October 6, 2013 3:43 pm

Welfare reform will not work alone

Bitter medicine is no guaranteed cure for UK joblessness

The dispiriting corollary to the principle that success breeds success is that misfortune can beget further misfortune. In the aftermath of the financial crisis both the Labour and coalition governments have tried welfare to work programmes as a way of ensuring that those who lose their jobs are not condemned to a lifetime of unemployment.

Policy makers are right to be concerned. For thousands of miners who fell victim to the pit closures of the 1980s, joblessness became a life-long ordeal. Returning to the workplace after a prolonged absence can be difficult even without the problem of obsolete skills. In the US, people who have been without a job for more than six months have proved less able to capitalise on the creation of new openings. There is a danger that this group, easily overlooked by employers, will find itself permanently shut out.

Two initiatives announced at the Conservative party conference aim to prevent this from happening in the UK. People who draw unemployment benefit for more than two years will be forced to do community work, take part in training, or attend daily sessions at the unemployment office. Young people will no longer qualify for the dole, and will be told to get a job or take a course instead.

These are timely proposals. Close to one-in-five school-leavers aged 16 to 24 is now unemployed, and almost half a million people have been out of work for over two years – levels not seen since the early 1990s. Making sure that this cohort does not drift out of the labour force is an urgent priority. Job-creation schemes are only useful, however, if they involve genuinely constructive work and not activity for its own sake.

One approach that has previously proved effective is to offer cash to employers who hire workers out of the dole queue, in the expectation that employees will be kept on after the subsidies end. But this is possible only when businesses are adding jobs. Even then, results are mixed. Studies have found that many participants fail to find sustained work after completing such programmes.

Previous dabblings with welfare to work in the UK have had little impact. Youth unemployment fell during Labour’s “New Deal”, which began in 1997. But that scheme coincided with a period of growth. Both Labour’s post-crisis Future Jobs Fund and the Work Programme created by the coalition government to replace it have helped fewer people than hoped.

Labour is promising to find a subsidised job for every adult who has been out of work for over two years. If this prods employers into considering competent candidates who have no recent experience of work, it could prevent them from dropping out for good.

Still, the credibility of this “compulsory jobs guarantee” is questionable. There would be little point in cajoling employers to create sinecures for workers they do not need. Only a return to sustained growth will end the drought of opportunity in Britain’s labour market.

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