The Deliberate Impotence of "Active Labour Market Policy": The UK Labour Market Continues to Deliver Quantity Rather than Quality

Craig Berry

Dr. Berry is the Deputy Director of the Sheffield Political Economy Research Institute, University of Sheffield

The UK is rightly understood as a pioneer of ‘active labour market policy’ (ALMP). The interventions encapsulated by this framing have long existed in some form, but became more central to economic statecraft in the UK in the 1990s as part of the ‘supply-side revolution’.

Yet the former coalition government’s changes to ALMP, typified by the establishment of the Work Programme – which I discuss in my article ‘Quantity over quality: a political economy of “active labour market policy” in the UK’ – have emptied the notion of a supply-side employment strategy of virtually all meaning. Through the Work Programme, the long-term unemployed are offered intense support in finding work, with private providers paid based on results. Although the former coalition regularly condemned the programmes it inherited from the Labour Party, there is no doubt that the Work Programme simply replicates a policy development process already evident under the Labour government between 1997 and 2010. Following the election of a majority Conservative government in May 2015, and the re-appointment of Iain Duncan Smith as Work and Pensions Secretary, we can expect it to intensify.

This hollowing-out of policy is best detailed in comparative context, and with reference to some little-known facts about UK ALMP in this regard. The UK spends significantly less on ALMP programmes than most of its closest neighbours, but generally slightly more than other Anglosphere countries. The UK spent around 0.4 per cent of GDP on this policy area in 2009, compared to 1.4 per cent in Belgium, 1 per cent in France, 1 per cent in Germany, 0.9 per cent in Sweden, 0.8 per cent in Spain, 1.5 per cent in Denmark, and 1.2 per cent in the Netherlands. Australia and Canada both spent around 0.3 per cent of GDP, and the United States spent only 0.1 per cent.

Furthermore, what little the UK does spend is overwhelmingly concentrated on one particular form of ALMP intervention. What the European Commission defines as ‘labour market services’ consists primarily of support for individuals in searching for a job, and related services such as job-matching programmes, job-acquisition training (interview skills, CV-writing, etc.), basic literacy and IT education, and in some cases work-related counselling.

The UK commits 90 per cent of its total ALMP spending to labour market services. Germany and the Netherlands both spend more than the UK on this type, but this spending represents only, respectively, 38 per cent and 32 per cent of their total expenditure. Belgium, Denmark and France spend around the same as the UK on this type of intervention, but this spending represents only, respectively, 16 per cent, 21 per cent and 26 per cent of total expenditure. This accounts for the UK’s low-spending profile, because such services are relatively inexpensive.

Although ALMP is conventionally understood as geared towards increasing the ‘employability’ of individuals, in practice it is primarily designed to smooth the function of the labour market. Frequent news stories about unfilled vacancies, or the failings of the Work Programme to place participants into work, highlight understandable concerns, but actually reinforce the notion that this is all ALMP is for.

The notion that improving the stock of human capital should be the main aim of any supply-side employment strategy has been effectively marginalised. Not so in other European countries: compared to only 4 per cent of total expenditure for the UK, several European countries spend a significant portion on training programmes, including 60 per cent in Austria, 45 per cent in Italy, 37 per cent in France and 36 per cent in Germany. Crucially, however, in these countries ALMP exists within a strong tradition of industrial policy. High levels of long-term public and private investment are necessary to create the jobs for which training is required.

We are constantly told in the UK media that the country has a ‘skills shortage’. This may be true in relation to some industries, but overall, the UK has a significant over-supply of skills. The UK’s services-dominated economy means further investment in ‘upskilling’ the workforce brings little benefit.

It is also worth noting that the vast majority of unemployed people will never call upon ALMP services. Firstly, many recipients of out-of-work benefits experience work/welfare cycling: the UK’s highly unregulated labour market makes work easy to find, but easy to lose. Coupled with strong conditionality in the benefits regime, the likelihood of unemployed people ending up on the Work Programme are fairly small, and as such it tends to cater for very disadvantaged groups (helping to explain its dreadful performance figures).

Secondly, as my article details in greater depth, the majority of unemployed people in the UK do not even claim out-of-work benefits – this is far more the case in the UK than most other European countries.

This is the perfect riposte to the notion the unemployed people are ‘scroungers’ and ‘spongers’. It is also a telling indication of the very limited ambitions of ALMP. The impotence of ALMP in the UK is the end result not of a supply-side employment agenda, but rather the notion that only the supply-side of the labour market matters. In that sense, ALMP represents laissez-faire writ large, as government largely abdicates any responsibility for creating jobs – let alone decent jobs.

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