Employing new ideas

Welfare reform proposals are like buses,’ an official recently told me.
‘You wait for ages and then lots of them come at once.’ After years of
relative quiet, a succession of government initiatives has pushed
welfare and employment issues back into the spotlight.

It
is not hard to see why. It is a sign of the government’s success that
unemployment, once so prominent, has sunk so far down the public’s list
of concerns over the last decade. Britain has seen its level of
employment rise to the highest in the G8. Unemployment has fallen to
its lowest levels since the late 1970s. Long-term joblessness has
dropped by almost 75 per cent.

But challenges remain.
Unemployment among lone parents remains high by international
standards. The numbers claiming long-term incapacity benefits (IB) have
remained stubbornly around the 2.5 million mark despite the fact that
as many as 1 million recipients may be able to work. Jobcentres remain
better at getting people into jobs than keeping them there: 40 per cent
of people who move off the jobseekers allowance (JSA) into work are
back on benefits within six months. Furthermore, career progression for
those at the bottom of the labour market has improved too slowly. As a
result, Britain has developed a growing working poverty problem. Half
of poor children come from working households, up 10 per cent on a
decade ago.

Other countries with strong employment records –
most notably the US – have faced similar difficulties. They stem partly
from the vagaries of the economic cycle, local labour market conditions
and employer attitudes. But government policy also matters.

Four
issues stand out. First, policy until recently has not placed strong
enough work conditions on groups like lone parents or IB claimants and
voluntary programmes have worked poorly, with single digit take-up
rates.

Second, despite improvements, 4.6 million adults still
lack qualifications. Half of them are unemployed or inactive. In a
period of rising prosperity, their employment levels have actually
fallen.

Third, financial incentives to make work pay have not
kept pace with rapid rises in means-tested benefits for the poorest
families. This approach has delivered historic cuts in child poverty.
But incentives to work, while improved, have grown less sharp over time
for second earners.

Fourth, jobcentres lack the incentives and
capacity to help people retain their jobs and progress. Staff are
rewarded only for getting people into jobs – regardless of whether they
keep them or not. Their ability to use money flexibly to tailor support
to the needs of jobseekers is limited. Coordination between jobcentres
and the existing training system, although improving, is inadequate.

These
challenges matter politically. In welfare, the Conservatives see an
opportunity not only to exploit fears about economic insecurity,
delivery and fraud but also to put Labour on the wrong side of a
fundamental argument about families and the nature of the welfare
state. Recent evidence suggests that public attitudes on poverty are
hardening, with only a third in favour of more spending on welfare
benefits, down from almost 60 per cent in 1991.While almost
three-quarters of the electorate remain concerned about the gap between
rich and poor, the majority of that group – 45 per cent of all voters –
support welfare only if it is linked to responsibilities.

David
Cameron is seeking to win over this middle ground by framing welfare as
a debate that pits a ‘Labour approach’ of top-down bureaucracy and
wasteful handouts that rewards idleness and discriminates against
traditional families against a work-focused ‘Tory approach’ modelled on
the ‘Wisconsin’ system. This would make benefits almost totally
conditional on work, use the charitable and private sectors to improve
performance and would invest the putative savings to boost tax credits
for working couples.

The Tory position should worry
progressives. Beyond its electoral impact – for a variety of reasons,
Labour’s poll lead on unemployment issues has fallen to its lowest for
almost 20 years – by tarring help for the poorest as inherently
wasteful and anti-family, Conservative policy may have the effect of
chipping away at public support for the cherished goal of eradicating
child poverty.

The government is acutely aware of these
challenges and has introduced a dizzying array of initiatives to
address them. To name but a few, it has announced the introduction of
compulsory work-focused activity for all new IB claimants and lone
parents with children over seven and has introduced new in-work
benefits. It has begun further expansion of the role of the private and
non-profit sector in delivery and has launched initiatives to improve
the accuracy of the tax credits and benefits. It has announced an
advancement agency to give careers advice to the low-skilled. It has
greatly expanded training and employers’ involvement in it. And it has
brokered deals with major companies to open up more jobs for the
disadvantaged.

