Frankonomics

I’ll keep the preamble short and to the point.

Here’s Frank Field trailing a report he’s written for ‘Reform’ which claims that New Deal isn’t working and needs urgent reform…

And what you’ll see below, explains why his report is a load of rubbish that’s based on badly presented and appalling misinterpreted statistics, which – if assessed in their proper context – show that the real position regarding New Deal is precisely the opposite of what he claims and that his proposed reforms would have no impact on recent performance whatsoever, unless it were to make matters worse.

Enjoy.

Ten years ago, Labour was elected on a manifesto pledge to abolish youth unemployment. The New Deal for Young People (NDYP) was designed to ensure that no young person was left to languish on benefit. The report that Patrick White and I have written shows that this, sadly, is far from the truth.In Welfare Isn’t Working, we show that:

• Youth unemployment is higher than when Labour was elected in 1997 (up by 18,000) and higher still since NDYP commenced (up 70,000).

This is a true but far from accurate picture of youth unemployment over the last 10 years because it fails to reference demographic changes in youth (18-24) population over the period.

ONS population data shows that the youth population in 1997 stood at 4.93 million, having fallen over the previous five years – Field starts his time series data in 1992 in the report – from 5.86 million. By way of demographic comparison, the current youth population of the UK is approximately 5.69 million. Youth unemployment has risen over 10 years by 18,000, while the youth population of the UK has increased over that period by around 760,000.

NDYP came on stream in March-May 1998, 12 months after Labour’s election victory in 1997, and as Frank correctly notes, the number of unemployed young people did fall by around 52,000 over the year 1997/8. 1998 is also the year at which the youth population bottomed out at 4,898,000, a fall of 33,700 over the previous year. Over the following three years, youth unemployment continued to fall by a further 60,000, bottoming out at 367,000 in May-July 2001, during which time youth population grew slowly to 5.01 million.

The trend in both youth unemployment and population demographics turned in 2001 and between 2001 and 2007, the number of unemployed young people increased by 140,000 to 507,000, while the youth population grew to 5.69 million, an increase of 680,000.

Looking at the overall time series from 1992 to 2007 cited in the report, youth unemployment as a % of population started out at 12.2% in 1992 (under the Tories), peaked at 13.8% in 1993,and then fell to 9.9% at the time of 1997 general election. From there it fell again to 8.9% by the start of the NDYP and bottomed out at 7.3% in 2001, since when it has risen back to 8.9% in 2007.

From the actual data, once one factors in demographic changes, one learns both that NDYP had its greatest impact in its first three years of operation, when investment in the programme was at highest level, since when it has fallen back to the point (percentage-wise) at which it started as youth population has grown and investment in the programme has been scaled back.

• Not surprisingly, therefore, the pledge to ensure that every young person was either in employment, education or training, has not been fulfilled. Today, there are 1,043,000 “Neets“, a rise of 131,000 since we were elected in 1997, and up 246,000 on the lowest level recorded in the summer of 2001.

Again, if one looks at the time series data and demographic data side by side, the number of ‘Neets’ – ‘chavs’ is more likely to be the colloquial term in most common use these days – follows the same basic pattern as the data for unemployment.

The pivot point at which trends in both data sets turns is 2001 which coincides both with start of a marked upward trend in youth population and with a significant shift in government policy away from tackling youth unemployment to investment in education and health, which followed the 2001 election.

Inactivity rates for 18-24 year olds show a similar trend: up 283,000 on the 1997 level we inherited.

Well yes, Frank. And does this does show the same trend as that for unemployment and ‘neets’? Of course it does – the trends in each of the three data series in question follow the same basic pattern.

Despite the fact that youth unemployment is rising, the proportion of young people on the New Deal is falling. Even so, one in three young people on the New Deal is a retread – they have been there before, some on many occasions. This finding ought not to be surprising. The most sure-fire way of finding work from the New Deal is to take part in the employment option. But the numbers being offered this option have tumbled. The latest figures show that a derisory 2.5% of New Deal participants able to take part in this option.

This is no surprise at all. Not only has investment in NDYP been scaled back over the period from 2001/2 but the contract terms for providers have been tightened considerably over that same period, making participation in the programme much less attractive that it was at the beginning. Moreover, the last 12-18 months have largely been taken up, at the policy level, with plans to redirect and refocus the government’s efforts towards those long-term unemployed on incapacity benefit, shifting the emphasis fuether away from tackling youth unemployment.

Reform is urgent. First, Jobcentre Plus must be involved before young people leave school to try and ensure they have a job lined up at the end of the summer term.

Second, the New Deal needs to begin on day one of unemployment – not six months later.

