UK Poverty Post

Unemployment in the 21st Century: is the welfare system fit for purpose?

Employment is important: for health, for relationships, and for the economy. When people previously unemployed find jobs, their mental health and well-being improves. In contrast, being unemployed for over six months causes health damage equivalent to smoking 200 cigarettes a day: some Scottish public health officials warn that unemployment is a greater cause of death than disease.  Unemployment also harms the economy – not only through current benefit payments, but also through future lost tax receipts. Being unemployed can also have a ‘scarring’ impact whereby future earnings are limited (a wage penalty):  the wage scar of youth unemployment is between eight and 15%, even if an individual is never out of work again.

Government welfare and employment policies have largely targeted the supply side of the labour market through measures such as making work pay; compulsory participation in schemes designed to increase employability; and increased private and voluntary sector involvement in delivery of labour market programmes. This focus on individuals is at odds with the complexity of unemployment and the experiences of those who are unemployed. Barriers to employment might be individual (such as low-self-esteem or insufficient skills), but they are also structural and external (such as a lack of local jobs, evident in many local authorities in Scotland or insufficient affordable childcare places).

Rather than blaming those who are unemployed and in poverty, there needs to be a more nuanced, sophisticated, and sympathetic appreciation and understanding of why people are experiencing the challenges they do exercise agency to the extent that they do, and the nature of structural causes of unemployment. For policy makers to simply view individuals as claimants and as recalcitrants who resist inclusion in the dominant economic mode of citizenship ignores the background to their situation, – the reasons behind a lack of soft skills, poor confidence, lack of literacy and numeracy, and insufficient social and human capital. It also ignores the structural causes of poverty – for example, a lack of jobs, insufficient adjustment support in the face of deindustrialisation, and weak pathways for the unemployed into green jobs that, it is hoped, will be a feature of Scotland’s recovery from the economic crisis

For individuals currently on benefits there are significant risks of moving into work.  The loss of benefits at a time when significant expenditure is required (childcare care, transport, or work clothing, for example) creates an understandable dilemma. Moreover, the realistic prospect of falling back into unemployment (it is estimated that approximately two in every five unemployed people who take up work are claiming JSA again in six months), but having to wait several months to re-qualify for benefits, presents little incentive to take the leap into employment.

Neither does work guarantee of a life free of poverty – to do this jobs needs to be sustainable and pay enough to live on. Any beneficial health effects, for example, are dependent on the nature of work. The growth of part-time and casual work means that being employed does not necessarily equate to a reduction in vulnerability. Unemployed people tend to take up the lowest paid work, the very jobs that are low-skilled, most vulnerable and precarious.  Forcing an individual to take an unsuitable job will be detrimental to the individual and to the employer (possibly deterring the employer from taking on others who have been out of work). The prevailing focus on individuals and the recession has, however, undermined pressure on employers to offer quality jobs. It has become survival at all costs.

Low pay similarly undermines the role of work in reducing poverty.  A Living Wage that reflects costs of living and eradicates in-work poverty is needed to ensure that individuals are sufficiently better off to make work a financially prudent decision.  If the Government wishes to incentivise people to work, efforts to uphold and increase the minimum wage could be a more effective use of public resources than punitive programmes to coerce individuals into work.