The government is very proud of its Work Programme. It is especially proud of the fact that the WPs private sector providers are only paid on the basis of individual outcomes – do the participants get a “long term” job.
But what is the policy aim here? Is it to get individual long-term unemployed people into employment? Few would disagree this is a laudable aim, but what are the costs and benefits. The cost-benefit analysis seems to be currently limited to individuals. Is this a cheaper way of getting people into jobs? But the real issue is systemic – is this a cost-effective way of reducing unemployment, and especially long-term unemployment?
Take a simple example. An individual long-term unemployed person is successfully retrained and placed in a medium-term job. Result. But what if this retraining simply displaces a slightly less well trained existing worker who then becomes …long term unemployed?
It is entirely possible the Work Programme could be a 100% success for (current) long-term unemployed participants and have zero effect on long-term unemployment as a whole.
Even if this “supply-side” programme simply raised the level of competitiveness amongst individual workers so that we had a much higher “churn rate” and fewer long-term unemployed this would make little difference to the overall cost of unemployment to the public purse. It might, of course, drive down average wages a bit, but this would have little effect on the economy as a whole.
What will really matter in the long run is the level of employment opportunities, and the Work Programme will make not one jot of difference to that.
STATECRAFT - improving government 
Colin you have highlighted a major concern here. How can the work programme get the long term unemployed back into work in a shrinking job market and economy with tens of thousands of qualified candidates for those jobs? This can only be accomplished by throwing money at it which the government is doing to “Bribe” employers into taking on the long term unemployed instead of those qualified candidates who have lost theirs. I fail to see how the scheme will reduce unemployment in the long term I hope I am wrong in thinking that.
Good point Colin. I quite agree that it is crass to aim to get “participants get a “long term” job”. But you don’t think the twits who set up these schemes can think in terms of abstracts like “reducing unemployment in the aggregate” or “reducing NAIRU” do you?
My attempt to analyse this whole issue in entirely abstract terms (which might interest you) is here:
http://mpra.ub.uni-muenchen.de/19094/
I think some ancient Greek philosopher said that the abstract governs the physical. Too right.
1) There is no reason the work programme could not function as a job creation programme – it is black box after all. The publicly available bids all state some form of either social enterprise, business start-up or enterprise grant type component. All outcomes could be generated through new business start-ups – no reason not to, the reward payments more than cover minimum wage costs.
2) Not an economist, but there is no “lump of labour” (fallacy). Moving unemployed people into work can create more jobs in the economy, not necessarily always straight substitution. One could invoke say’s law or simply point to these schemes increasing efficiency in the matching function.
3) A higher churn rate does save the taxpayer money (not just by improving labour market efficiency). All the evidence shows that skills, health and social ability fade sets in the longer unemployment lasts – leading to increased public service demand – health costs, criminal justice costs, increased future return to work costs as barriers to employment become entrenched, their is relatively strong evidence to suggest intergenerational transferability here also – there are significantly greater costs for one long term unemployment period over, two individual short ones..
I am one of those thousands of qualified candidates stuck in our shrinking economy knowing that every application I make there can be between 50 and 200 applications. I left an unstable industry to put myself through ten years of higher education, did voluntary work for seven years with a leading charity and have now been on the Work Programme for a year. This government has turned people into commodities that private enterprises can profit from. Back in the early 90s when I had another spell of unemployment I was lucky to get access to relevant training for my industry and a work placement which lead straight to long-term employment. The whole Work Programme was sold to me as a carrot on a stick and to say that I am outraged is an understatement, but I guess there are lots of people like me. This hardship felt by many will eventually lead to solidarity and the government will feel this in the ballot box. Good luck to Cait Reilly for taking legal action against the government for forcing her into unpaid work at the expense of her own voluntary experience. I’m sure millions of people, unemployed and employed, are in complete support. I am too embarrassed to reveal my identity here but would happily tell my story to the mainstream media if I knew I would be taken seriously.
Just wanted to follow up on the essence of your prediction about the Work Programme. I firmly believe your statement “…it could be a 100% success for (current) long-term unemployed participants and have zero effect on long-term unemployment as a whole” will indeed be the reality. As a direct result of the government outsourcing the responsibility and cost of unemployment (via the mechanism of privatisation) job centre staff have already been made redundant, certainly at the Central Bristol office. So your theory about the displacement of workers is already happening, at job centres! My concern is the majority of these people directly fall within the category for becoming long-term unemployed themselves, partly due to age, limited skill sets and most probably now a lack of motivation.
I wish successive governments would stop pretending full employment is achievable and face the fact the era of Industrialisation is over and there is simply not enough scope in the range of work available, mostly in the form of manual labour, especially for an ever growing population. Perhaps we should all accept unemployment is a feature of modern society (thanks to the Victorians who improved the nation’s health) and offer more kindness and support to those affected by the lack of work and money. Of course there will always be a percentage of people who dislike work – that’s human nature. What the government SHOULD be doing is providing free training to the long-term unemployed for the sectors affected by skills shortages, and there are quite a few of those. This is also a time at which we could really develop the green economy and develop a more sustainable future by capitalising upon the wealth of existing redundant labour, NOT sending people to do menial work at Poundland or free untrained security at the Jubilee! It is seriously concerning that the Work Programme providers are given complete autonomy to ‘manage’ their customers as they are motivated by profit and are not concerned about the future of our society or the health of the economy.
Interesting report from Radio 4 that debates the fate of the Work Programme with people who really understand the system and the plight of the unemployed:
http://www.bbc.co.uk/programmes/b014ggh3
It’s nowhere men making nowhere plans for nobody.