Making the labour market work better
A Capita/DfES case study

Page 1: The New Deal

Unemployment is one of the worst social evils. It saps the self-confidence and motivation of those it affects directly and has knock-on effects for all members of society. By under-utilising labour, the wealth and economic well-being of the country is reduced. Unemployment can also produce poverty and social exclusion.Taking policy measures to reduce unemployment should therefore be high on the...
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Page 2: The nature of the labour market

In the labour market employers have to compete with each other for human resources. Workers 'supply' some of their time and effort to organisations for a wage while the organisations 'demand' labour in order to produce goods and services. The labour market plays a very significant role in resource allocation. The interaction of demand and supply determines the price of labour which is known as the...
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Page 3: Changes in the labour market

The demand for labour is what economists term a derived demand. Generally, employers do not want labour for the sake of hiring labour, rather, they hire employees to make goods and services which are demanded by final consumers. In simple terms, we can say that the demand for labour is derived from the demand for goods and services.The sale of goods and services is highest when the economy is...
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Page 4: The costs of unemployment

Unemployment has several disadvantages. It has an enormous social cost for individuals and communities.It leads to a considerable waste of resources. For example, for approximately 20 years prior to the Second World War, unemployment averaged at least 10in this country with idle machines, factories and employees.Rises in unemployment lead to falls in consumer spending. A small fall in consumer...
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Page 5: Why has unemployment increased?

A number of different explanations have been put forward to try and explain the rise in unemployment since the 1970s. Not all of these explanations are valid and no single one fully explains the growth in unemployment.1. GlobalisationBetween the 1950s and the 1990s, there was a massive increase in the movement of capital around the world due to the liberalisation of trade i.e. a reduction in...
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Page 6: Policy making for employability

Most people would agree that in a modern society, it is essential to help all citizens gain meaningful and useful employment with long-term evelopmental opportunities. Governments have a key role to play in creating the framework which supports existing market structures and removing any weaknesses or faults in current market arrangements.Traditionally, the UK has had very few labour market...
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Page 7: The nature of the problem for young people in the labour market

Young people face particular difficulties in the labour market. On entering the labour market, some young people find it difficult to obtain a secure foothold. Their lack of experience and limited skills means that employers can be reluctant to take them on and incur the costs of training them. In January 1997, 18-24 year olds made up a quarter of the claimant unemployed. Young unemployed people...
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Page 8: Unveiling the New Deal

In July 1997, the Labour Government unveiled its rationale for a New Deal by emphasising a new approach to welfare reform in this country:'In the new economy....,where capital, inventions, even raw materials are mobile, Britain has only one truly national resource: the talent and potential of its people. Yet in Britain today one in five of working age households has no one earning a wage. In place...
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Page 9: The New Deal for young people

There are a number of New Deals aimed at different groups of people disadvantaged in the labour market. In this case study, we will focus on the New Deal for Young People. The New Deal is for those aged 18-24 who have been claiming Jobseeker's Allowance for six months or more. It started in January 1998 in 12 'pathfinder' areas before going nation-wide in April 1998.The New Deal sets out to...
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Page 10: The Gateway

Young people who enter New Deal will begin by spending up to four months in the Gateway.On entering the Gateway the young person will be allocated a personal adviser who will help and support them throughout their time on New Deal. They will discuss their needs, ambitions and options and agree their New Deal Action Plan.Many young people will already have good employment prospects, having the...
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Page 11: The four options

For those young people who don't leave the Gateway for jobs advertised by employers in the normal way, the New Deal offers access to four practical options to help the young person develop the skills and experience necessary to gain and keep a job. These options are:A job with an employer for which the employer will receive a subsidy of £60 a week for six months. Training will always be...
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Page 12: Follow-through

In order to build on the time, learning and experiences gained, continuing support will be provided during and after the four options where appropriate. The level of support will vary depending on progress and needs and its main objective will be to help individual young people to find and retain employment. The personal adviser will play a key part in providing this support.
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Page 13: Who provides New Deal?

New Deal is being delivered by the Employment Service, national and local companies, local authorities, voluntary organisations, education and training providers (including TECs and LECs) who work together to provide opportunities in their local area.
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Page 14: Monitoring the success of New Deal

It is too early to assess the success of these ambitious programmes but the government is aware of a few possible problems which it aims to limit. The programmes may involve spending money on people who would have found jobs on their own anyway. In economic jargon, this is a dead weight loss which represents a waste of government resources. In addition, new workers may merely displace existing...
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