ONS Productivity Figures Suggest a Different Labour Market Policy is Needed

Data released by the ONS this week show that the UK economy has fallen behind on productivity when compared to competitors like the US, Germany and France.  To those well versed in these statistics, it is old news – they always show that the UK has a productivity gap with these economies. What is new, is that during the 2000s some of that gap narrowed, but since the onset of the current economic crisis in 2008, that gap has again been growing.  The big problem for the UK is that employers in this country have held onto labour in the context of falling output.  Ofcourse, in may ways this is good.  It has helped keep the labour market – employment and unemployment – in a better shape than it would otherwise have been.  The downside of this is that workers have accepted stalled wages and falling standards of living to square that circle.

The implications of this in the longer term, pose significant challenges for labour market policy.  At the Work Employment and Society Conference a week or so ago I gave a paper which argued that the implementation of Active Labour Market Policy across Europe, and particularly in  the UK, was stuck in the early 1990s.  My paper suggested that the way that Public Employment Services manage their activities is excessively focused on discipline and ‘activation’ – forcing the unemployed to apply for any job.  I suggested that instead they should reorient themselves to focusing on the European Commission’s Public Employment Services Strategy which emphasizes the importance of ‘Transitional Labour Markets’.  This approach, following the ideas of Gunter Schmid, suggests that governments should use labour market policy to encourage those who can to apply for work now, while seeking to upskill others and even recognizing that there are points in the lifecycle when employment is not the best option, or that it should be combined with other responsibilities such as caring for children and other relatives.

Such an approach would though need to break with the idea of pushing competitiveness down to the individual level – something I have blogged against here before.  The lessons from my paper and yesterday’s ONS data is that labour market policy needs to change.  This is particularly so in the UK, where the current emphasis on discipline and activation simply provides employers with a ready supply of cheap, sometimes free and state subsidised labour, that they have little or no incentive to retain, train or value.  In that context, if a recovery of output were to emerge, employers could simply employ more cheap labour and avoid the costs of capital and productivity enhancements. The result would be that the UK economy would retain its comparative low skill equilibrium.

In place of this, labour market policy needs to shift away from disciplining the poor and toward a holistic view of what is good for households and good for the economy and society at large.  That will mean working to increase skill levels, combatting poverty (as a right and not an uncertain potential reward for competing for low quality employment), and that economic problems are to be found not just on the supply side of the labour market – but on the demand side too. I’ll be making some of these points at the Public Employment Services Dialogue conference in Brussels in two weeks time.  I hope those assembled will listen.

Performance Management in Public Employment Services (again): Boring? Well not really!

So I’ve spent today presenting to an assembled group of national representatives of Public Employment Services from across Europe.  15 member states and the Commission were present.  I’ve done this before, and most people’s response when I mention it?  Well a yawn to be honest.

So why do I say this is not really boring?  It certainly sounds it.

Ultimately it is interesting because performance management in the delivery of public services more generally, resolves the tension that often exists in high level strategies, political rhetoric and speeches and the like.  Put simply, if you want to see what the real priorities are, you have to dig deeply, engage with detail and work through who is being incentivised (and occasionally discouraged also) from doing what.

Public Employment Services (PES), or Jobcentre Plus in the UK, are illustrative of this.  There has been much furore in the media lately about how the detailed performance management system (outcome payments to private providers) has led to the use of work trials (lamented as ‘slave labour’ by some) and wage incentives to subsidise poor quality employers.  But the agenda of ‘activation’ has been around for a decade or more and driven largely by performance management regimes that communicate messages to individual Jobcentre staff about who they should prioritise among the unemployed and how they should ‘help’ them.

The debate over activation interventions such as work trials and wage incentives is complex andI don’t want to go into that here.  Suffice it to say that it is less simple than either proponents or naysayers would have us believe.  The point I want to make here is that the way in which organisational management structures work is not just a technical issue – it is a political, economic and social issue too.

This was the basis of my presentation today to the participating PES.  Performance management should be seen as a governance process which needs to be inclusive (incorporating social partners and other stakeholders) and integrate a variety of evidence and knowledge, including evaluation results to better inform a discursive and deliberative governance process.

Time will tell whether this message will be heeded but it is essential to socially just and economically sustainable outcomes.  Labour market governance is crucial to the achievement of Europe 2020 strategies (or any alternatives that might emerge from the emphasis on Social Innovation – my preference).  PES performance management will be central to this, and from what PES and Commission officials alike were saying today, suggests that I am not alone in thinking this.

Watch out for my report coming from this process, which I’ll summarise here. But in the meantime, have a look at some of the research that this is all based on:

Nunn, A. (2012). Performance Management in Public Employment Services. PES-2-PES Mutual Learning Programme. Brussels, European Commission.

Nunn, A. and D. Devins (2012). Process Evaluation of the Jobcentre Plus Performance Management Framework Norwhich, HMSO.

Nunn, A. (2010). Performance management and neo-liberal labour market governance: the case of the UK. Reframing Corporate Social Responsibility: Lessons from the Global Financial Crisis. W. e. a. Sun, Emerald.

Nunn, A. and S. Jassi (2010). Jobcentre Plus Jobseeker’s Allowance off-flow rates: Key Management Indicator Post-Implementation Review. Norwich, HMSO.

Nunn, A., T. Bickerstaffe, et al. (2010). International Review of Performance Management Systems in Public Employment Services. Norwich, HMSO.

Nunn, A., S. Johnson, et al. (2007). Working with JOT 18 months on: Qualitative research in former Option 1 Pilot Districts. DWP Research Report 409. Leeds, DWP Corporate Document Services.

Nunn, A. and S. Kelsey (2007). Review of the Adviser Acheivement Tool. DWP Research Report 453. Leeds, DWP Corporate Document Services.

Nunn, A. and Johnson, S. (2007). Job Outcome Target national evaluation. Leeds, Corporate Document Services.