A GUIDE TO UNEMPLOYMENT REDUCTION MEASURES Also by Edwin Whiting HOW TO GET YOUR EMPLOYMENT COSTS RIGHT A GUIDE TO BUSINESS PERFORMANCE MEASUREMENTS A Guide to Unemployment Reduction Measures Edwin Whiting Honorary Fellow, Manchester Business School M MACMILLAN PRESS © Edwin Whiting 1987 Softcoverreprint ofthe hardcover1st edition 1987 978-0-333-41295-4 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright Act 1956 (as amended), or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 7 Ridgmount Street, London WCIE 7AE. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. First published 1987 Published by THE MACMILLAN PRESS LT D Houndmills, Basingstoke, Hampshire RG21 2XS and London Companies and representatives throughout the world British Library Cataloguing in Publication Data Whiting, Edwin A guide to unemployment reduction measures. I. Unemployment 2. Full employment policies I. Title 331.13'77 HD707.5 ISBN 978-1-349-08623-8 ISBN 978-1-349-08621-4 (eBook) DOI 10.1007/978-1-349-08621-4 To James and Janet and Sophie and Nick Contents Preface Xl Supplement: updating schemes and cost data to 1986/87 xm PART 1 OBJECTIVES AND SCOPE 1 1 Introducing the concepts 3 Basic approach. Cost and benefit. Structural unemployment. Summary. 2 Explaining the framework 8 Choice of measures. Reviewing the measures. Background (1). Variations on the theme (2). Effect on employment (3). Effect on productivity (4). Costs (5). Long-term aspects (6). Problems of implementation (7). Social and political implications (8). Conclusion. Summary. 3 Defining unemployment 16 Work, jobs and employment. Types of unemployment. Registers and surveys. Benefit recipients. Summary. 4 Counting the costs 22 Importance of cost. Use of net cost per person. Calculation of cost per person. Productivity and investment. Social costs. Summary. Analysis of benefits paid to unemployed. Exchequer gains from employment. PART II APPRAISAL OF THE MEASURES 35 The sections of each chapter in Part II are standard throughout and are numbered after each chapter number as follows: .1 Background .2 Variations on the theme .3 Effect on employment .4 Effect on productivity .5 Costs .6 Long-term aspects .7 Problems of implementation vii viii Contents .8 Social and political implications .9 Summary .10 What the author might do Group A Reducing the numbers of people needing paid work 5 Retiring earlier 37 6 Stopping work after retirement 57 7 Substituting directly retired by unemployed 68 8 Partially retiring 76 9 Expanding education 83 10 Providing more training 100 Group B Sharing the work 11 Shortening the working week 114 12 Shortening the working year 123 13 Reducing overtime 130 14 Fostering part-time employment 147 15 Reorganising working patterns 159 Group C Matching people with jobs 16 Bringing jobs to depressed areas 167 17 Helping people in depressed areas to take jobs elsewhere 182 18 Improving the job finding process 194 19 Building the confidence of the unemployed 201 Group D Using marginal subsidies 20 Reducing wage cost by recruitment subsidy 213 Contents ix 21 Awarding grants for increases in employment 224 Group E Organising business for employment 22 Averting closure and redundancy 234 23 Promoting and assisting new businesses 245 Group F Providing work in the community and public sector 24 Finding work for the long-term unemployed 265 25 Employing people directly in jobs in the public sector 278 PART III COMPARISONS AND CONCLUSIONS 285 26 Summarising and comparing the various measures 287 General summary of measures. High yield schemes. Measures saving money for the Exchequer. Perils of numbers. Summary. 27 Reviewing major issues 297 Introduction. Compulsion. Education and training. Discrimination by area. Public sector image. Headcounts. Types of unemployment. Social costs. Research and statistics. The informal economy. Conclusion. Summary. Abbreviations 306 Index 307 Preface Somehow unemployment ought to be reduced. In Britain it has been at almost unbelievable levels for over ten years. Is it beyond the wit of man to find some solution after all this time? Many economists complain that their solutions have not been tried and continue to press for macroeconomic measures such as increasing Government spending or reducing taxation. But many others are against such moves and there is a growing consensus that 'little can be done by macroeconomic policy to reduce unemployment' (to quote the OECD in January 1986). Ever since 1976 I have been interested in the unemployment problem and particularly in the true cost of unemployment. At Manchester Business School, where I was teaching management accounting and control, I felt that somehow the same kind of techniques could be used to sort out the various proposals for reducing unemployment. I envisaged each measure in the same way as a business project. Could it not be treated as a capital investment, using a cash flow projection and discounting it over the probable life of the measure? I soon found that such an idea would not work. But I did find that there was data enough on some measures to produce a comprehensive statement of costs and revenues in the same way as would be done for a business decision, and not many of the measures seemed to have large invest ment components. The cost per person to the Government of each measure struck me as the key ratio on which decisions should be made. When I retired from the Business School I was more free to pursue this further. I identified about twenty to thirty measures or schemes and tried to work out a cost per person for each one. Lack of data was my main problem. I was not in a position to do my own new research, but I did find a collection of other people's research that proved very useful, often from unexpected sources. The rest of the data came from my own estimates or guesstimates, which I admit are far from adequate, but better than nothing. It may be that readers have xi