Long-term unemployment is a deeply-rooted and highly damaging problem for European economies – one that will persist regardless of how buoyant these economies become. The problem is not solely cyclical: it also has deep structural causes.
Resolving it will not be easy, therefore, particularly as demand-side interventions such as direct job creation have largely fallen out of favour. The governments of developed economies have increasingly been turning to supply-side employment support programmes to make the long-term unemployed (LTU)1 more employable.
The objectives of these programmes are similar across different countries. Namely, they are intended to improve labour supply, reduce unemployment and increase employment by making jobseekers more attractive to employers, and by making work more attractive than benefit receipt.
While programme objectives may be similar, their methods differ by country. These differences are driven by a number of factors – primarily the political economy in which they evolved, the specific labour-market challenges they are looking to address and the institutional actors responsible for their design. This inevitably means that strategies are configured differently within each European country, although they tend to combine different elements of two broad approaches, both of which are focussed on improving the ‘supply side’ – that is, focussing on the activities of the LTU themselves.
- The employability (or ‘work first’) approach, which looks to attach people to jobs as quickly as possible. This approach is largely effective for those closer to the labour market, and costs relatively little. However, its tendency to assert that ‘any job is a good job’ means that costs can potentially be incurred further down the line, as the jobs in question are relatively unlikely to be good quality or secure, and the economy therefore does not benefit from the full potential of the workforce.
- The ‘human capital development’ approach, which tends to be far more expensive upfront, and prioritises a more thorough ‘up-skilling’ of claimants. While job entry is typically delayed, those jobs are more likely to be sustained in the longer term.
Whatever its emphasis, the purpose of employment support is to make potential employees more attractive to employers. It is therefore essential to understand what employers actually want.
The role of employers
In all countries, whether in growth or recession, employers are central to resolving long-term unemployment – employers will decide whether or not to employ someone who is long-term unemployed. The coexistence of both long-term unemployment and skills shortages indicates that there is a business case for better employment support policy, as well as a social case.
It is no surprise, therefore, that both the supply-side measures that dominate policymaking, and the more limited use of demand-side interventions designed to complement them, seek to meet employers’ needs.
Understanding employers’ attitudes and behaviour in hiring decisions is therefore essential. Their views, whether they are accurate or not, are a material consideration. For this reason we surveyed a total of 2,552 employers across five European countries – the UK, Sweden, Spain, Germany and France – asking them a series of questions related to the LTU and employment services.2
Employer attitudes and interactions
Although 60 per cent of the employers we surveyed said that they did recruit from the LTU, they do tend to differentiate between the LTU and other candidates.
- There is a big difference between countries in terms of employers’ propensity to recruit the LTU, with 74 per cent of Spain’s employers and 50 per cent of Germany’s employers recruiting from the LTU. In many ways, this reflects the different labour market challenges in each country.
- Even employers who recruit from the LTU differentiate between the LTU and other potential recruits. Overall, nearly only one-third (32 per cent) of employers who recruited from the LTU confirmed that they did not differentiate; this figure ranged from 50 per cent in Sweden to 21 per cent in Spain.
However, the employers surveyed also had some quite positive perceptions of the LTU.
- The most frequently cited reason for recruiting them was that they had a better attitude than other candidates (cited by 33 per cent of respondents). This proportion was highest in Spain (45 per cent) and lowest in Sweden (18 per cent).
- Past experience of recruiting the LTU was rarely given as a reason for not recruiting them (cited by only 9 per cent of respondents), although far more employers in Germany (16 per cent) than in France (5 per cent) gave this answer.
- More employers thought the LTU ‘well- or very well-prepared’ for work (37 per cent) than not (13 per cent). Spanish employers were especially positive in this regard, at +50 per cent (net prepared), while in Germany they were least positive, at just +14 per cent (net prepared).
- Employers who did recruit the LTU were more than twice as likely to consider them well- or very well-prepared (47 per cent) compared to those that didn’t (21 per cent).
Obstacles to employment
Despite the fact that employers hold some broadly positive views of the LTU as potential (and actual) employees, long-term unemployment persists even during periods of economic growth. Employers, in their responses to our survey questions, gave some indications as to why that might be.
- Not receiving applications was one of the major reasons for employers not recruiting LTU candidates – overall, 34 per cent of those surveyed specified this, ranging from 40 per cent in both the UK and France to 28 per cent in Sweden.
- While, as noted above, past experience was rarely given as a reason for not recruiting the LTU, a significant minority (20 per cent) of employers who did not recruit them said that this was due to concerns about their lack of recent work experience. There were wide variations in this regard between the countries studied, with the highest proportion found among employers in the UK (38 per cent), and the lowest among those in Sweden (10 per cent).3
Furthermore, by drilling down further we find that all of the employers we surveyed, whether they recruited from among them or not, believed that the LTU had specific skills shortages.
