Below is the text of the speech made by Alan Johnson, the then Work and Pensions Secretary, to the Chartered Institute of Personnel and Development conference on 9th February 2005.
It’s a pleasure to be back here again at the CIPD for this Annual Reward Conference. Now in its sixteenth year, it’s a tremendous forum for all those involved in managing and developing people, and I’m delighted to have this opportunity to talk to you today.
Over the past seven years welfare to work policies have driven a transformation in the UK’s employment market.
In 1997, one in five families had no-one in work and one in three children were growing up in poverty. And over the previous 18 years, unemployment had twice hit 3 million, whilst the numbers on Incapacity Benefits trebled to 2.6 million.
But since 1997, we have begun to transform the welfare state from a passive one-size-fits-all system to an active service that tailors help to the individual and enables people to acquire the skills and confidence to move from welfare to work.
Thanks to a stable economy, and our investment in the New Deal and Jobcentre Plus, there are now more people in jobs than ever before. Unemployment is at its lowest level for 30 years – with long-term youth unemployment 90% lower than in 1997. And with almost three-quarters of the working age population in work, our employment rate is the highest of any of the G8 countries.
But we can and will go further. Today we face the welcome challenge of a healthier population that is living for longer.
As the baby boomers of yesterday become the pensioner plethora of tomorrow, it will produce dramatic changes in the dependency ratio.
In two years from now the number of people over State Pension Age will overtake the number of children. In just over 30 years, the proportion of the population aged 65 and over will have increased by 50% while the number of pensioners aged 80 and over will have doubled.
Society’s ability to meet this ageing challenge will hinge crucially on our ability to develop and deliver an evolving welfare state that supports ever greater numbers of people into work for longer.
Last week the DWP published its Five Year Strategy. At its heart is a new long-term aspiration of moving towards an employment rate equivalent to 80% of the working age population.
This takes us beyond just helping the unemployed to helping those who are further away from the labour market – who have more complex and substantial barriers to overcome.
Our goal is genuine inclusion – stamping out the discrimination and disadvantage that prevents people from fulfilling their true potential.
To reach our 80% aspiration could mean helping as many as 1 million people on Incapacity Benefit into work, as well as an extra 300,000 lone parents – and having a million more older workers in the labour force, including many who will choose to work beyond the traditional retirement age.
At the heart of our Five Year Plan is our proposed reform of Incapacity Benefit. These reforms will build on our investment in Jobcentre Plus and the New Deal.
Already our Pathways to Work pilots – which combine financial incentives to seek work, compulsory interviews with skilled personal advisers, and access to groundbreaking NHS rehabilitation support – are achieving startling results.
In the pilot areas we’re seeing six times as many people getting back to work help and twice as many people recorded as entering jobs, compared with the rest of the country.
And our reforms of IB will build on this platform with a new basic benefit below which no-one should fall.
There will also be a speedy medical assessment linked with an employment and support appraisal and increased financial security for the most chronically sick. Our reforms will mean more money than now for those who take up the extra help on offer; but less money for those who decline to co-operate.
For the first time ever we will differentiate between those with the most severe conditions – who will get more money without having to do anything extra – and those with potentially more manageable conditions who will receive tailored support and clear rewards for seeking a path back to work.
But this all needs to be accompanied by wider change – and employers have a key role to play in creating healthier workplaces and playing a more active role in the rehabilitation of their employees.
The benefits to business are very clear: Retaining skilled and experienced employees and avoiding unnecessary recruitment and training costs. Employer involvement in helping individuals to recover is not just socially responsible but is also good business sense.
As we move towards full employment, we can not afford to be denied the skills and contributions of those who can and want to work, but who remain outside the labour market.
And this goes beyond simply breaking down the barriers to getting a job – it means equality of opportunity within the workplace.
The role of HR professionals is crucial in helping employers to benefit fully from the skills of disadvantaged groups – but ultimately the progression of these workers can no longer be an issue solely for HR or any other individual part of a business. Instead, it must be mainstreamed into the heart of each organisation.
Together we must build on our progress in fighting discrimination, moving to a world where opportunity and security are not dependent on disability, ethnic background or age.
A key part of our framework for helping those on Incapacity Benefit is to stamp out discrimination against disabled people.
