Making the labour market work better
A Department for Education and Employment case study

Page 1: Introduction

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: Changes in the 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 3: Why has unemployment increased?

A number of different explanations have been put forward to try to 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. Globalisation Between 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 4: The nature of the problem

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 mean 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 5: 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...
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Page 6: Conclusion

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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