Changes in the UK Labor Market Programs - Essay Example

Changes in the UK Labor Market Programs Introduction Recent changes in the global economics have affected the current generation negatively. Several states in the globe, especially in the developed nations like United States, United Kingdom, Germany and Australia, have gone through tough the economic crisis between the year 2007 and 2009. The crisis was a major financial crisis in the 21st century, which reduced the Gross Domestic Product of many countries. Many financial institutions were affected with threats of collapsing due to inadequate funding. Many central banks had to step in to assist the institutions in meeting their financial needs. The major economic downfall of 2007 to 2009 led to scarcity of jobs for new people in the labor market. Ten years before the major economic crisis, that is, early 2000s many developed countries had steady achievement in terms of economic growth including large growth in job opportunities, but due to the economic crisis all these achievements have stalled. Millions of people have no place to work in the current tough economy. The crises have severely affected the public financial gains. The financial crisis has created many challenges to the European countries in the labor market and especially the issue of unemployment. Another challenge brought by the economic crisis include attempts to meet the European Union targets of economic growth, which may require the countries to retrench people to cope with the economic recession (Pattison, 2012, p. 466). The discussion paper involves the use of existing academic materials to determine the effects of the 2007/2009 financial crisis. It explains the actions that the governments in some countries such as USA, Australia and the UK have taken to reduce the effects of the financial crisis on the labor market. The strategies adopted and their rationales to assist the unemployed population are also discussed in the paper. Discussion Performance based contracting, which is a method same as payment by results, was used in the United States. The strategy led to development of new policies that decentralized funding and purchasing power to network of private companies. The policies emphasized on performance outcomes through financial incentives that motivated the staff of the agencies. The Department of Labor set the performance targets to achieve annually and the outcomes determined the funds saved from the investment. The outcomes also included delivery of employment services with contract periods of more than six months. It also emphasized on training the employees on work skills, which helped them to increase their competency in the labor market. Performance bases contracting improved the employment rates of people in all the states of the United States (Finn, 2010, p. 292). The United Kingdom (UK) government adopted the strategy used in the United States to develop methods that maintain sustainable employment while maintaining high value for the taxpayer money and growth in the economy. The innovation involves the concept of paying the employees basing on the output of their work. Payment based on the results is one of the advanced forms of performance management, where the service providers are given revenues based on the outputs and outcomes rather than using the procedures followed. The method gives the service providers motivation and incentives to perform and achieve maximum outputs (Petrongolo, 2013, p. 27). Hill, (2013, p. 200) argues that the design of payment based on results transfers the economic risk of providing effective services to the unemployed and vulnerable group from the public sector to other major service providers and their networks operating in the private, voluntary or public sectors. The organizations are given their revenues when they achieve the target results defined by the state such as giving an unemployed people into sustainable work contracts for approximately two years. The model emphasizes responsibility on the results to ensure high value for money from the taxpayers. The design diverts the role of the state from direct provision of major services including commissioning and management of the service delivery. The strategy worked well and reduced the levels of employment in the UK. According to Hill, (2013, p. 200), many countries in the European zone have re-evaluated their strategies to assisting the unemployed population in an attempt to respond to current levels of unemployment arising due to fiscal recession. The public employment service in the UK has adopted the role of redefining the rights and duties of the unemployed people. The outcome of such new methods of contracting other sectors to provide services has led to the creation of quasi markets in the provision of employment services and labor market programs. The concept of contracting other sectors to provide employment services to the unemployed people is based on the proposition that contracting out allows the state to deliver public services at low costs. Although some critics say that the quality of service provision by contractors is low as compared to that provided by the state. According to Portes, (2012, p. 5), traditional strategies in the economy of contracting delivery public services usually dealt with the problems of moral hazards, unfavorable competition in emerging markets and incomplete information among the contracting sectors. These problems are common in the sectors, but providing a contracting agent to achieve certain outcomes results in improvement of other outcomes such as quality. This shows the importance of contractors in service delivery to the people such as improvement in quality of services in higher levels as compared to direct provision by the government. The approach of giving contracts of service delivery reduces the spending of the state because of the low cost of delivering employment services. Therefore, the approach is relevant in the current labor market intervention with a purpose to support the unemployed people in a cheaper way. According to Grover, (2009, p. 492), unemployment in the UK has risen over the last decade, which has forced the government to change its labor market policies. The old methods in the labor market have undergone changes into active policies in order to cope with the rising rate of underemployment. The state welfare has also undergone reforms in the current ruling government in order to improve service delivery to the unemployed people. The rationale for such changes includes the introduction of Universal Credit, which targets to increase employment incentives