Social security in a changing labour market (IV): big challenges, big opportunities

17 November 2016

The history of Tower Hamlets tells the story of the UK’s economic transformation in the latter 20th century. Once a shipping gateway to the world, the borough has seen the smokestacks of freight-liners give way to the skyscrapers of the global financial sector. This fundamental shift in the structure of the macroeconomy has had profound consequences for the labour market.  Previously, full-employment and interventionist wage policies guaranteed many people a ‘job-for-life’. But in the 21st century, citizens are increasingly required to combine high skills with the adaptability to undertake multiple careers in a lifetime.

The ongoing challenges of job insecurity, income inequality and low productivity all suggest the UK workforce is still struggling to adjust to this new economic reality. For example, although Tower Hamlets has the fifth-highest jobs density in London, only 14 per cent of these opportunities are currently filled by residents. This is perhaps unsurprising when you consider that 12 per cent of our population have no qualifications, putting many professional services jobs in Canary Wharf beyond reach.

The causes of such economic exclusion are complex, but part of the problem relates to a national failure to articulate the basic purpose of our social security system. Is it a safety net to provide subsistence for those who fall on tough times, or is it part of the ‘social infrastructure’ that helps workers adapt to the shifting demands of the labour market? A lack of clarity on this difficult question has, historically, contributed towards short-termism within the UK’s ‘active labour market’ policymaking. As recently noted by the RSA, there have been over 20 different national programmes tackling labour market issues since 1991.

Whilst Universal Credit is clearly an attempt to overcome this, benefits consolidation alone is just a partial solution. Although Universal Credit should help smooth people’s transition into and out of work, to be a truly effective ‘means to an end’ it requires underpinning by employment support interventions that respond to claimant need. This has not always been the case in recent years. For example, despite chronically high levels of long-term, health-related unemployment, limited specialist support within the Work Programme has resulted in just 10 per cent of new Employment and Support Allowance claimants achieving a job outcome.

There is nothing inevitable about this failure, and our experience at the epicentre of the country’s transition from industrialism to professional services suggests social security could play a greater role in building a more inclusive economy.

Devolution of powers and budgets to local authorities over components of social security would enable more efficient targeting of resources, by harnessing our detailed knowledge about population need and close engagement with local employers. For example, the Tower Hamlets ‘Raising Aspirations’ pilot took a long-term, holistic approach to helping those furthest from the labour market become job-ready, and 75 per cent of participants saw their barriers-to-work reduced.

Likewise, improved integration between services is essential. There is little reason for having multiple front-doors into the employment support system; it creates confusion for users and results in duplication of provider effort. Central government should be working with local government to redesign programmes so they are easier to navigate and better coordinate interventions to address the wider determinates of unemployment. This is why councils must be fully engaged in commissioning the Work and Health Programme.

All stakeholders want a social security system that works. To achieve this we need to embed social security into a long-term economic strategy that recognises the role of local government in driving participation, productivity and prosperity. This would allow us to address the causes of economic exclusion, rather than simply managing the symptoms.

Will Tuckley, Chief Executive, Tower Hamlets Council

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