Employment Subsidy.

  Hasluck, C (1999) Employers, Young People and the Unemployed: a review of research, IER for ES, ESR12.

  James, R (1997) Increasing Employability: An Operational Perspective, ES Occupational Psychology Division, Briefing Report 585/B.

  Layard, R (1997) "Preventing Long-term Unemployment: Strategy and Costings", Employment Policy Institute Economic Report, March 1997.

  Meager, N & Metcalf, H (1987) Recruitment of the Long-term unemployed, IMS report 138.

  Metcalf, D (1986) "Employment subsidies and redundancies", in Unemployment search and labour supply, R Blundell and I Walker [eds].

  OECD, (1997) Enhancing the Effectiveness of Active Labour Market Policies.

  Turner, P (1985) "After the Community Programme—results of the first follow-up survey", Employment Gazette, Jan 1985.

  Robinson, P (1997) Labour Market Studies: United Kingdom, European Commission

  White, M Lissenburgh, S & Bryson, A (1997) The Impact of Public Job Placing Programmes, PSI.

"An economy which has very high unemployment is one which is likely to be running a large budget deficit, as in Britain in the early 1990s. Inevitably then any work programme will need to have a low cost per place, and in order to avoid displacing regular work will need to be at the margins of socially useful activity. Labour market programmes are instituted because of the shortage of regular employment opportunities. But in order not to interfere with the regular workings of the labour market, such programme places must not look or feel like regular jobs. They have to offer relatively low rates of pay so that the incentive to obtain a regular job remains. This was the paradox face by the Community Programme in Britain in the mid-1980s. This kind of work programme will always represent a stop-gap" (Robinson, 1997, p 74).Back

15   This is important: the same survey showed that employers recruiting for unskilled and semi-skilled manual jobs listed as the shortcomings which led them to reject applicants: lack of motivation or right attitude (46 per cent), lack of basic skills (42 per cent), lack of stable job record (34 per cent) lack of previous experience (33 per cent). Back

16   Source: DfEE Statistical First Release, 30 March 2000 (SFR 10/2000), Table 11. Back

17   Participants who had got a job were also inclined to give the programme the credit: when asked whether they would have got their job even if they had not gone on a Work Trial, just 38 per cent said "yes"-44 per cent said "no", and 18 per cent were uncertain (Ibid, p 32). Furthermore, "there was no clear tendency for the WT sample to be relatively advantaged in relation to job gaining characteristics". (p 31) Using regression analysis to control for personal and household characteristics, work history, labour market background, job expectations and previous participation in other programmes, "Work Trials increased the odds of employment at interview by a factor of about 5." (Ibid, p 35)

"The typical participants in Work Trials increased their employment rate by 35-40 percentage points, a result which (to the best of our knowledge) has no parallel in previous studies of national labour market programmes." (Ibid, p 123).Back