and to enable the transition to work simple, easy and financially attractive. Portes, (2012, p. 8) shows another change involves the introduction of Work Program that utilizes the private and voluntary sectors to provide employment services on the basis of payment by results, which helps to reduce the rate of unemployed people. The intended effect of the changes is to lower the number of workless people in the country. The present of the United Kingdom has set aside about five billion sterling pounds plan to help the long-term unemployed people to have jobs. The plan has helped approximately thirty two percent of young people seeking jobs to acquire sustained employment. Finn, (2010, p. 292) says that many governments have taken a step to activate their welfare states for the past twenty years. The activation of the welfare approaches has elicited reforms that re-define the duties and rights of beneficiaries of welfare benefits and divert the role of public agencies delivering services to the jobless population. According to Petrongolo, (2013, p. 28), the governments have detached agencies from their central ministries, with policy makers focusing on achieving performance targets that state outcomes to achieve rather than the amount of finances to spend. The state monopolies in providing employment services does not exist in the current economy, instead other private and volunteer sectors obtain contracts to provide labor market programs and employment services to the group. The aspect of providing welfare to the unemployed has produced positive results in Australia, Germany and USA. During the economic recession, UK rate of unemployment increased from about five percent to eight percent. This increased the number of long-term unemployed people in the labor market. Long-term unemployment increased government spending through provision of welfare services to the unemployed. These have motivated the government authorities to develop many policies to address the issue of long-term unemployment. The policies involve mandatory job search and direct assistance to the jobless people (Finn, 2010, p. 292). It also includes providing help during job search process and training on the same. Another policy involves providing revenue subsidies to organizations that provide jobs for the long-term unemployed people. However, the policy impact does not provide satisfactory results due to limited resources required to implement the policy. Another limitation involves high cost of implementing the policy (Petrongolo, 2013, p. 28). The UK government has also adopted the activation strategies to assist the unemployed people. The strategies emphasize on strict criteria used to select eligible candidates for such beneficial programs and delivery of effective employment services. The government also encourages self-sufficient economy while supporting the low-income population through provision of various forms of benefits. Well-designed activation strategies contribute to the labor market output by ensuring welfare beneficiaries have a great opportunity of secure jobs and minimize the risk of long-term unemployment (Immervoll & Scarpetta, 2012, p. 6). Activation strategies are locally implemented by the Public Employment Service with support from private job and training providers. The actions target people of working age who do not have jobs, but have the potential to work and beneficiary of income-replacement benefit. The activation strategies have a rationale in making the people receive benefits on the condition that they comply with employment and job-search requirements (Driehuis, 1978, p. 638). Marketing of employment services is another change with significant impacts in the labor market. The government of UK has adopted active labor market to implement allow marketing of employment services to succeed. The active market policies ensure the unemployment benefits assist in providing incentives to the unemployed to look for jobs. In addition, the government has made reforms in its employment services in order to offer training that provides skills for the job seeking to the people (Hill, 2014). Conclusion Finally, adoption outcome based delivery of employment services creates potential for innovation, creativity, flexibility and efficient financial savings. It also offers many organizations and institutions a tool for stimulating and maintaining change (Finn, 2012, p. 4). It also forces the policy makers to develop contracting networks that offer a balance to the incentive impact of result payments with the provision of services to the people in an equitable way. However, the concept of contracting other sectors to deliver employment services to people has some risks. For example, contractors who receive payments based on results can select ready-to work or easy-to-train people that allow them to achieve the set targets, rather than recruiting those people who might benefit in the long-term. In addition, the contracted service providers can offer services of poor quality that do not meet the employment needs of the population. Prevention and reduction of such risks from occurring involve the responsibility of the government agencies. The government should publish the agreement of contracts to enable the public understand the costs, savings and revenue obtained from such contracts. References Driehuis, W. (2008). Labor Market Imbalances and Structural Unemployment. Harrisburg: John Wiley & Sons. Finn, D. (2012). “The design and effectiveness of active labor market programs in OECD countries.” [WWW Document]. URL http://eprints.port.ac.uk/9999/ (accessed April 19, 2014). Finn, D. (2010). Outsourcing employment programs: contract design and differential prices. European Journal of Social Security, 12(4), 289-301. Grover, C. (2009). Privatizing employment services in Britain. Journal of Critical Social Policy 29(3), 487-506. Hill, J. (2014). Marketing of Employment Services. New York: Cengage Learning. Hill, G., J. (2013). The marketization of employment services and the British work program. Competition and Change, 17(2), 197-207. Immervoll, H., & Scarpetta, S. (2012). Activation and employment support policies in OECD countries. An overview of current approaches. IZA Journal of Labor Policy, 1(9), 1-20. Pattison, V. (2012.) Payment by Results: Delivering high quality public services in straitened fiscal times. Local Economics. 27, 465–474. Petrongolo, B. (2013). Tackling long-term unemployment: the research evidence. Journal of Public Economics, 26-28 Portes, J. (2012). Welfare and Work: Continuity and Change. National Institute of Economic. Review. 221, F4–F9. Read More