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Welfare-to-work and the New Deal

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  • Richard Layard

Abstract

"This paper addresses two questions: -Can Welfare-to-Work expand employment and -Has Britain''s New Deal for young people actually done so, and have its benefits justified the cost? There is ample evidence that unemployment (and employment) is affected by how the unemployed are treated. Other things equal, countries that offer unemployment benefits of long duration have more unemployment (and less employment). This is because employment depends on the effective supply of labour. Cross-sectional and time-series evidence is presented. The British New Deal for Young People is a policy that prevents young people from entering long-term unemployment. To get a crude estimate of its overall effects on the unemployment (and employment) rate of young people, we can take the change in the rate between April 1998 and April 2000 and subtract from it the change in the rate for adults aged 30-49. The estimated effect is then a fall of 70,000 in unemployment - and a rise of 35,000 in employment. This compares with the NIESR''s latest estimates of 45,000 and 25,000 respectively. For illustration we perform a forward-looking social cost-benefit analysis, using figures of 50,000 and 25,000 respectively. The net social benefit per year is estimated at £100 million (this compares with the gross Exchequer cost of about £350 million a year). On any reasonable assumption the policy passes the social cost-benefit test."
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Suggested Citation

  • Richard Layard, 2000. "Welfare-to-work and the New Deal," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 136(III), pages 277-287, September.
  • Handle: RePEc:ses:arsjes:2000-iii-4
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    Cited by:

    1. John Van Reenen, 2004. "Active Labor Market Policies and the British New Deal for the Young Unemployed in Context," NBER Chapters,in: Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000, pages 461-496 National Bureau of Economic Research, Inc.
    2. Bagaria, Nitika & Petrongolo, Barbara & Van Reenen, John, 2015. "Can Helping the Sick Hurt the Able? Incentives, Information and Disruption in a Disability-Related Welfare Reform," IZA Discussion Papers 9089, Institute for the Study of Labor (IZA).
    3. Van Reenen, John, 2005. "Welfare to work: the evidence on Labour’s new deal policies," LSE Research Online Documents on Economics 4672, London School of Economics and Political Science, LSE Library.
    4. Élie Chosson, 2013. "Allocataires du RSA, entre retour au travail et stratégies alternatives. De l'émancipation face à la domination de la valeur," Post-Print halshs-00904287, HAL.
    5. Mike Campbell, 2000. "Reconnecting the Long Term Unemployed to Labour Market Opportunity: The Case for a 'Local Active Labour Market Policy'," Regional Studies, Taylor & Francis Journals, vol. 34(7), pages 655-668, October.
    6. Richard Blundell & Monica Costa Dias & Costas Meghir & John Van Reenen, 2004. "Evaluating the Employment Impact of a Mandatory Job Search Program," Journal of the European Economic Association, MIT Press, vol. 2(4), pages 569-606, June.
    7. Nitika Bagaria & Barbara Petrongolo & John Van Reenen, 2015. "Can Helping the Sick Hurt the Able? Incentives, Information and Disruption in a Welfare Reform," CEP Discussion Papers dp1347, Centre for Economic Performance, LSE.
    8. Richard Blundell & Monica Costa Dias & Costas Meghir & John Van Reenen, 2001. "Evaluating the employment impact of a mandatory job search assistance program," IFS Working Papers W01/20, Institute for Fiscal Studies.
    9. Karl Aiginger, 2003. "Insufficient investment into future growth: the forgotten cause of low growth in Germany," Economics working papers 2003-14, Department of Economics, Johannes Kepler University Linz, Austria.
    10. Karl Aiginger, 2004. "Labour Market Reforms and Economic Growth. The European Experience in the Nineties," WIFO Working Papers 232, WIFO.
    11. de Koning, J. & Layard, R. & Nickell, S. & Westergaard-Nielsen, N., 2004. "Policies for full employment," LSE Research Online Documents on Economics 47444, London School of Economics and Political Science, LSE Library.

    More about this item

    JEL classification:

    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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