28 February 2007

Jim Murphy MP

Minister of State for Employment and Welfare Reform

London, the labour market and welfare – the future

Wednesday, 28th February 2007

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London is one of the greatest cities in the world. Walking the streets you can feel the energy of the city, the vibrancy, and the culture which over hundreds of years has brought people from all over the rest of the UK -  and indeed, all over the world - to seek out the opportunities here. 

• London’s economy is bigger than the economies of many European countries, including Belgium, Denmark, Sweden and Austria.
• It is one of the top three financial and business centres in the world.
• And the richness of the diversity of the city is internationally renowned - all the world’s nations and faiths are represented here, and over 300 languages are spoken.

All this has culminated in a capital which we are rightly proud of. A city which has been recognised as one of the most successful and dynamic places in the world, which on its own merit, won the chance to hold the Olympics in 2012. And as Sebastian Coe rightly said, “London has the skill, vibrancy and history to stage a great games.”

However, for too many, London is a very different place to the one most of us know. Next door to some of the most successful people in the world, live people in some of the worst conditions across the UK. The poorest, the most disadvantaged, the most socially excluded.

How can the 7 miles between Kensington and Tower Hamlets, affect whether you are more likely to die in your early seventies, rather than live to your eighties?

How can those 7 miles, double the chance of you leaving school with less than 5 GCSEs?

How can those 7 miles, mean your over twice as likely to be unemployed?

Despite this, it is not the case that there hasn’t been any progress. Indeed, those boroughs which were in the worst position in 1997, like Tower Hamlets, have improved more than any where else. But the problem is that as they started at such a low position; there is still a long way to go. It has to be our ambition for the next decade to go much further.

We cannot hope to reach an 80% employment rate to which we aspire, if we fail to tackle the specific problems that London faces. Achieving this will transform the lives of thousands of people. Even meeting today’s national employment rate, will mean a quarter of a million more people will be work than are at the moment.

We can take confidence in our employment record across the UK - which I believe shows that we can do this. We have made huge progress in extending the opportunity of work. There are 2.5 million more people in work than 1997, and the employment rates for the most disadvantaged groups have improved more than anyone else.

We should also be encouraged, that there are a lot of jobs out there in London. Between April and January there were over 250,000 jobs advertised through Jobcentre Plus alone, of which 100,000 were low skilled jobs. This doesn’t even cover any of the jobs advertised independently and through agencies.

Some people comment that one of the issues is that local people don’t get local jobs. In theory, there is one job per Londoner. But the draw of London brings many more people into work here, that don’t live here. Therefore, in reality, some estimates suggest that it is more like four people competing for every job, rather than one.

But whilst the competition is perhaps greater in London than elsewhere, this does not explain why Londoners sometimes lose out in that competition.

The problem goes much deeper than competition, as I am sure you are all aware.

Work by the Greater London Authority as well as within my Department, has shown that in London, not only are there a higher proportion of people who suffer disadvantage in the labour market compared to the rest of the country, but there is also a higher chance that people face a combination of more than one barrier to work.

• One in every three Londoners is either a lone parent, disabled, or lives in social housing. Yet this third make up two thirds of the total workless.
• The employment rate of mothers – both on their own and in a couple - is substantially below the national average at just 54% compared to the national rate of 68%.
• Three quarters of people with no qualifications are either a lone parent, disabled, from an ethnic minority or over 50.
• And, as the Hills’ report from last week showed, London has worse quality of social housing than anywhere else in the UK; and of those who live in social housing, around a fifth are  disabled, around a fifth are lone parents, and over a quarter are from ethnic minorities.

Given this, is it any surprise that to some people, the world of work can seem a long way away?

As these figures show, the case for local solutions for local problems, is stronger in London than it is almost anywhere in the UK. It is only through partnerships with organisations tailored to communities they serve, that the specific challenges Londoners face can be addressed.

Work is already underway. Two of the city strategy pathfinders are in London. When I look at the agencies involved, I take confidence in the number of organisations who are investing in this shared goal. The London Employer Coalition is doing some great work in involving big companies in supporting some of our most disadvantaged customers back to work.

In partnership, I feel that we have a great opportunity over the next few years to make a real difference. But there are still some systemic problems which need to be overcome, and which Government has to play a part in.