Third, the New Deal urgently needs decentralising. Each Jobcentre Plus should become autonomous and therefore control its own New Deal programme. The whole emphasis should change from one of ticking boxes (ie, have New Dealers prepare their cv’s, turn up for interviews, etc), to one where local staff are rewarded for landing New Dealers into jobs.

Fourth, as there have been almost 3m new jobs created since 1997, the right of young people to draw benefit beyond a specific time limit should operate in those areas which have shown a consistent increase in the numbers of new jobs.

More of the same will not work.

Field is correct only in his last statement – more of the same will not work.

Everything else, not least his assertion that “reform is urgent” is complete and utter rubbish. In fact the statement that ‘reform is urgent’ makes no grammatical sense whatsoever.

Where shall we start? At the beginning with the suggestion that Jobcentres should be lining young people up for work no soon as they’re out the school gates?

And if getting a job is not in these young people’s future plans?

What if they intend to continue their education? What if they’re not sure exactly what to do and our waiting on their exam results to make a final decision? You know, the results they don’t get until 4-5 weeks after you expect them to join the employment treadmill?

What about New Deal beginning on day one of unemployment… why?

The key data set to understand here is that on page 27 of the report (table 7) which provides time series data for youth unemployment broken down by length of claim (i.e less than 6 months, 6-12 months, 12 months to 2 years and over 2 years).

Again the same observable trends, which follow demographic shifts in population for all but the period from 1998-2001, are evident in this data albeit that they lag behind shifts in population demographics by 12 months – this is function of how the statistics were compiled as the report bases in figures on the period from March to May, before the year’s main ‘intake’ of young people (i.e. school/college leavers) join the workforce (and unemployment register) in September. This intake, therefore, does not come through on the statistics until the following year.

Despite the slight increase in raw figures for youth unemployment over the ten years of this current Labour government, what the data for youth unemployment shows is that in 1997, some 47% of young people were unemployed for at least 6 months, and therefore eligible for assistance from New Deal. This fell to 42% be the start of the New Deal programme in 1998 and continued to fall until 2003, bottoming out at 30%, before rising over the last four years to its current level of 37%. Even allowing for the statistical time-shifting of unemployment trends arising out of the the choice of March-May as the period for which statistics are cited by field, youth unemployment continued to fall for a full 2 years after the populations demographics began to turn significantly upwards, i.e. one full year longer that would be expected simply from the correlation between population demographics and youth unemployment.

This does indicate that New Deal did have a marked effect over the period from 1998-2001/2 and into 2002/3 – which is what one would expect given that changes in policy after the 2001 election would take 12 months to filter through into the system and a further 12 month to impact on statistical trends.

The statistical picture that emerges when one looks at long-term (12 months +) youth unemployment is even more interesting. This started out at around 38% in 1992, peaked in 1994 at 52% and fell back to 37% at the time Labour came to power in 1997. This fell by a further 6% over 1997/8, before New Deal, to 31% and then by a further 17% over the period from 1998 to 2002 to a mere 14%, before creeping back up to its current level of 23%.

Over the full life of the New Deal programme, the youth population of the UK has grown by 15%, while the number of young people who are unemployed for more than 12 months has fallen, as a percentage of total youth unemployment, from 27 to 23% and for those unemployed for more than six months from 32% to 27%. Moreover, at then end of the main period of investment in New Deal, in 2001/2, long term youth unemployment (1 year +) amounted to a mere 14% of youth unemployment as a whole, while the figure for those unemployed for 6 months + sat at 32% (and fell even further to 30% in the following year).

And New Deal had no impact at all?

Leading on from this, Frank’s third point is a complete nonsense.

One would presume, to begin with, that Frank’s use the terms ‘decentralising’ and ‘autonomous’ in this context (Jobcentre Plus) indicate that both have, or are about to become, political euphemisms for privatisation. Now, whether there may or may not be some merit in that is outside the scope of this article, but what is most germane is what Field’s data actually says about the performance of the New Deal Programme in the context of both demographic shifts in population and the manner in which programme delivery and contract payments have altered within New Deal over time.

As noted previously, the demographics for the youth population of the UK bottomed out in 1998 and rose only marginally between 1998 and 2001.

By comparison, the main trends in the fall in youth unemployment from it 1992/3 peak moved in concert with the population demographics until 1998, at which point the main statistical trends in youth unemployment continue to fall past the point at which the population stabilised, only beginning to rise again in 2001, at the same time that the youth population also began to rise dramatically – and in the case of the percentage of young people out of work for 6 months+, the trend actually continued downwards for a full two years after other trends bottomed out and turn upwards.

