Forget the budget deficit, the coalition must deal with the jobs deficit

There are now five people chasing every vacancy in the UK.

There can be no doubting Iain Duncan-Smith's commitment to welfare reform. The Secretary of State for Work and Pensions has staked his political career on ambitious and costly plans to simplify the benefits system and make work pay. And though it has received less attention, his Department is also investing in the 'Work Programme', a scheme costing billions annually to improve people's job prospects and help them find work.

But in a year when the number of long-term unemployed workers alone outstrips job vacancies by 330,000, shouldn't we be asking whether these are the only, or indeed the right, priorities? The vast ranks of unemployed workers who are neither 'workshy' nor trapped in a cycle of benefit dependency (some would say the majority) are in for a hard time over the next few years. A quick look at the maths tells us why.

Long-term unemployment has doubled in the last two years to 797,000 while the number of job vacancies on Jobcentre Plus books has fallen to 467,000. There are now five people chasing every vacancy in the UK and our estimates based on Office for Budget Responsibility projections suggest this will shift only slightly to 4.6 people for every vacancy by the end of 2011.

These are not the only vacancies in the job market but they are the ones most likely to be secured by those with fewer skills or less experience - also those most at risk of being left behind in the wake of the recession. Though employment increased in the last quarter much of this can be accounted for by more part-time work and people choosing not to retire.

In today's climate, reforms to make work pay and improve people's job prospects are not wrong, they're just not enough. The Coalition government is relying on private sector growth to fill the jobs gap, with no alternative strategy if this doesn't work out.

A new report published by IPPR this week identifies a number of ways the government can help boost the jobs market without having to resort to expensive job subsidies. Small businesses will be central to sustaining the recovery, creating jobs in new and expanding sectors. Yet many say they can't find workers with the right skills and don't have the capacity to recruit. As well as helping people find work, welfare to work providers could
help stimulate growth by supporting businesses to expand or invest in workforce training, thus creating jobs and boosting productivity.

Similarly, unemployed workers could cover periods of staff training or absence, providing those out of work with new skills and preventing a drop in productivity for employers. This approach was used in Finland and Denmark during the recessions of the 1990s and helped businesses in these countries weather the downturn. In Denmark three out of every four unemployed people found permanent work in this way in the 1990s. Re-directing some existing skills funding and greater employer co-financing could pay for this.

Over the last year we have interviewed unemployed people who are frightened and angry at finding themselves out of work for no reason other than the highs and lows of the economy. We asked people what they want from the system. Their demands were modest. They want to know what jobs they can find locally both now and in the future, so that they can re-train if necessary. In national, standardised system such as the one we have in the UK, this kind of advice is surprisingly hard to find. They want job-specific training that makes it more likely they will find work. They want to know they will eventually find a job if they try hard enough.

But most of all they want to know that they and their families are not alone in being made to carry the burden of a financial crisis they had no role in creating. Unless more is done to create the jobs they need, they may take some convincing on this.

Claire McNeil is a researcher at the IPPR think tank.