There are two particular issues that I want to comment on today.

The first is the financial barrier to work that some people in London face.

We have to ensure that the financial rewards of work are clear. Not to do this, promotes a life dependent on benefits as a preferable option. This should not be the case. Not only for the sake of the taxpayer, but crucially for the sake of the person themselves.

Of course, the benefits of work go much further than simply monetary gain. Work can make you healthier, happier, and helps to give a sense of personal identity. One piece of research in the mid 90s concluded that being unemployed led to a higher mortality risk than any other occupation – even the most dangerous. 

Since 1997, we have done a great deal to make work pay. The introduction of the National Minimum Wage and Working Tax Credits has made a real difference the lives of thousands of people. From April this year, families with children will be on average around £1550 a year better off – while those in the poorest fifth will be around £3450 a year better off.

However, as Lisa Harker’s recent report on Child Poverty points out, the costs in London can mean that the financial benefit from entering employment is less than in other parts of the country.

• The average house costs £66,000 more.
• Private rents are a 71% higher than the England average, whilst even social housing costs are around a quarter higher.
• And childcare costs can be over a third higher than the England average.

Meanwhile, the wage premium for working in London is much lower for those on low wages - at only 16% compared to 29% for a high wage worker.

We have to make sure that in future, no-one in London is better off on benefit than in work. The welfare state has to do more to recognise the specific challenges in London, about ensuring work pays.

London is a unique place to live. Therefore it needs unique solutions to solve its problems.

So we have to acknowledge that the financial pressures that parents face in London are higher than the rest of the UK.

That is why, in 2005, the largest region specific programme to promote affordable childcare was established in partnership between the Department of Education and Skills, the Greater London Authority and the London Development Agency. All 33 local authorities are looking at ways at supporting affordable, flexible childcare to low income families for around 6000 children. In total, there will be 10,000 new childcare places by 2008.

The in-work credit, also being piloted at the moment, is another way in which we can help parents in the transition from benefits to work. But we need to ensure that this money can provide the extra support needed in London as well as it can elsewhere. We are currently looking to the best way to do this.

It is vitally important that we address the financial barriers which Londoners face. We cannot eradicate child poverty without it.

The second matter I wish to discuss is the particular problems that some people from ethnic minorities face when trying to enter and progress in the labour market. I know that Tunde Banjoko will be going into this is more detail later on. But today of all days, when the Equalities Review has placed the spotlight on the extent of the challenge, this issue cannot be ignored.

Over a third of London’s working-age population come from ethnic minority groups, whilst over the next 20 years, ethnic minorities are expected to account for around three quarters of the growth in the potential workforce.

But if current trends continue, it would take a young British Asian woman until her retirement before she sees people of ethnic minorities have the same employment rate as their contemporaries.

There are diverse reasons why this is the case. One is language barriers – around 40,000 people from ethnic minorities state that difficulties in language are hindering their chances of finding work.  That is why, at a previous seminar, I announced that addressing language barriers to work should be a key focus of the Jobseekers Agreement.

We are also looking at the issue of procurement. Three pilots are underway to test the effectiveness of conditions relating to equality, to do more to highlight the importance of tackling racial discrimination in the workplace. This is not about quotas; it is about the Government taking the lead and ensuring that its partners are doing the same.

But alone, this is not enough. A more comprehensive package is needed to really turn this situation around.

That is why the Secretary of State John Hutton, has today asked me, along with the Ethnic Minority Employment Task Force, to develop a series of practical and specific proposals ahead of a ministerial summit in May. We will engage with both business and ethnic minority communities to augment the membership of the group to ensure better representation, and draw on the recommendations of the forthcoming reports made by the Business Commission and David Freud’s review.

As part of this, we will be looking at the issue of employer discrimination. Analysis suggests that up to half of the employment rate gap could be explained by employer behaviour.  We must examine seriously why it is the case that Pakistani women graduates are over four times more likely to be unemployed than their female counterparts.

We know that there is no one solution which will solve the particular difficulties that London faces. But our focus on the hardest to help, extending the right to work to all, will work in favour of the people of London.

This is absolutely essential if we are to achieve our number one priority of eradicating child poverty. This is not about abstract targets; it’s about creating a society which we want the next generation to inherit.