When one factors in demographic data, what one finds is that New Deal did have a measurable effect on youth unemployment, most significantly over the three years from 1998 to 2001 but with some lingering effects on medium-long terms rates (6 months +) in evidence for a further two years after other trends had turned to follow the population demographics.

This neatly coincides with the period (1998-2001) during which the government made its greatest investment in New Deal, in terms of both policy emphasis and financial resources – tackling youth unemployment was a key theme of Labour’s first term but was given far less emphasis from its second term (2001) onwards, with the focus shifting to investment in education and health before being somewhat overtaken by the invasion of Iraq. Whether Britain received an adequate economic return on its investment in tackling youth unemployment via NYDP is another matter entirely, one that Field conspicuously fails to address or even question is his report.

To make matters more interesting, the period in which NDYP was working was also the period in which the programme was least driven by defined targets and job outcomes and, contractually, recognised and rewarded providers for delivering ancillary outputs, such as basic skills development and providing young people in the programme with an element of what might be termed ‘pastoral care’. The focus of the programme, amongst many of the better providers at the time, was not only on getting young people into employment, but also on providing them with the basic skills, social skills and confidence to make their employment opportunities stick and, where possible, start to build careers.

NDYP has clearly, from the statistics, declined in its effectiveness since 2001, and particularly since 2003 in terms of its impact on medium-long term unemployment amongst young people. And this does coincide with a reduction in the financial resources allocated to the programme, with which came a significant shift in emphasis away from ‘pastoral’ support towards a target-driven culture in which the job outcome isnot only ‘king’ but, following the most recent round of contract changes, has now become the sole basis on which programme providers are paid.

Interesting, eh? The more that NDYP has moved towards Frank’s preferred ‘incentive model’ – payment by job outcome – the less effective the overall programme has become.

Moreover, and this something else that Frank neglects to mention, the shift in contracts towards, and then fully to payment by job outcome alone, has also had the effect of driving many of the local New Deal providers, who were involved in the programme at the outset, out of the programme altogether, particular in relation to the New Deal Voluntary Sector Option (NDVSO does what it says ‘on the tin’ – provides work experience placements and support though VSOs and local charities to help young people in to work).

As a result, delivery of NDYP has become much less local over time, in no small measure due to the very contract/incentive culture that Field is trying to champion, which has driven small local providers out of the market in favour large national organisations like A4E, which have hoovered up millions of pounds in local contracts over the last few years in areas where the local providers have walked away from the programme because it was no longer financially viable for them to continue to deliver it.

(Some might take the view that that’s business and ‘them’s the breaks’ – without going in to the full ins and outs of, especially, local voluntary sector funding regimes, that’s not strictly the case here. Trust me, it’s a little more complicated that it might first appear as the product of a distinctly uneven set of playing fields.)

According to Field, ‘more of the same will not work’ – and I agree, which is why I find his proposals laughable.

What Field proposes in no more than the same target/incentive based contract culture and outcome-driven methodology that been developing since 2002/3 and which came fully in to place at the last New Deal contract round in 2005 – and as Frank’s own statistics show, this purely incentive driven model, which rewards only job outcomes, isn’t working anything like as effectively as the more flexible and more pastorally orientated, New Deal programme that ran from 1998 to 2001/2.

Shifting the contractual basis of New Deal delivery to a purely outcome driven system has changed the overall ethos of New Deal from one in which a significant emphasis was placed on preparing and supporting young people into employment in addition to find them a job to one that emphasises driving them in to jobs as quickly as possible and with the minimum of preparation and support to the exclusion of all other considerations, and the statistics show that its the former approach that worked most effectively.

New Deal had the greatest impact – and bucked the trend in terms of the correlation between population demographics and youth unemployment – during the period from 1998 to 2001/2, when the ethos of preparing young people for, and supporting them into employment, held sway, and reverted back to the general track of population from 2002 onwards, the period in which New Deal contracts became much more target driven and moved towards, and then on to, payment solely by job outcome.

The very system that Field advocates, under which New Deal is driven purely by financial incentives attached solely to job outcomes, is the delivery model that has failed over the last five where, previously, New Deal was a qualified success in the sense that it did reduce youth level of youth unemployment below the prevailing trends set by population demographics – exactly how much of a success it was during this period (or even whether it was a success at all) depends not just on it statistical impact on unemployment level but whether the economic benefits of the programme exceeded the cost of delivery and, if so, by how much.

Field, as you might expect, make no effort to even consider, let alone assess this last characteristic of the New Deal programme.

