Welfare to work
A Department for Education and Employment case study

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Page 2: Unemployment and the economy

Economies change over time. Firms come and go, industries rise and fall, new jobs are created, old ones disappear. Some areas flourish, others decay. Throughout all this, people try to stay in work. Many succeed, but some don’t. The challenge to them and to the government is to find them another job before they lose heart, stop searching, and are lost from the labour force.

Over the past twenty years, successive governments have looked to improve the way the labour market works. For people to obtain jobs, they must know that a vacancy exists. They also need the education and training that the vacancy requires, so governments have looked to improve job advertising and job training.

That is not enough, however. People need to feel motivated about taking a job. Being employed has to be made to look attractive and rewarding. Guaranteeing a minimum wage has a part to play, but so does reform of the tax and social security system, so that people keep more of the money they receive as a result of being employed rather than unemployed.

Unemployment has been falling steadily since December 1992. The proportion of people of working age who actively seek work is tending to increase, so if unemployment is not to rise, the number of jobs available has to increase. Over the past ten years, the UK economy has continued to grow, new jobs have been created, and the number of people with a job is currently at a record high. This is a significant achievement and a major contributor to citizens’ welfare. Some problems remain, however: 

  • There are pockets of low employment and high welfare dependency in some, mainly urban areas.
  • The number of households in which nobody has a job has, until recently, tended to rise.
  • Opportunities for young people to find work vary widely from place to place.

These trends suggest that the benefits of a growing economy are not being evenly distributed. A significant group of people and households are ‘missing out’ on the job opportunities and higher prosperity that an expanding economy has brought to many others. Their plight is a serious challenge for policy makers.

Department for Education and Employment | Welfare to work