Labour market 2013: Prospects for Scotland and the UK Tony Wilson Centre for Economic and Social Inclusion

The story so far...

Deep and lasting recession...

Matched by big falls in employment

Employment rates in local authorities Employment rate - aged North Ayrshire61.5 Glasgow City63.5 Clackmannanshire65.8 Inverclyde66.1 South Ayrshire66.4 East Ayrshire66.8 Dundee City67.2 West Dunbartonshire 67.9 Renfrewshire68.0 Dumfries and Galloway 68.2 Eilean Siar68.2 North Lanarkshire68.8 Fife70.4 Stirling70.6 Falkirk71.5 Argyll and Bute71.6 Edinburgh, City of71.6 West Lothian71.7 South Lanarkshire72.0 Scottish Borders72.1 East Renfrewshire72.5 Angus72.6 East Dunbartonshire 73.0 East Lothian73.1 Perth and Kinross74.8 Midlothian75.2 Aberdeen City76.1 Moray78.0 Aberdeenshire79.2 Highland80.0 Orkney Islands80.4 Shetland Islands81.9 Scotland70.7

Unemployment up – for men and women

JSA up more in areas where it was higher

Numbers on ESA still dwarf JSA, LPs

Looking at disadvantaged, some gaps wider

Long-term unemployment up strongly

Young people: 18% not in education or learning

With 12% of 16-19s “NEET”

Skills – more with no quals, and high quals

Scottish employer views on skills Almost half said would have provided more training if they had been able. Lack of funds most common reason. Very small firms have higher rates of vacancies, hard-to-fill vacancies and skill shortages, less likely to provide staff training People doing jobs that require skills are more likely to be deemed not fully proficient; less likely to receive training Where proficiency is lacking, mainly because of weaknesses in soft skills such as planning and organising, customer handling, problem solving and team working

New vacancies fallen, and still broadly flat

Vacancies not keeping up with new claims

How has JCP done against this backdrop?

Some evidence that off-flows have declined for Work Programme groups

Looking ahead...

Back in 2010, consensus was return to trend growth...

Since then things have got worse – new forecasts are much weaker...

And those now look wildly optimistic

Scotland picture (Working Futures 2012) Employment projected to grow only half as fast up to 2020, more slowly than for the UK Employment growth projected to be fastest in Construction and private sector services ; employment is projected to continue to contract in Manufacturing Business and other services sector is projected to be the largest industry sector in Scotland in terms of employment in 2020 Broad shift in occupational profile away from lower-skilled occupations towards higher-skilled occupations projected to continue, with 50% of jobs to be held by people holding higher level qualifications by 2020 Vacancies from ‘replacement demand’ (replacing people who retire) projected to be greater than vacancies from net growth in employment

So “in the teeth of an economic gale”... Most radical welfare reforms since modern welfare state Changes to: Eligibility – e.g. IB/ ESA migration, HB changes Generosity –HB changes, UC premia, childcare Delivery – CTB and SF localisation, UC

Already affecting families across Scotland Incapacity Benefit reassessments – ongoing to 2014 Benefits now uprated by Consumer Prices Housing Benefit: Lower uprating of Local Housing Allowances LHAs tied to cheapest 30% of housing and capped 60,000 tenants lose on average £40 per month Tax credits changes: Increase in working hours needed to qualify for WTC Cuts to amount of childcare costs met

Still to come: April 2013 Overall welfare cap – affecting households from Aberdeen to West Dunbartonshire Penalties for “over-occupation” of social housing –94,000 social tenants will lose £11 per week Social Fund and Council Tax Benefit localised Rollout of Personal Independence Payment begins – April/ June 2013 to 2016

From October 2013 – Universal Credit Combining out of work benefits, tax credits, housing benefit Monthly payments, “digital by default”, head of households Improved financial incentives at low hours – matched with “in work” conditionality Changes to entitlements – no tax credits disability premium, can’t combine caring and ESA elements

Key challenges...

Increasing and meeting demand People stay on JSA for less time than UK – moving people into jobs quicker helps prevent long-term unemployment Jobs need to be created quicker – vacancies are not keeping up with the rest of the UK Too many people have no or low quals – improving skills base needs further efforts Scottish young people more likely to be NEET – improvements needed to connect young people to work and training Women’s employment has been hit hard in the last year – what more can be done to return to traditional high levels of women’s employment?

Supporting those furthest from work Needs to be greater focus on tackling long-term unemployment – stopping a cyclical problem becoming structural Off-flows for long-term unemployed have deteriorated –may suggest Work Programme is under-performing (due to wider economy)? Local authorities with highest unemployment have seen larger rises – with gaps between areas increasing Gaps between overall employment rate in Scotland and the rate for disabled people, ethnic minorities and those with no quals have widened – more effective targeting is needed to prevent exclusion 57% of all out-of-work claimants are sick or disabled – higher than UK but reducing at a faster rate Inactivity is well below the UK – a higher proportion of Scots want to or need to work

Welfare reform Mixed evidence on whether Scotland fares better or worse than UK, but either way the challenges will be huge. Up to 170,000 households will receive less and will be substantial changes in how benefits are paid, services accessed and support delivered. Per capita spending on out-of-work benefits in Scotland is just above the UK average and considerably below London – but it is Employment Support Allowance and (still) Incapacity Benefits that cost Scotland more Proportionately more children in families with ‘material deprivation’ than in the UK, and reducing child poverty is likely to become more difficult over the coming years.

Tony Wilson Policy Director Centre for Economic and Social Inclusion