- Three quarters (75 per cent) of all employers thought that the LTU were lacking in at least one of the skills or characteristics listed in our survey.4 Interestingly, those that did recruit the LTU were more likely to say that they had at least one of these deficiencies.
- Employers that did and those that didn’t recruit from the LTU had very similar perceptions of specific skills deficiencies among the LTU.
- While the most frequently cited reason for employing the LTU was that, as previously noted, they had a better attitude than other candidates, other respondents said that motivation was actually a problem – this was the most commonly cited skills deficiency among the LTU, albeit by only a quarter (25 per cent) of employers.
- A minority of employers also found lack of experience in the organisation’s line of work to be a problem – overall, 18 per cent of employers cited this as a deficiency, ranging from 24 per cent in the UK to 10 per cent in France.
- Teamwork skills were also found to be lacking among the LTU, with 17 per cent of employers citing it as a problem, ranging from 22 per cent in Germany to 10 per cent in Sweden.
Employers and employment policy
Across all five countries, the employers we surveyed showed a low regard for all government policies and activities aimed at making the LTU more employable, and policy was a peripheral consideration – only 15 per cent of those employers who took on the LTU did so because of government policy (though this varied from country to country, from 26 per cent in France to just 8 per cent in Germany).
However, the majority of employers did experience the benefits of policy in terms of demand-side incentives.
- Most employers (63 per cent of all those surveyed) had received at least one of the incentives to take on LTU candidates we listed.5 This proportion was highest in France (69 per cent) and lowest in the UK (53 per cent).
- Unsurprisingly, employers who recruited LTU candidates were more likely to regard financial incentives as effective (57 per cent) than those who did not (40 per cent).
- ‘Wage subsidies/grants’ was the type of financial incentive most commonly taken up by employers. However, there were differences between countries – in the UK work experience placements were most common, while in Spain tax incentives were.
On the supply side, the employers surveyed expressed clear beliefs about how effective or ineffective certain interventions were.
- Of the four types of intervention we asked respondents to assess, across all countries employers thought that ‘work experience and job placements’ was by far the most effective type of measure (43 per cent net effectiveness), followed by formal qualifications and courses (16 per cent net effectiveness).
- Employers appeared to reject threatening to withdraw benefits as a means of improving employability (-12 per cent net effectiveness).6
There is an evident mismatch between the policies that are in place and employers’ perceptions of which policies are actually needed within each country. In the UK, employers were most favourably disposed towards formal qualifications, but that is not what is offered by the UK public employment service (PES)7 (far from it). However, the opposite is true in France: there the survey indicates that employers don’t tend to value formal qualifications, yet they are a prominent part of the offer to the LTU.
For the purposes of effective policymaking, contact between employers and employment services is also vital.
- Of those employers who did recruit from the LTU, 56 per cent recalled contact with the PES, compared to only 21 per cent of those who did not recruit from the LTU.
- Most employers didn’t engage with the PES in their country, although again this varied by country: while almost half (49 per cent) of French employers had contact with the PES, only a third (33 per cent) of those in the UK did.
- Broadly speaking, employers had a negative view of the PES: 31 per cent said it was effective, compared to 58 per cent who said it was ineffective (-27 per cent net effectiveness). Employers regarded it least favourably in Sweden (net -45 per cent) and most favourably in the UK (net +2 per cent).
- PES contact appears to differ by business size – small businesses (less than 50 employees) and very large businesses (more than 1,000 employees) tended to have less contact with the PES than those in between; those with between 100 and 249 employees tended to have most contact.8
- In general, employers considered government policy ineffective for dealing with the LTU: 34 per cent said it was effective, compared with 58 per cent who said it was ineffective. Employers in Sweden and Spain regarded it least favourably (-34 per cent net effectiveness), and those in the UK most favourably (-2 per cent net effectiveness).
Transforming the labour-market chances of the LTU is a difficult task, and one that can only be overcome with a clear understanding of employers’ attitudes towards them. While those employers who responded to our polling generally had fairly positive perceptions of the LTU, there are some severe challenges that employment support needs to resolve. Many employers perceived the LTU as having positive attitudes and adequate skills, and those who had contact with them were even more positive. However, many employers believed that their lack of recent work experience was an issue, and that they also lacked other skills and characteristics.
