TWO years ago next month, Helen Liddell began an address to the Scottish Labour Party conference in Dundee by recalling a previous speech she had made in the city. It had been at a rally against unemployment, she said, back in the dark days of the Tory winter. Liddell reminded conference that unemployment in Dundee had fallen by almost a third under the Blair government and that the city had become world famous as a beacon of innovation. She pointed to medical research being conducted at the University of Dundee and the prospect it held for a cure for cancer, then highlighted the success of NCR, whose ATM cash machines can be found all over Europe. Finally she talked about a new-found confidence which was turning round generations of decline. ?It's a long way, ? she said, ?from Oor Wullie and The Broons?.

Two years on, the figures seem to back up what Liddell said that day. In the story Dundee is writing for itself, it does appear to be booming. In the fields of technology and medicine its reputation is, indeed, impressive. Its creative industries are world beaters and elsewhere in Scotland, the story appears to be the same. Statisticians report that unemployment is at a 30-year low and First Minister Jack McConnell tells us Scotland must foster a culture of entrepreneurialism, the better to lift the country into the New Enlightenment.

Walk into a job centre today and you'll see that the business of finding work has been given a cool 21st century sheen appropriate to this climate. Jobseekers stand at consoles that wouldn't look out of place on the bridge of the USS Enterprise and bring up vacancies simply by touching a screen. The buroo looks more like a building society now and, if the statistics are right, finding a job in 2005 is simply a matter of showing up.

That's the theory, but what's the real picture? Why do we still see the "scrounger" headlines and who are they aimed at? What are the effects of the so-called benefits culture and does it even exist?

How do the thousands on incapacity benefit - "the sick" - skew the statistics? And what kinds of jobs are out there anyway?

I have come to Dundee to try to answer some of those questions and gain some insight into life on the dole in Scotland today. I want to chase down a few myths, see if I can square the new city with the old one and ask whether the culture of unemployment has also had a 21st-century makeover - or whether it remains rooted in a world of low expectation and industrial malaise that has little changed since the last time Liddell crossed the Tay Bridge to speak.

At Dundee's Gellatly Street job centre, three burly but polite security guards mind the door. Benefits claimants also sign on here but the days of reinforced plexiglass and harassed-looking staff have gone. The first thing I notice is how young everyone looks. The second is how busy it is. I spoke earlier to Glasgow University urban studies lecturer Nick Bailey and he's already put me right on a few things.

Unemployment at a 30-year low? "It's a myth, " he says, "that's often repeated but not true. This country is very good at hiding large chunks of the unemployed through statistics. In Dundee, there are almost three times as many people on sickness benefit as are officially recognised as unemployed."

Some 78,000 people are claiming benefit in Scotland, putting unemployment levels at around 5.5-per cent.

However, if you add in those considered sick or disabled, the number of "economically inactive" Scots rises sharply. That second number was 266,000 at the last count. Already, the picture is changing.

Across town, 40-year-old Kay Millar is visiting the Dundee Employment and Aftercare Project (DEAP) - which aims to help unemployed people back into the workplace - for only the second time. She's been unemployed for "five or six years" and her last job, as a barmaid, lasted only two days - long enough for her to realise she was only pounds-4 better off a week after she'd paid her rent. Before that she worked in a shop but, again, wasn't given enough hours to enable her to pay her rent. She became depressed and was put on medication. She still takes anti-depressants now and again, "but I'm not as bad as I used to be".

Millar's son lives with her and works part-time for the Post Office. Her brothers and sisters all work and there's no history of habitual unemployment in the family background. Nevertheless, she's spent half a decade out of work. Why come back now?

"I'm sick of sitting in the house all the time, " she says. "It's boring, doing the same thing every day, so I thought I'd go and get a job. Could help moneywise as well."

What would she say to those who would call her lazy? "I'd say I'm not. I mean I have tried, I've been down to the buroo. It's not all that easy just to go and get a job. I tried for loads and loads but just never got any. Or they said, 'There's not enough hours so you cannae do it because of your rent or you cannae do it because of this'; I have been trying."

Stephen McCardle is trying, too. A DEAP regular, he has turned up today wearing a shirt and tie. He always carries a pen in his pocket in case he needs to jot down a number from a job advert. He worked in a chemist's until a year ago when he was dismissed after being accused of stealing money.

He has found unemployment "very hard". "I went downhill, " he says, talking quietly and slowly. "I suffered from depression. After losing the job I took a nose-dive. I was on anti-depressants, I was getting panic attacks, I just felt like everyone was talking about me."

McCardle says he didn't steal the money, and the experience has left him with a deep reservoir of bitterness. It's as if he sees unemployment as a personal affront and I sense a real anger behind his determination to find a job.

