The Problem of Unemployment

Blog entry
Date: 
30.01.2012
Author: 
Steve Coles

Unemployment is a ‘disaster’ and a ‘very special problem’.  That’s how Professor Richard Layard of the London School of Economics describes it.  Unemployment is painful, it destroys income, relationships and meaning, and we don’t habituate to it.  That is, we don’t get used to the pain of unemployment over time.  In fact, research has shown that even when back in employment, a period of unemployment leaves psychological scars. If “paid employment is central to the functioning of societies and to the mental health of individuals” as Professor Warr at the Institute of Work Psychology concisely summarises, then this is a time of particular challenge and concern as the number of individuals out of work is at its highest since the autumn of 1995.

There is also a particular, more peculiar, more troubling problem underlying the headline figures of unemployment – that unemployment is turning from being a cyclical phenomenon to being a structural phenomenon (as noted by the Social Market Foundation). The Work Programme should be addressing this – however, a recent National Audit Office (NAO) report details how the Work Programme is struggling, and expresses concerns about how much the ‘harder to help’ are being helped.  The longer that those individuals are out of the workplace, the more entrenched, and therefore structural, their unemployment could become.

With the right support, social enterprises can play a vital role in reversing this trend.  It is increasingly well documented that social enterprises tend to employ more people per unit of turnover than mainstream businesses do and that Work Integration Social Enterprises, such as those supported and championed by our friends at Social Firms, make particular efforts (with significant social impact) to create employment for those furthest from the labour market – i.e. those more susceptible to entrenched, structural unemployment.

My colleague Will Gallagher has argued that the social sector is just as important in an economic downturn as in boom years – if not more so.  In the same way, as unemployment is becoming both more widespread and more entrenched, we should be paying great attention to what social enterprises need in order to scale and make a significant dent in this problem. This is our approach with our venture, the Social Business Partnership.  We’ve been developing the Social Business Partnership to broker private sector procurement from social enterprise suppliers with the aim of enabling social enterprises to scale up and in doing so to create more vacancies for employment and opportunities for training, apprenticeships and personal development.

The slide from cyclical unemployment to structural unemployment is not irreversible.  However, a ‘very special problem’ will need a special solution.  Social enterprises may well be that solution, and the government, social sector, and private sector must do what they can to ensure that it is social enterprises that become embedded in the structure of the economy.

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