Constraint and Opportunity: Identifying Voluntary Non-Employment, by Tania Burchardt and Julian Le Grand

(CASEpaper 55, Centre for Analysis of Social Exclusion, London School of Economics, 2002). A summary appears as CASEbrief 22.

This paper attempts to assess the extent to which the behaviour of an individual in the workforce is the result of the constraints which they face or of the exercise of preferences. Four ‘layers’ are used to measure the extent of opportunity for employment: 1. those factors over which an individual has no control (such as age); 2. those factors over which someone has no control at present (such as educational achievements); 3. those factors which someone can change in the near future but where high costs of various kinds might be experienced (such as place of residence); and 4. those factors which someone could change easily (such as starting voluntary work).

The researchers start from the position that all non-employment is voluntary and then introduce into their analysis the constraints in layers. If the model predicts that someone has a high probability of being in work, and he or she is not in work, then they are regarded as voluntarily out of work.

The researchers conclude that if the only factors regarded as beyond someone’s control are age, gender, ethnicity, and parental social class, then British Household Panel Study data show that 35% of all men and half of all women not in work are out of work through choice; if health, labour market experience and education are also regarded as beyond an individual’s control, then 20% of men and 31% of women not in work are voluntarily so; and if place of residence and family responsibilities are also regarded as beyond someone’s control, then again 20% of men are not in work voluntarily, but the proportion of women not in work by choice falls to 25%.

The authors recognise that there might be ‘unobserved constraints’. One important constraint is the high marginal tax rate suffered by many people who enter the employment market, and another (less quantifiable) constraint is the uncertainty people experience about the level of change in net income. It is one thing to know that net income will rise very little if you enter employment; it is another not to know how much income will rise or fall, whether free school meals will still be available, or how long it will take to recalculate housing benefit if employment proves to be short-term.

The research reported in these papers is a valuable start. It is to be hoped that the research will continue, and particularly that it will research the effect of these additional two constraints on whether or not individuals enter the labour market, and that it will go on to quantify the effects of the reduction of such constraints which would occur if either Child Benefit were increased, or proportions of tax allowances, tax credits and means-tested benefits were to be paid as nonwithdrawable cash benefits.