Ultimately, the most telling statistics in the report – other than the data on the levels of medium-long term unemployment – are to be found on its final page, which gives time series data for the youth population classified as ‘economically active’. ‘Economically Active’ is defined by the ONS as follows:

A person is economically active if they are either employed or unemployed in a particular period – usually the survey reference week. Economically active people supply, or want to supply, their labour to produce goods and services within the production boundary, defined by the UN System of National Accounts. Therefore, economic activity is on the supply side of the labour market framework. Some countries refer to ‘participation’ to mean precisely the same as economic activity.

And conversely…

The economically inactive are those people who are not in employment, but do not fulfil all the criteria to be classified as unemployed.

The number of economically active young people peaked at 77.6% in 1992-3, under the Tories, at the same time that youth unemployment was its highest level in the time series, and has fallen fairly consistently since, bottoming out in 2003 at 74% before picking up slightly to where it sits now at 74.4%.

Field cites this as evidence for the failure of the New Deal programme, and yet offers no data to explain either the fall in levels of economic activity or its causes, indeed in noting that ‘the proportion of young people has fallen as a proportion of the numbers claiming benefit’ borders on the incoherent. Fewer young people on NDYP should push up the figure for economic activity as if they’re not on the programme, they should be classed as unemployed and, therefore, economically active according to the ONS definition – participation in a New Deal programme removes one from the unemployment register and, therefore, from the statistics on economic activity.

What these statistics do show is that amongst young people there is a fairly intractable number, amounting to around 25% of the youth population who are likely to economically inactive at any given time, a figure that will include students in full time education, women with children who do not, presently, work and who are are not currently required to actively seek employment, irrespective of whether they are in receipt of welfare benefits or not, young offenders on remand or serving prison sentences, young people with disabilities and long-term limiting illnesses or who act as carers for parents and relatives with disabilities and, of course, those who cannot find employment, often due to poor basic skills, or simply will not find employment unless more or less coerced into it.

Field makes no effort at all to account for this trend nor to explain it other than in terms of his assertion that New Deal is not working and, in terms of his proposed remedies, appears to believe that the best way to attack this issue is through more incentive driven coercion of the kind that the rest of his data shows to have been ineffective.

The slow but steady fall in the number of economically active young people over the last 15 years suggests that the underlying issues are actually structural and, therefore, largely intractable to the manipulation of employment policy, no matter what incentives one throws at Jobcentres.

A proportion of young people will always be economically inactive no matter what, these being those who stay on in full-time education. The same will be true for young offenders – they will always be a proportion of young people on remand or in prison at any given time. Adjustments in some areas of social policy may have some small impact on this downward trend, increased access to affordable childcare could release more young women into the labour market, as could a fall in the number of young women with children – the latter is, of course, a matter in which employment policy will have little or no impact at all. There may also be some scope for policy initiative to tackle the number of young people who are economically inactive due to disability, long-term limiting illness or because they act as carers – although the extent to which the costs of such policies might be justified in terms of the economic benefits that might accrue from them is a much more difficult matter to assess.

In the case of all those listed above, Fields final proposed remedy – restricting access to welfare benefits in areas where there are limited employment opportunities and limited scope/activity in terms of job creation – is a complete waste of time. Those in full-time education have no need to relocate to find work, and may do so anyway on joining the workforce at the conclusion of their time at college/university. Those with young child, disabilities or caring responsibilities lack even the most basic degree of economic and social mobility necessary to ‘get on their bike’ Tebbit-style.

What is left is a rump of the indigent and often unemployable, whom Field suggests should be forced into becoming what amounts to an itinerant, rootless, labour pool to be driven around the country according to local demand for labour, with all the attendant social consequences that would arise from such a policy.

The trite, right-wing response to this is that of Norman Tebbit, which I’ve already mentioned. Get on your bike and look for work.

In simple economic terms that may seem persuasive, but it complete ignores the social consequence that such a policy would engender – the net social impact of the forced creation an itinerant indigenous pool of labour, driven to relocate en masse by market forces and labour demand would have no less an impact – in terms of social pressures and demand pressures for services, housing, etc. – on those areas into which these young people were driven by the need to seek employment than would a similar influx of labour from Poland or any of the other EU accession state – in fact the impact would be somewhat greater given that, as UK citizens, their entitlement to access services and welfare benefits is considerable greater than than of economic migrants from other countries.

What Field seems to have forgotten, or chosen to ignore, is that with the right kind of incentives in place, labour market ‘mobility’ can be made to cut both ways – rather than forcing the labour pool to relocate to secure employment, the existence of a suitable labour pool in a particular area can serve as an incentive for businesses to relocate to where the workforce is to take advantage of its availability, especially if the right kind of economic inducements for business are on offer.

