What happens when 'workfare' replaces paid workers?

[janieluk]

Originally published at Welfare to work, web stuff, other. You can comment here or there.

Apropos of this article in the Guardian, I've been musing over the impact of mandated work experience placements on the labour market, specifically those that end up replacing paid jobs.

Comments

[janieluk]

Hullo! Your first point sounds like you're talking about structural unemployment, i.e. the idea that the reason unemployment's high might be that people have the wrong skills (or are in the wrong places). There are always going to be some professions that have difficulty finding enough people. Parts of the IT industry are the obvious ones at the moment. Evidence is that this imbalance isn't a major cause of current unemployment levels though.

Breakdowns by profession are pretty weird, for much the same reason that the lists of professions on most websites are fairly weird and don't usually have your job title. The usual thing in economic reporting is to break down by major industry category or 'level' of job, but neither of those is great. Recruitment agencies / websites are probably the best resource for this kind of information, possibly REC if it carries out surveys.

Retirement age - IANAeconomist, but I think that in theory, more people joining (or staying in) the labour market doesn't reduce the ability of other people in the labour market to find employment. The lump of labour fallacy applies. Having said that, I'm scratching my head a bit over how this fits with a labour market where the number of jobs actually is a limiting factor. For what it's worth, the actual change in when people become economically inactive will likely change rather more slowly than the legal change. It's always been fairly fuzzy round the edges anyway.

[abigailb]

Structural yes - I would even wonder if current levels of unemployment aren't the natural levels, and the previous figures only achieved because of the bubble.

REC seem to charge corporate amount for their reports. ONS have lots of stuff but because it doesn't distinguish between casual and skilled work in the same sector it is frankly bobbins.

Googling for "skills gap" provides some results - shortages of electricians, plumbers, chefs - these are not the sort of hyper-casual things I'm seeing in mandatory workfare placements, but more suited to apprenticeships. I wonder if the massive expansion of university education hasn't results in a lot of people becoming reluctant to write off their degree and do that sort of thing. Meanwhile; there's also a shortage of maths/science/engineering graduates... So we're putting up the fees across the board and closing down chemistry departments.

[janieluk]

These two slightly US-centric posts by Paul Krugman lay out what seems like a reasonable way of telling if the cause of current unemployment is structural. The natural level of unemployment is way beyond my level of understanding, though I'd be tempted to say that as long as there's stuff that needs doing that isn't being done, then there's room for more people to spend time doing that. It may bump into the lump of labour fallacy again.

[abigailb]

is there stuff that needs to be done that isn't, though? Retail jobs and stuff like that are basically just busywork once you've reached a certain shop density...

[janieluk]

I wouldn't mind the country being done up a bit. There's a whole load of infrastructure that could be upgraded, a lot of people living in fairly crappy conditions that could be improved, big long queues for various healthcare interventions, and so on. If there's 'natural' unemployment due to lack of jobs doing these things then that's presumably an addressable inefficiency in the economy given that there's stuff out there to do and people sitting around who could be doing it. If it's because not enough people have the right skills then that's structural, but that only applies if the unfilled jobs are there in the first place. I guess what I'm saying is that as long as there's stuff out there to do, it doesn't make sense to say 'well, that's just what the employment rate *should* be'. I'm also assuming you're not referring to 'full' employment, which happens when everyone who can is working except for those who are reskilling, briefly inbetween jobs, or incapable of work.

[abigailb]

You are absolutely right, but nearly all of that requires state spending, though, doesn't it? Whereas the government are expecting the private sector to supply the jobs.

[janieluk]

Damn! Outed as a Keynesian! :p This article about NAIRU has a counterargument to government demand management, to which there are counter-counterarguments etc. Surely the idea of a permanent natural rate that you posited implies market failure though? *shrugs* I should get some lunch and buy a kitchen.