We found that employers had clear views about which policies were and were not effective, but – given that there is limited contact between employers and employment services – it is perhaps no surprise that they did not hold those services in high regard. Employers gave quite strong indications of which policies they thought would make the LTU more employable – they favour work experience and formal qualifications over the threat of benefit sanctions, for example. However, there appeared to be a mismatch between the policies employers thought effective, and the policies actually being delivered. Employers also had a very dim view of employment policy in general.
Relationships between employers and employment services are clearly important, but regulating these relationships is unlikely to be the answer. De Koning and Gravesteijn (2012) have demonstrated that making the registering of vacancies with employment services mandatory, as some countries have, has not resulted in employment services gaining full access to available vacancies, or in higher levels of contact with businesses. Nevertheless, both sides should take steps toward developing more formal connections, and to that end we make the following recommendations.
- Public employment services should be coordinated at the level of functional economic areas, and should proactively engage with local employers in order to access unadvertised vacancies for the benefit of their clients. It is vital that the geography of policymaking matches the geography in which businesses and their labour markets operate, so that it can better align demand and supply for labour across an area. While there are already instances of this – the welfare-to-work market in the UK, for example (where private providers deal with the very long-term unemployed and economically inactive) – public employment services are often limited to only sourcing publicly advertised vacancies.
- Public employment services should be conducting more detailed surveys of the skills and candidate requirements of local workforces – and employers, if they want to influence the shape of services, should fully participate in these exercises. Public employment services should also be regularly reviewing the incentives they are offering to employers to determine whether they are impacting on hiring decisions.
- Employers should proactively engage with work experience and vocational training schemes. Many of the skills problems employers identified relate to experience of work, and this applies not only to the LTU but to all those over the age of 16 without a vocational qualification, who are most likely to become long-term unemployed later in life.
- Employers should also be prepared to pull their weight and make positive steps towards recruiting longer-term out-of-work candidates. Arbitrarily discriminating against those who have been out of work for six months or more may be an efficient way of screening high numbers of applications, but it also means that employers are missing out on a range of potential candidates who could be up to the job. Employment services can help to change negative perceptions by encouraging work placements and trials, and educating employers about what support can be provided to candidates who are perceived as more risky hires.
Employment services can and must make a difference – and there is scope for them to do so. Different countries with different labour markets will face very different challenges, but they share a common need to reduce long-term unemployment and provide effective services to support those who are out of work. While supply-side measures are ultimately not, on their own, enough to provide jobs to all who want them, they can make a difference by connecting jobseekers with vacancies, and by improving their human capital so that they are better able to compete for jobs.
However, getting the best from employment programmes involves more than signposting, employability and training: it also depends upon fostering relationships with those who ultimately provide routes out of unemployment. At the moment, employers are too peripheral to services, and services too peripheral to employers. Bringing both sides together is key to identifying and securing the jobs and skills that will be needed in the future European jobs market.
1 For the purposes of this report and the survey that informs it, we defined ‘long-term unemployment’ as ‘being unemployed for longer than six months’.
2 Online fieldwork for this survey was conducted between 28 November and 10 December 2014.
3 NB: a smaller proportion of UK employers surveyed did not recruit from the LTU.
4 These were: ‘positive attitude/motivation’, ‘experience in organisation’s line of work’, ‘team-working skills’, ‘experience of the working world in general’, ‘required skills or competencies’, ‘IT or software skills’, ‘technical, practical or job-specific skills’, ‘foreign language skills’, ‘oral communication skills’, ‘planning and organisation skills’, ‘problem-solving skills’, ‘written communication skills’, ‘education’, ‘common sense’, ‘customer-handling skills’, ‘numeracy skills’, ‘literacy skills or strategic management skills’ and ‘other’; the other options were ‘not applicable – I do not think the LTU lack any skills’, and ‘don’t know’.
5 These included: ‘wage subsidies/grants’, ‘work experience placements’, ‘trial work-placements’, ‘training subsidies/grants’, ‘tax incentives’, ‘flexibility over labour market rules’, ‘vouchers (e.g. travel, childcare)’, and ‘other’.
6 The fourth of these questions asked, ‘How effective or ineffective do you think the Jobcentre Plus/pôle emploi is at making the long-term unemployed more employable?’ While the wording of the question remained the same for each country, the specific name of each country’s PES (Jobcentre Plus/pôle emploi and so on) was used in each case.
7 In the UK the PES is Jobcentre Plus. As noted above, in each of the countries surveyed we asked a country-specific question (regarding the pôle emploi in France, for example) to ensure that we were comparing like with like.
8 These results are indicative and based on sample sizes of between 200 and 392 within each size band (fewer than 50, 50–99, 100–249, 250–499, 500–999 and 1,000+).