People talk about a benefits culture in Scotland, by which they mean a pool of unemployed people who have no inclination to come off benefits and who view unemployment as a way of life. Stirling University psychologist Dr David Fryer has studied the effect of unemployment on mental health.

Comparing data on jobless people in 1930s Vienna and 1990s California, he found that the experience of unemployment is constant across the years.

Wherever and whenever it happens, it is "demeaning, intrusive and unpleasant".

"There's very little evidence that there are people who are quite happy to lounge around on benefits, " he says. "The idea that there's a large number of people who are happy to be on the dole appears to be a social myth."

Ask unemployed people, however - Kay Millar, Stephen McCardle - and it's a different picture.

They do witness the benefits culture of the tabloid headlines but believe that its roots lie in drugs, not laziness.

All the unemployed people I talk to have either direct or indirect experience exposure to drug use. For McCardle, it came when he worked in a chemist doling out methadone to unemployed addicts. For Millar it was through a friend who sold everything to fund her cocaine addiction, then lost her children into care.

For Michael McCallum, it was through gangs.

McCallum joined the Mid Craigie gang - known as "the Mid" - when he was "nine or 10". He thinks he found in them a sort of surrogate family; he's not really sure. What he does know is that it nearly killed him - certainly it killed three or four of his close friends. In the end, he got out.

"I saw the damage it was doing. I was getting involved in drugs, crime. I thought, this is not the way I want to live, not the person I want to be. I just took a look around me and saw what it was doing to my friends. They were getting hooked on the drugs - crack, smack."

He still sees old gang members around Dundee but says they often don't even recognise him.

"They're too far gone. They're in their own little world. They get their drugs every day and they're happy with that life. I've got more life in me. It's a lot easier to sit on the buroo and get benefits than quit your drug habit, do eight hours a day and get a steady job. To them, they think that's all right.

"I tell them, 'You should give up that shit cause it's going to kill you'. It's like stoatin' your head off a brick wall because their lives have become a colosseum of ruin." Sparky and unbowed, Michael McCallum has a way with words; some of his friends say he should become an actor.

Leaving the city centre, I head for Whitfield, a peripheral housing scheme notorious in the 1970s and 1980s for its drug problems. Stephen McCardle grew up here but moved away 12 years ago. Much of the area has since been flattened and rebuilt, but it's still in the top five areas in Scotland's index of deprivation. Today it has a couple of schools, a supermarket and a police station.

There's also an activity complex, where I meet 23year-old Ronnie Cooper, a former paratrooper. He was previously homeless after being discharged from the army and now lives in the neighbouring Douglas scheme. He's dropped in to talk to Susan Clark, a member of the Action Team For Jobs, which offers practical help and one-to-one interviews.

Cooper is being primed for an interview for a bank job soon. He's even been fixed up with a suit.

Like Millar and McCardle, Cooper suffered from depression and has spent time "on the sick". He says he needs to "pay my way", a feeling which comes from his upbringing: his father was also in the army and he grew up in the sheltered surrounds of a barracks. No noise, no drugs, no violence.

"People say there's no jobs but that's bollocks, " Cooper tells me. "People have said that to me and I've gone out the next day and got a job."

He's worked on building sites, in pubs, as a security guard, but nothing's ever lasted long. "I have a problem with authority, " he admits. His experience of job centres isn't good either, which is why he prefers to speak to Clark and her colleagues.

But he's in a rut and he's sick of it. He's started attending a writing course, putting down stories from his life or things he's made up or just what's in his head. As with Stephen McCardle, there's anger inside him. We talk in the busy cafe, now full of school kids eating chips out of plastic containers.

When a loud dispute breaks out at a nearby table, Cooper's eyes flash towards it. His isn't a stare I'd like to be on the end of for very long.

Dr David Fryer argues that the job market is changing; the line between employment and unemployment is becoming blurred. Many of the jobs that do exist he characterises as insecure and low quality. He calls this "the new flexible labour market" but I see it as an ugly place that brings with it stresses which are commensurate with unemployment.

In that respect, people like Ronnie Cooper and Michael McCallum are in a lose-lose situation:

frozen out of the quality end of the job market by a lack of skills, they risk entering a spiral of part-time, insecure jobs.

I leave the city of jute, jam and journalism - or cancer research and cash machines - with no clear picture in my head. Instead there's merely a collage of facts and impressions. Drugs have created a benefits culture in Scotland, but the Rab C Nesbittstyle loafer is a social myth. Before your wallet, it's your mental health that's the biggest loser should you become unemployed today. Jobs are everywhere - but security? A chimera.

The Scottish Labour Party conference returns to Dundee next month. More speeches, more applause, more fine words carrying over the Tay. If Helen Liddell was called to reprise her themes of two years ago she could indeed argue that we have come a long way from Oor Wullie and The Broons.

But in which direction? If we think that unemployment is yesterday's problem, tomorrow's dawn brings trouble.