Focusing on the most vulnerable: modernization of social protection and supporting activation Mik Woolley & Simon Smith - UK

2 Objectives Key facts about position of UK labour market – bad and not so bad Current position of key disadvantaged groups in labour market – lone parents & people with a health condition/disability – who make over 3/4 of inactive population (excluding students) Supporting most vulnerable in economic downturn

3 Key facts about current UK labour market Overall employment rate down to 74.1% (down 0.7% on year) Unemployment rate 6.5% (up 1.3% on year). ILO unemployment now 2.03m (up 420,000 on year) Jobseekers benefit numbers 1.39m (up 600,000 on year and 140,000 on month) Job vacancies 482,000 (down 200,000 on year) Redundancies 266,000 (up 154,000 on year)

4 UK labour market & disadvantaged groups Off-flow from Jobseekers Allowance (JSA) remains very high – 80% still leave within 6 months Rise in unemployment spread relatively evenly amongst age groups & regions & previously weak/strong labour markets (not the case at this stage in previous recessions) Economic inactivity is continuing to fall (not case at this stage in previous recessions)

5 UK labour market & disadvantaged groups Economic inactivity (Q4 2008) number of inactives fell 30,000 and inactivity rate fell to 20.8% (down 0.2% on year) or excluding students – 15.4% (down 0.4%) Sub-categoriesFigures Jan ‘09Change on Year Change on Quarter Looking after child/home 2.22mDown 28,000Down 34,000 Temporary& long-term sick 2.17mDown 65,000Down 43,000 Retired586,000Down 17,000Down 21,000 Others713,000Down 83,000Down 46,000

6 UK labour market & disadvantaged groups – numbers on incapacity benefits

7 UK labour market & disadvantaged groups – numbers on lone parent benefits

8 Supporting most vulnerable towards work Primary focus continues to be on labour market activation for key disadvantaged client groups. Cautiously optimistic can avoid horrific scarring of previous recessions as millions moved into/didn’t leave economic inactivity This is for four key reasons: a. Structure of labour market….. b. Social and demographic change….. c. Individual decision-making…..

9 Supporting most vulnerable – towards work Fourth reason - major benefit system changes continuing push towards employment: Recent changes JSA – lone parents with children aged 7+ are being reclassified as unemployed + significant extra help Incapacity Benefit replaced with Employment & Support Allowance (ESA) – more rigorous, earlier test (flows from JSA), greater focus on rehabilitation + greater conditionality and support Tax credits & Minimum Wage – continue to deliver strong in-work gains

10 Supporting most vulnerable – towards work Recently announced further intensification of conditionality regime for lone parents with children aged 1-7 & ESA claimants: Test out, from October next year in 15-20% of country, requirements to: Have ongoing series of compulsory personal adviser interviews Sign up to an Action Plan comprising activities they & adviser agree will make progress back towards work (‘’work-related activity’’); Undertake agreed or directed work-related activities as part of their own journey towards employment But no requirement to actively seek work

11 Conclusion UK labour market is suffering significantly as rest of EU is in face of recession Compared to previous recessions impacts are more evenly spread Position of inactive groups remains more positive (compared to previous recessions) this appears to be due to structural and demographic changes UK policy position remains heavily focused on ensuring right framework to enable key disadvantaged groups to enter the labour market as jobs are still around Huge uncertainty and risks remain however – especially risk of long-term unemployment, transforming into inactivity