The New Deal
25feb98a: Kim Swales: The New Deal - Smoking without inhaling.
The UK has a schizophrenic attitiude to labour subsidies.
Whilst politicians deride labour subsidies as not providing
proper jobs, they are, in practice, addicted to them. Over
the last two decades numerous schemes have been introduced
that subsidise labour: YOPS, YTS, Employment Training,
Employment Action, Action For Work, amongst others.
Unfortunately these schemes have been temporary, selective
and narrowly targeted to specific disadvantaged groups.
This has made them difficult to administer and unlikely to succeed.
They may have been cheap in terms of exchequer cost but they
have been expensive in terms of real effectiveness. However,
the politician's intuition is correct about the positive
impact that labour subsidies could make, but labour subsidies
should be introduced in a much more systematic manner. At
present, like Clinton, we smoke but don't inhale.
Is the New Deal any different?
08mar98a: Val MacLeod: Neighbourhood New Deal groups.
People who are unemployed and living in areas of high
unemployment find ways of living which surprise outsiders.
New Deal efforts to change these patterns must be
As a community worker familair with the 1970 Community
Developnmnet Areas and having worked with groups of
single parents, I see that in managing their everyday life
people develop social skills. These skills, (for example helping
each other when starting a new job) are important assets
in any new situation.
New Deal groups based on neighbourhoods would be expensive.
But such locally based solutions are necessary to address
the problems of working parents caring for children.
With 70% of child care costs found and work opportunities
available, parents beginning work need support in leaving
their children with other carers. Parental guilt and childrens
distress, transport, school meals and benefit problems could
well be eased by the chance to talk in a neighbourhood group.
Before and After School Clubs now add to the child care
infrastructure of relatives, schools, nurseries and childminders
and this could be extended if New Deal opportunities were to
have a flexible time structure.
If work and school hours had starting and finishing times from
8.30am to 3 pm and l0.30am to 5pm then neighbours could share
out childcare which could be arranged in a neighbourhood centre.
Similarly worksharing posts could be designed which allowed
two people to share the same job sharing the care of their
children. These could be advertised at the neighbourhood New
28jul99a: The Royal Economic Society: Press release for 26th July 1999.
How Effective Are Active Labour Market Policies
Like The New Deal?
Do active labour market policies like the New Deal programme
in the UK and the Workforce Investment Act in the United
States actually increase the wages or employment of the
people they seek to help? According to new research by
Professors James Heckman and Jeffrey Smith,
published in the latest issue of the Economic Journal,
programmes of this kind make almost no difference to the
level of unemployment or the wage rates of those gaining
employment. What is more, many official evaluations overstate
the effectiveness of such policies because they assume
unrealistically that nothing would have happened without
How should we evaluate the effectiveness of programmes like
the UK's New Deal and the US Workforce Investment Act, which
provide job search assistance, job matching services and
skills training to people looking for work? Heckman and
Smith argue that the trick is to figure out what would have
happened to unemployed people if they had not participated.
At first glance, it seems natural to think that nothing would
have happened - they would have remained unemployed. But
using unique data from an experimental evaluation of the Job
Training Partnership Act (JTPA) programme in the United
States, the researchers reveal that this natural assumption
In the experiment, people who applied to and were eligible
for the JTPA programme were assigned at random to two groups.
One group was allowed to receive the programme's services
and the other was excluded from them. The excluded group
indicates what would have happened to unemployed people
had they not participated:
These findings shed new light on the high placement rates
often cited by programme officials - placement rates that
implicitly (and incorrectly) assume that participants
would not find work without the programme.
- In contrast to the intuition that without the programme,
participants would remain out of work, the JTPA data reveal
that the unemployed and the disadvantaged find work almost
as well - and for male youth, better - without the programme
as with it.
- For most groups, the difference in employment rates is
just a few percentage points.
- Differences in average earnings are similarly small.
Heckman and Smith also show that many traditional approaches
to evaluation fall down because they make incorrect assumption
about what would happen to people's earnings if they did not
participate. Many evaluations of government programmes
compare the earnings of participants just before and just
after participation and attribute the difference to the
The experimental data reveal that participants experience
a 'dip' in earnings prior to the programme, but that their
earnings would rebound and grow beyond pre-programme levels
even without any programme services. Official evaluations
falsely attribute such earnings growth to the programme
and thereby produce overly-positive estimates of the effect
of the programme.
'The Pre-Programme Earnings Dip and the Determinants of
Participation in a Social Programme: Implications for
Simple Programme Evaluation Strategies' by James Heckman
and Jeffrey Smith is published in the July 1999 issue
of the Economic Journal.
Heckman is Professor of Economics at the University of Chicago;
Pack is Professor of Economics at the University of Western
02aug99a: Kim Swales: New Deal web site shoots government in foot.
The heavyweight paper by Heckman and Smith mentioned in the
previous posting is not the only one to show that training schemes
like the New Deal do not affect jobless levels. Another one
by Keith Marsden writing for the Centre for Policy
Studies points out that France and Germany spend much more than
twice as much as the UK on job schemes but have much higher
But even before these were published, it was clear that someone
in government knew the score. A careful look at the Department of
Education and Employment's web site gives the game away
(United Kingdom Employment Action Plan)
. This claims 70,000 young people have moved
from the New Deal into sustained jobs. With the "64,000 on other
education, training and work experience options" the New Deal
has succeeded in removing about half its entrants from
Figures also published in the action plan suggest
that before the New Deal about half of people unemployed
for six months (who would now be New Deal entrants)
left unemployment in the following six months.
So according to the government's web site, the New Deal
does not seem to have made any difference.
03aug99a: Webmaster: European coordination or european coincidence.
It has been pointed out to faxfn that most other european
governments to have similar policies.
The 1999 Action Plans for Employment have remarkable
similarities. Did Allan Larsson, Director General of
the employment directorate organise the hymn sheet?
(The view of a swedish economics student passing through St James Park.)
Or was it Commissioner Flynn? Or is this evidence of New Labour's
new influence in Europe?
Faxfn has been asked to investigate. Please help.
07aug99a: Joe Pattinson: Still more hills to climb.
I was out of work and was threatened with being sent to the Malton
Bacon Factory. Since I did want to do Art & Design I signed on for
a course. It got me what I wanted and it made DSS happy because
I was technically off the unemployment register as being trained.
It also made Job Agency running the scheme for the DSS happy
because they got their commission.
They will let you go on any course you want and pay for it,
whether it's any good or not, as long as it's under twenty
hours a week. But you must be available for work.
I have done five years of foundation art and two years of
counselling. I did enjoy the courses and learnt from them.
However, I still have to do more courses in order to get
a job. I am going to do a diploma in Gestalt Counselling,
another four years part-time. I plan to use exhibitions
and art to fund it.
Since I was signing on fifteen years ago there has been a
change. Then, you went and signed on - few questions
asked. It is different now. If you don't have a plan,
the Job Centre will make one for you. Doing nothing is
not an option.
Although I still have more "hills to climb", in retrospect,
it has kept me focused on my objectives. For many on the
scheme this is not true but I do come from a middle class
Politically and economically the system we live under is
daft: people like me are working hard and training to find
our place in the job market and
others are in jobs servicing the system working excessively
to the detriment of their health and family. But, in my
cynical moods, I do look forward to the increased
opportunities for counselling.