The multiple risk factors of worklessness

By isolating the ‘risk factors’ and certain combinations of ‘risk factors’ associated with a person’s chance of being out of work, new analysis from the West Midlands Observatory can help decision makers get to grips with the complex interplay of issues behind the current high rate of worklessness across the West Midlands.

The research is already informing the Department for Work and Pensions in its review of welfare policy, as it provides insights into the major factors influencing a person’s chances of being in or out of work. It shows that these chances can vary greatly according to the individual’s background and personal characteristics. The research demonstrates how combinations of factors such as having no formal qualifications or a long-term health problem or disability, or being a lone parent, affect a person’s chance of being out of work.

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A tough year for inward investment in the West Midlands

In 2009/10 there were 84 inward investment successes in the West Midlands and another four knowledge-based investments. These investments created over 1,500 new jobs and safeguarded another 4,300.

Of these 88 successes, Advantage West Midlands were involved with just under half but this assistance helped create over 60% of the new jobs.

Some of these inward investments were high-profile including Kraft’s acquisition of Cadbury in Bournville, Birmingham affecting nearly 3,000 employees at their head office as well many more around the country.

Other investments in the news included the acquisition of Birmingham City Football Club by Far Eastern businessman Carson Yeung’s Grandtop International, the continued expansion of the ex-Longbridge car plant by SAIC of China where a new engine test facility is to be built and the taking on 50 skilled engineers by Indian Tata Group’s Jaguar Land Rover.

Some other notable inward investments included:

  • Expansion of Japanese tool-maker Makita‘s manufacturing facility in Telford, which created 70 jobs
  • Expansion of TK Maxx‘s distribution depot in Newcastle-under-Lyme, Staffordshire, which created 100 jobs
  • FourStar from the Netherlands is to open a new UK headquarters in Birmingham employing over 250 people to provide employment and skills training to the unemployed

Two other investments from the United States also catch the eye. Remotec in Coventry, a subsidiary of Northrup Grumman, expanded its facility designing and manufacturing robotic bomb disposal units.

But it’s the opening of a new computer games design studio in Digbeth, Birmingham by Microsoft-owned Rare Games that’s hoped will give a boost to games design in the Midlands. 90 new games designers will be employed there.

Analysis of West Midland inward investment

Further analysis of the inward investment figures show that, with 88 investments, 2009/10 saw the fewest number of investments in the  West Midlands since 2005/06 when investment numbers were still recovering from the falls in global investment since 2001. This highlights the fact that the global economic crisis began to seriously affect investment decisions.

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West Midlands sees large fall in unemployment

The latest regional labour market statistics (zip, 2.9mb), released by the Office for National Statistics, show a large quarterly fall in the unemployment rate in the West Midlands, down 23,000 people to 230,000 (8.6%) in the quarter to May. This is the largest fall of any English region.

Unemployment in the West Midlands rose sharply at the beginning of the recession and peaked in April to June 2009 at 284,000 people or 10.5% – the highest unemployment rate of any English region.

Since then, unemployment here has fallen, whereas other regions have continued to see a rise. The West Midlands now has the fourth highest unemployment rate of English regions.

There’s also been a fall in the number of people claiming Jobseeker’s Allowance, the unemployment benefit. The number of claimants in the West Midlands fell to 159,800 in June, a fall of 2,800 people. This is a smaller decrease than in previous months but is 24,800 claimants fewer than the peak in October 2009.

Within the West Midlands, nearly all local authorities have seen a fall in the number of people claiming Jobseeker’s Allowance over the last year. The biggest decreases have been in areas like Cannock Chase and Redditch which saw large increases in Jobseeker’s Allowance rates at the beginning of the recession.

Our interactive map shows how Jobseeker’s Allowance rates differ between local authorities.

The fall in unemployment has been accompanied by a rise in employment. The employment rate in the West Midlands is now 71.2% with 31,000 more people in employment than in the previous quarter.

Nationally the rise in employment was largely due to a rise in the number of part-time workers. Data on part-time workers at regional level is only available up to September 2009 (national data are for the quarter to May 2010) but does show that the number of part-time workers in the West Midlands increased during the recession even though the number of people in full-time employment fell.

More information on changes to the labour market during the recession are available in our economic inclusion annual report 2010 (pdf, 929kb).

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New support aims to help young people “Think Enterprise”

At its launch last month, the 3% campaign – developed by the Young People’s Enterprise Centre of Expertise – outlined its ambitious aim to create 5,000 young entrepreneurs by 2012.

The campaign, backed by Advantage West Midlands and Business Voice WM,  was based on research highlighting a number of barriers young people face when it comes to starting a business and accessing support in the West Midlands.

