Polly Today

If you\’re going to quote someone it helpsto get their name right. You know, first rule of publicity, that.

Professor Sir Richard Layard says: "Even if people are re-employed and regain their income, they are less happy and less secure. Life feels more dangerous."

Professor Lord Layard you mean I take it.

Also, if you\’re going to quote someone, it helps if you present their views in the whole.

As multitudes sign on, expect a sharp shift in public attitudes. In boom times people are punitive to the "workshy", but in recessions everyone knows it\’s not their fault. Living on £60.50 a week quickly disabuses people of myths of luxurious benefits. Expect a groundswell of protest at almost the meanest dole in the European Union, which has fallen by 10% on Labour\’s watch.

Well, yes, we do have a low dole. For a rather good reason too, at least that\’s what Lord Layard thinks.

But the truth is, all the research points towards the welfare-to-work direction. If James Purnell stopped grandstanding about a "blitz on dole scroungers", more in his own party might examine the research. The model is not the brutal Wisconsin system that threw single mothers off benefits. It was the social democratic Nordics that blazed this trail, and most other social democracies followed, including Sweden and the Netherlands, France and now Germany.

Erm, you know that the Wisconsin system is actually based upon My Lord Layard\’s research?

Originally the Danes paid the unemployed 80% of their pay for eight years unconditionally. But when in the early 1990s it was cut to just one year, after which people had to join compulsory schemes, unemployment fell. The threat of compulsion jolts people into taking available jobs instead of jobs they hope for – and that is better than languishing. It is remarkable how consistent all the evidence is from every country.

That is indeed consistent with the research from the Noble Lord, I\’ll give you that.

The details are to be found here.

The rationale for welfare-to-work is simple. If you pay people to be inactive, there will be more inactivity. So you should pay them instead for being active – for either working or training to improve their employability.
The evidence for the first proposition is everywhere around us. For example, Europe has a notorious unemployment problem. But if you break down unemployment into short-term (under a year) and long-term, you find that short-term unemployment is almost the same in Europe as in the U.S. – around 4% of the workforce. But in Europe there are another 4% who have been out of work for over a year, compared with almost none in the United States. The most obvious explanation for this is that in the U.S. unemployment benefits run out after 6 months, while in most of Europe they continue for many years or indefinitely.


Thus a major objective must be to reduce or eliminate the long-term unemployment caused by welfare dependency. There are two possible approaches – “stick” and “carrot”. The evidence suggests that much the best approach is a combination of the two. This combined approach is now being used increasingly in Britain, Denmark, the Netherlands and of course in the U.S. for single mothers on welfare. In consequence in these countries there have been dramatic falls in unemployment consistent with a given level of vacancies – which in most other countries continues to rise.

See, he likes the Wisconsin model!

In most countries the “stick” is always there in principle, but often little in practise. The rules say you should only draw benefit if you are trying to find work and failing – in other words there is a “work test”. But in many countries this is very weakly applied. In Britain for example from 1982-6 people on benefit were not even required to register as job-seekers at job centres. From 1986 however the work test began to be used again and the system in Britain tightened. The benefit offices and job centres were reunited. In 1986 six-monthly Restart interviews began, and since 1990 benefit recipients have been formally expected to be “actively seeking work”. Under the Job Seeker’s Allowance introduced in 1996, job-seekers can be given explicit directions by their adviser. Failure to comply with the rules can lead to loss of benefit for up to six months.
These changes are part of the reason why unemployment in Britain has been able to fall as it has without inflation rising. In 1989, when unemployment fell to 7%, inflation took off; today unemployment is 5½% but inflation is still level. The unemployed that we have now are more active in job search. So it is easier for employers to fill their vacancies and inflation remains under control.

Compulsion to take a job…..

Thus the big new idea in Labour’s New Deal is this. We ought to offer everybody on the threshold of long-term unemployment a choice of activity for at least a period. And when that happens we should remove the option of life on benefit.

Work or lose your benefits…..

It would seem that Richard Layard is rather fonder of the stick approach than Polly makes out. Funny that, eh?




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