These are exciting times for Disability Rights. Last October saw the extension of full discrimination protection to 600,000 existing disabled workers. And it brought an additional 7 million jobs and 1 million employers within the scope of the employment provisions of the Disability Discrimination Act. And our new Disability Discrimination Bill currently going through Parliament will take us even further.
The New Deal for Disabled People has seen over 45,000 job entries since its launch in 2001. And our other New Deal initiatives – for lone parents and young people for instance – have also been effective.
Altogether, nearly 195,000 disabled people have been helped into work through the totality of our New Deal programmes.
All of this has contributed to the rise in the employment rate of disabled people – up 5 percentage points since 1998 and now crossing the rubicon of 50%. This really challenges the old preconceptions because now the majority of disabled people work.
Ethnic Minorities are another key group. We’ve already seen the Ethnic Minority employment gap fall from just under 17% to 15.4% – that’s around 50,000 more individuals of ethnic minority origin in employment.
But despite this progress, ethnic minorities are still twice as likely to be unemployed and one and a half times as likely to be economically inactive as the overall working age population.
And it’s not just in securing employment, that this differential exists. Ethnic minority staff earn an average of 7% less than other staff. And this in itself masks wide variations within ethnic minorities: For some groups – such as Bangladeshis – the average salary is as much as £7000 a year lower than the average for white employees.
So there is much further to go in this area and our Fair Cities initiative – working with employers in London, Bradford and Birmingham – will help us to understand what more we need to do.
A crucial part of the response to longer lives must be enabling people to choose to work for longer.
Some have suggested that we should raise the State Pension Age but part of the challenge that we face in the UK, is to help people to work up to the current State Pension Age rather than setting a higher one. For example, over 1/3 of men have left the labour market by the age of 60; 2/3 before age 65.
Our State Pension Deferral policy increases the rewards for choosing to work for longer – introducing an enhanced pension or a lump sum of up to £30,000 for people who decide to take their State Pension at 70 rather than 65.
And our tax simplification measures also mean that, for the first time, it’s possible to carry on working for the same employer whilst drawing an occupational pension.
The announcement we made on age equality at the end of last year also moved us further towards a culture where a single retirement age is no longer relevant.
We’re sweeping them away entirely for people under 65, and we’re giving those above that age a Right to Request which their employers will have to engage with seriously.
And the review in 2011 – which will look at whether to end the default retirement age – is to be tied to evidence on specific social trends all of which are showing a retirement age is increasingly outmoded.
Of course, the option of longer working is one part of the pensions equation. The other is saving more.
Here the role of the employer is even more crucial and we are very grateful to the CIPD for their work with our Employer Task Force.
In particular for publishing a “Good Practice Guide” focused on communications – alongside the Employer Task Force Report last December.
Next month, we will build on this guide by launching a single Government-sponsored website on Good Practice – which will draw together the CIPD’s work with similar material from other organisations.
Employer contributions will be crucial. ABI research shows what a difference this can make – where there is no employer contribution, pension take up stands at just 13%, but with a contribution of at least 5% it rockets to 69%.
But communicating the benefits of this pension provision is equally crucial – particularly against the backdrop of the increased security afforded by the Pension Protection Fund and other measures in our Pensions Act.
Last October’s Interim report by the Pensions Commission, shows that for the earnings bracket with the most people in it – namely those on £10,000 – £20,000 – there are more people with no pension working for employers that have a contributory scheme that they haven’t joined than there are workers who have no pension and no access to a scheme. Indeed there are some 4.6 million workers who are not taking advantage of contributory schemes that their employer provides.
If we could tackle this, we would go a long way towards meeting the pensions challenge. Effectively these workers are turning down the equivalent of a pay rise – and the evidence suggests that this isn’t an informed decision. Which is why an idea like auto-enrolement is so important. So instead of having to opt-in – people are automatically enrolled into the scheme but have the information they need to take an informed decision to opt-out.
I pay tribute to the CIPD’s commitment to creating a modern working environment. This no longer means simply equality of opportunity in the workplace – though this is crucial – now it also means meeting the challenge of an ageing society.
Neither individual employers nor society as a whole can afford to be without the skills and contributions of all those who are willing and able to work.
The failure to meet this challenge could threaten the future sustainability of our welfare system as well as the economic prosperity of British business.
But the success which is within our grasp will ensure that Britain remains a world leader – not just economically – but as a truly integrated and socially cohesive society, which is all the richer for its diversity.