The research found that:

  • Relatively small amounts of funding can be instrumental in enabling young people to start productive businesses, but there is a gap in provision for those who do not meet the Prince’s Trust deprivation criteria or those not on student enterprise schemes.
  • Young entrepreneurs have short work histories and require business advisers and mentors who have relevant business experience to provide essential knowledge.
  • Young entrepreneurs highlighted the loneliness of working on their own when starting a business and the need for a pro-active support network.
  • Application forms for support are perceived as excessively bureaucratic and jargon-laden, deterring young entrepreneurs not familiar with the terminology and business.
  • Although a culture change is reported, many of our young skilled entrepreneurs are entirely disengaged from school.
  • Enterprise activities in schools are highly valued and supported, with the emphasis on getting young entrepreneurs involved in the Further Education sector.

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Transformational change can generate substantial new jobs in West Midlands over next five years

The pace of economic growth in the West Midlands over the next five years is forecast to be modest. Only 11,000 net new jobs (representing growth of 5% in total employment) are expected to be created between 2010 and 2015.

However, the Observatory’s new report The West Midlands economy post recession: key issues and challenges (pdf, 844kb) includes scenarios illustrating the benefits for the West Midlands in terms of new job creation — if action is taken to support fundamental, transformational change.

Scenario one: up-skilling the workforce within existing businesses

If workforce skill levels in the West Midlands were raised to match the England average, it’s estimated that net increase in employment over the next five years would almost double to around 21,000 jobs.

The main beneficiaries would be sectors where skill gaps and shortages act as a significant constraint on growth, such as:

  • ICT
  • High value added business & professional services
  • Wholesale & retail distribution
  • Transport

Scenario two: up-skilling plus diversification of the economy

If more businesses in higher value added sectors and clusters were also attracted to the West Midlands, such that their share of GVA matched the England average, the impact would be much more significant with the creation of more than 200,000 net new jobs.

High value added activities such as high value added business & professional services (where more than 100,000 net new jobs would be created) and ICT (30,000 net new jobs) are notable beneficiaries.

There would also be modest increases in employment levels in engineering (nearly 3,000 net new jobs) and manufacturing (nearly 6,000 net new jobs).

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Read more about the future of the West Midlands economy in our report:

Replacement demand set to be key source of jobs in West Midlands over next 5 years

An under–representation of higher value added sectors means that the pace of economic growth in the West Midlands over the next 5 years is forecast to be modest. Only 11,000 net new jobs (representing growth of 5% in total employment) are expected to be created between 2010 and 2015.

But the Observatory’s new report The West Midlands economy post recession: key issues and challenges (pdf, 844kb) predicts an additional 860,000 job vacancies are expected to arise between 2010-2015 due to ‘replacement demand.’

It’s estimated that nearly 510,000 jobs (58% of all job vacancies) will be due to labour turnover and more than 350,000 jobs (40% of all vacancies) will be due to older workers retiring.

Pie chart shows overall job vacancies forecast in West Midlands between 2010 and 2015

Text description of this chart available. Chart prepared by West Midlands Regional Observatory based on Cambridge Econometrics forecasts and Office for National Statistics Labour Force Survey.

Replacement demand is forecast to be more significant in traditional private sector industries and public sector activities which have an ageing workforce. For example:

  • 59,000 vacancies are expected to arise in manufacturing
  • 50,000 vacancies are expected to arise in engineering
  • 37,000 vacancies are expected to arise in construction

In health and social care, meanwhile, nearly 70,000 vacancies are expected to arise. The figure is more than 45,000 in education and more than 30,000 in public administration.

Many of the jobs on offer due to retirements are likely to require specific skills, qualifications and experience. Around 90% of these jobs are expected to be filled by people already in employment.

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Only modest economic growth is forecast for the West Midlands over the next 5 years

A continuing under–representation of higher value added sectors means that the pace of economic growth in the West Midlands over the next five years is forecast to be modest.

Gross Value Added (GVA)

The Observatory’s new report The West Midlands economy post recession: key issues and challenges (pdf, 844kb) forecasts GVA to grow by just 11% (£9 billion) between 2010–2015. This compares with growth of 15% (£11 billion) between 2000–2007.

While the pace of growth is forecast to be strongest in higher value added private sector activities (such as ICT & telecoms and high value added business & professional services), they account for only a limited share of GVA. Growth is expected to be much weaker in sectors that dominate the regional economy such as lower value added, traditional private sector activities and the public sector.

Geographically, GVA is forecast to grow most strongly (by some 13% between 2010–2015) in areas identified as those with potential to lead the region’s recovery such as Solihull, Warwick and Stratford-on-Avon.

The weakest growth (less than 9% over the period) is expected in areas identified as having long-term issues that may inhibit recovery such as Wolverhampton, Walsall, Stoke-on-Trent and Sandwell.

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