Government policy on work experience overlooks unemployment

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Government policy on work experience overlooks unemployment

 

The debate over work placements needs to consider the weakness of the UK economy.

 

Introduction                    

 

Recent media coverage has focused upon unemployment amongst the young, aged 18-24.   Efforts have been made to find people work experience, often unpaid placements in a supermarket.  But voluntary work in the private sector does not address unemployment, which has generally risen since 1971.

 

The legacy of Richard Douthwaite

 

In the 1990’s, the economist Richard Douthwaite warned of the dangers of economic growth.  One of these shortcomings was unemployment.  He calculated that the expansion of UK supermarkets, at the expense of independent shops, had led to a significant fall in full-time employment; partially offset by an increase in part-time work.  He also outlined the seriousness of being without a job among the young.  His book Short Circuit (1996), stated that “a third of the men aged between 18 and 24 were either unemployed or economically inactive”.  He also gave reasons for such unemployment since 1971.  His work is still relevant given the debate over joblessness; especially among the young in 2012.

 

The scale of the problem

 

In 1994, Lansley argued that attempts to reduce unemployment, by delaying entry into the labour market, were not successful.  For example, the expansion of higher education, as a way of reducing unemployment, has generally not worked.  In 2012, rates of unemployment are similar between (recent) school leavers and (recent) university graduates.  Work placements are often immaterial, to gaining paid work, in this context.  According to Purnell, government work initiatives risk sending benefit claimants to employers where they will not get jobs.

 

Work experience schemes and the supermarkets

 

There has been recent controversy over supermarkets providing work experience.  Such schemes do not change the structure of food retailing with a reduction in full time employment; as discussed by Douthwaite.  The debate over work experience has overlooked a lack of paid work, which pays the minimum wage.  For these schemes to appear legitimate supermarkets need to pay people.  Purves has suggested that young people do not feel useful until they are paid. However, supermarkets may struggle to employ and pay many more staff.

 

Although Tesco plans to employ another 20,000 people in the next two years, this needs to be seen in context.  Some of these jobs may be temporary and also they may replace people who have left the company through natural wastage.

 

Supermarkets are under pressure from international investors who want to make profit.  One of the ways that firms can make profit is to reduce costs.  This can be done by substituting technology for labour. This could be achieved by the increased use of self-scanning technology. This process can be seen as part of an earlier development.  After the war, self-service shops were introduced into the UK which affected retail employment.

 

Previous approaches to unemployment

 

It was understandable that the last government attempted to reduce unemployment by employing more people in the public sector.  There appeared to be an attempt to offset lost jobs in manufacturing with jobs provided by the state.  However, this policy was not sustainable.  The additional jobs, in the public sector, had to be paid for through increased public debt.  This was because the private sector could not support the additional state employment. For example, the manufacturing sector had declined from 30 per cent of the UK's GDP in 1979, to 14 per cent in 2007. 

 

Former Labour minister, Purnell, suggests that the government should provide work by “creating jobs with charities”.  This risks creating another unsustainable employment scheme; similar to the additional public sector jobs described above.  Alternatively, if the work and the pay are limited then such approaches risk public anger.  Charities could be criticised for creating an artificial ‘job scheme’, in a similar way that the supermarkets have been.

 

Other solutions to unemployment

 

The right-wing Institute of Economic Affairs suggests that ending the minimum wage could help increase employment.  Arguably, by ending the minimum wage, firms would be able to pay something to help young people to get by.  If firms paid lower wages then they would have additional money, with which they could hire more staff.  On this basis, there is perhaps less need for introductory ‘work placement schemes’.  Firms could afford to employ more people, directly, albeit at a lower wage.

 

The problem, with this argument, is that if workers’ hours remain unchanged then their incomes are reduced.  Such workers could become increasingly reliant on in-work benefits, such as tax credits.  Their spending power is also weakened which lowers demand in the economy.

 

A reduction in the minimum wage overlooks the role of large scale companies.  These employ relatively fewer people, for the same amount of sales, compared to a smaller business.  Each member of staff, in a supermarket, will often generate more sales, compared to a similar worker in a small shop.  This benefits the leading grocers, and their investors, but has been ruinous for national employment.

 

The implications for the political left

 

Short Circuit offered solutions to unemployment based on more community initiatives and greater local self-sufficiency.  This is a radical agenda which means that the Green Party can offer an alternative to the Labour Party.  This is not just a question of which political party may fare better in the opinion polls.  It is about politicians helping people to find meaningful paid work.  It is a debate which goes beyond the merits of supermarkets’ work experience placements.  

 

Sources

 

Richard Douthwaite, (1999), The Growth Illusion: How Economic Growth Has Enriched the Few, Impoverished the Many and Endangered the Planet, Page 88

 

Stewart Lansley, (1994), After the Gold Rush, The Trouble with Consumer Capitalism and the way forward, Henley Centre, Century Business Books, Page 220

 

James Purnell, (2012), We need a welfare state that secures Beveridge’s legacy, Financial Times, March 4, 2012, Page 13

 

Libby Purves, (2012), “No pay packet? But that’s half the experience, The Times, February 27, 2012, Page 19 

 

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