Ultimately, if one puts to one side the question of those who are simply indigent by choice and preference, the majority of those within this rump of surplus labour will be there by ‘virtue’ of the lack of bankable skills and experience – and more often than not, those skills they lack are likely to be of the most basic variety, literacy and numeracy in particular. These people are, again, the ‘victims’ of structural changes in the UK labour market over which they have no control whatsoever; many, if not most, are those who have little to offer but a strong back and a (hopefully) willingness to work hard in return for a fair reward. They are those who would once have been absorbed into the workforce through the unskilled/semi-skilled jobs provided by Britain’s manufacturing industry, of which very little exists when compared to the last significant period of full employment, which came once Britain had rebuilt following the Second World War.

To some extent one can attempt to address some of the structural issues this raises by way of investment in education – a better educated workforce is better able to take up opportunities for employment in a labour market where the key demands are for skills and knowledge rather than hard graft and muscle. However, the mere fact that we are dealing with human beings of vastly differing talents and capabilities suggests that education alone will not be sufficient to take up the slack in the workforce. There will always be a segment of the population for whom a strong back is all they have of value to offer to employer, and the one question that neither Field, not those like him who advocate exclusive market-driven solutions, seems willing or able to address is the question of whether, in an era dominated by globalisation, the market, acting alone, really can provide sufficient employment for this segment of the population, not just in the UK but across the ‘developed’ world as a whole.

Personally, I would suspect not, being influenced in my thinking to a considerable extent by the knowledge that even the most vocal of proponents of globalisation – the US – are still wont to lapse in open and obvious protectionism when it suits there domestic interests and serves to shore up their internal labour markets.

Field’s analysis of New Deal is little short of rubbish. His statistical data is presented entirely without reference to population demographics over the period, without which the context in which New Deal has operated and it actual performance over time cannot be adequately assess.

In short Field has chosen his evidence to fit the argument he wished to advance, rather than founded his arguments on the evidence, and, when viewed in their full context, nothing in the evidence he does provide supports his prescription for reform which, if adopted, would amount to nothing more than throwing good money after bad.

As to why Field would produce such a poorly crafted and conceived report at this time, the answer to that seems all to apparent in this single statement, which appears in both the executive summary of the report and its body content:

The New Deal programme is very much the Chancellor’s brain child. Gordon Brown’s laudable ambition has been to make life on benefit thing of the past.

No vendetta like an old vendetta, eh?

Interestingly, one of the comments under his article on CiF suggests that in the event of the Conservative victory at the next election, Field should be offered the opportunity to cross the floor and work on the development of Tory policy.

Tell you what – why wait? If the Tory Party is so enamoured of Field, then they can have him now, the sooner the better in fact.

8 thoughts on “Frankonomics

  1. great stuff, Fields intervention worried me until I saw him on the GB hatchet job on channel 4.

    Tories do like him, I guess this is the converse of Ken Clarke being popular amongst Labour members. I think he is very persuasive because he is so soft spoken and polite. His audience finds it difficult to challenge him as it makes them feel they are mugging an OAP.

  2. Frank Field Is Tory Under Labour Colours Shocker!

    Great stuff indeed- but can we file this along with Pope is Catholic news. No change for our Frank from the kind of rubbish that saw him fired as Minister for Welfare all those years ago.

    And cf. Sion Simon.

  3. True, Frank is running true to form but then then enjoyment in writing this lies not in pointing out the obvious but in dismembering his analysis of New Deal.

    This was the man who was going to modernise the welfare state, and yet he cannot present an accurate evaluation of New Deal’s performance from his own statistics.

    When you think about it, Field and Letwin would make an apt pair of bookends for Cameron – the illiterate to my right, the innumerate to my left.

  4. Phew!

    Thanks D-Squared – it’s a relief to know that I got the basics right and haven’t made an arse of myself.

    As might be obvious from the title – there’s more than hint of influence from Levitt’s Freakonomics in this. Had I not read it, I might not have thought of going after the population demographics as means of checking the validity of Field’s arguments.

  5. I grew up in Birkenhead (Fields patch) and coming from a Labour supporting family was always amazed by the way people spoke so glowingly of him. He always came over to me as a Tory.

    Many years later the CLP tried to have him removed as a PPC (this was in the Kinnock years shortly after (or maybe during) the removal of Hatton and his Militant cronies from Liverpool).

    I knew the people responsable in the Birkenhead CLP where not Militant. They were left of the party, but not one where members of Militant.

    They had their memberships withdrawn and Field stood yet again.

    The sooner Frank Field finally declares his true colours, the better as far as I am concerned. Good riddance.

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