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Government is flying blind on the impact of public sector workforce cuts on the labour market

With the Coalition reaching the halfway point for its Spending Review, and in the wake of the West Coast Main Line fiasco, an in-depth analysis published last this week by The Work Foundation warns that the government is largely flying blind on the damage public sector workforce cuts could be doing to the labour market, despite making cuts at a faster rate than either the Thatcher or Major governments. The report also raises concerns about the impact on public sector skills, with recent events at Department for Transport raising the possibility that cutbacks could be leaving key areas with a shortage of essential skills and experience.

The report argues that under the Thatcher and Major governments, cuts fell on the public industries and administrative services. Yet if the OBR’s forecasts of public job losses through to 2017 are correct, public sector employers will have to make significant reductions in priority service areas of education, health and social services and the police on a scale not previously seen in the UK.

Public Loss, Private Gain? raises concerns that the Coalition has very little knowledge of the impact of workforce cuts on this scale, in these areas and over this time period. It calls for the government to take immediate steps to begin monitoring the impact of workforce cuts with a view to identifying major labour market problems as they arise. In particular, the report shows that many of those leaving the public sector are moving into inactivity rather than remaining active in the labour market. This could have long-term consequences for economic growth.

Ian Brinkley, director of The Work Foundation, said: “The government has some major blind spots around the impact of its public sector workforce cuts. These cuts are progressing at a rate not yet seen in the UK, yet the government appears to have little knowledge of what this is doing to the labour market or the skills and experience of the public sector workforce. So far there has been little evidence they are driving significant changes in the way public services are being delivered, although recent events at the DfT could be indicative of a wider problem.

“Our analysis of previous public sector cuts shows that the UK labour market is capable of absorbing large scale reductions in the public sector workforce without high levels of unemployment  - but only if there is strong and sustained private sector jobs growth. With doubts around the sustainability of the recovery, it is imperative that the government monitors the effects of its cutbacks on the labour market more effectively. If there are major problems – such as a deterioration in the skills base or fewer opportunities for women workers - then we need to identify them early so that policymakers can respond.”

The report calls for a more active role for the Cabinet Office and the Office for Manpower Economics in providing a regular public sector labour market picture. This would allow the government and observers to identify the problems and make recommendations for public sector managers and policy makers. It identifies particular blind spots over what happens to public sector workers who are made redundant and the impact on the regions.

Ian Brinkley added: “We would also like to see the public debate move on from some of the unhelpful rhetoric. Our analysis shows that claims of a previously ‘bloated’ public sector and unsustainable job growth have been greatly exaggerated. Neither is there compelling evidence that a small public sector is essential for economic growth.”
The report also examines trends and rhetoric around the public sector. It concludes that the expansion of the public sector under New Labour was not excessively large compared to similar periods of expansion in other OECD economies. It shows that the UK has remained in the middle of the table for OECD economies for public sector employment.

Summary of key trends:

• Nearly 1 million who said they were employed in the public sector at the end of 2010 had left by the end of  2011 – far more than can be accounted for by public sector job cuts;

• The OBR’s attempts to forecast the cuts in the public sector on a year by year basis have been thwarted by the lack of workforce planning across the public sector as a whole, making it impossible to predict where and when the biggest cuts will fall;
• Although female workers make up the majority of job losses from the public sector, male public sector employment has fallen faster in percentage terms than female public sector employment to date;
• Public sector job cuts are only part of the story of why female employment has grown so slowly in this recovery. In the past two years to April-June 2012, male employment has been growing twice as fast as female employment across private based services, especially in less well-paid jobs in admin, personal services and sales, which have been traditionally dominated by women;
• Claims that cutting public sector pay in the regions would help encourage private sector employment are not convincing given high levels of unemployment and lack of demand;
• There are no obvious regional patterns that suggest the cuts are worsening or improving regional labour market imbalances to date.

Notes to Editors:

1. Ian Brinkley is available for interviews, comment and briefings.
2. Public Loss, Private Gain? is available at or from the media team in advance.
3. The Work Foundation is the leading independent authority on work and its future. It aims to improve the quality of working life and the effectiveness of organisations by equipping leaders, policymakers and opinion-formers with evidence, advice, new thinking and networks. In October 2010, Lancaster University acquired The Work Foundation, forming a new alliance that enables both organisations to further enhance their impact.

Media enquiries:

Tom Phillips 020 7976 3554

Anna Kharbanda 020 7976 3646

For urgent out-of-hours media enquiries: Nasreen Memon 07825 527 036


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