These are all significant steps in the right
direction and should be welcomed. But four extra ingredients are needed
if they are to have a transformative effect.

The reforms to IB
should be extended to cover everyone who currently receives the benefit
and is capable of work. They currently apply only to new claimants and
the under 25s.

The career progression offer should be
broadened and made more proactive. A passive careers information
service similar to current programmes is unlikely to enjoy more than
limited success. Evidence suggests that the advancement service must
actively seek out and follow up with workers if it is to engage the
low-skilled. This will have the most impact if it is accompanied by
initiatives that help create promotion opportunities, such as career
ladders.

The value of in-work credits and benefits should be
further increased to sharpen the incentives for second earners to find
work. One option would be to follow the ippr proposal of raising the
value of the working tax credit by a third and extending some personal
allowances.

And finally, the government should pursue
thoroughgoing reform of the Jobcentre Plus agency. Staff should be
given formal incentives to prioritise job retention and much greater
flexibility over how they spend money to tailor services to
individuals. Money should follow individuals, as in the training
system. A much greater integration of employment and training services
should be pursued – including possibly a merger of parts of the system.

Besides being practical and critical to the accomplishment of
its policy goals, this reform agenda could unlock the politics of
employment and poverty for the government. For it will allow it to
focus debate on the extreme, if not downright nasty, nature of some of
the Tory proposals. Voters support tying rights to responsibilities.
But they also favour generosity where people face serious barriers to
work such as disability. And they remain worried about poverty.

A
‘Wisconsin’ system may make for a good soundbite but it is not so clear
that the public will be keen on the small print of time-limited
benefits, high barriers to claiming and lack of any support for job
retention. Moreover, Conservative proposals are silent on key issues of
practical and political salience. For instance, what would they do on
skills and advancement? Or about those who cannot find work? They do
not say.

Pushing welfare reform further will enable the
government to capture the centre ground on this crucial issue, leaving
the Conservatives nowhere to go but to the extremes. It gives them the
opportunity to transform the debate into a fight about good jobs versus
McJobs, about giving people the skills to build permanent
self-sufficiency versus just trying to dump them off of benefits, about
real change versus sound bites.

Most importantly of all,
however, it will give the government opportunity to change lives. It’s
an opportunity that should be grasped with both hands.

Welfare reform proposals are like buses,’ an official recently told me. ‘You wait for ages and then lots of them come at once.’ After years of relative quiet, a succession of government initiatives has pushed welfare and employment issues back into the spotlight.

It is not hard to see why. It is a sign of the government’s success that unemployment, once so prominent, has sunk so far down the public’s list of concerns over the last decade. Britain has seen its level of employment rise to the highest in the G8. Unemployment has fallen to its lowest levels since the late 1970s. Long-term joblessness has dropped by almost 75 per cent.

But challenges remain. Unemployment among lone parents remains high by international standards. The numbers claiming long-term incapacity benefits (IB) have remained stubbornly around the 2.5 million mark despite the fact that as many as 1 million recipients may be able to work. Jobcentres remain better at getting people into jobs than keeping them there: 40 per cent of people who move off the jobseekers allowance (JSA) into work are back on benefits within six months. Furthermore, career progression for those at the bottom of the labour market has improved too slowly. As a result, Britain has developed a growing working poverty problem. Half of poor children come from working households, up 10 per cent on a decade ago.

Other countries with strong employment records – most notably the US – have faced similar difficulties. They stem partly from the vagaries of the economic cycle, local labour market conditions and employer attitudes. But government policy also matters.

Four issues stand out. First, policy until recently has not placed strong enough work conditions on groups like lone parents or IB claimants and voluntary programmes have worked poorly, with single digit take-up rates.

Second, despite improvements, 4.6 million adults still lack qualifications. Half of them are unemployed or inactive. In a period of rising prosperity, their employment levels have actually fallen.

Third, financial incentives to make work pay have not kept pace with rapid rises in means-tested benefits for the poorest families. This approach has delivered historic cuts in child poverty. But incentives to work, while improved, have grown less sharp over time for second earners.

Fourth, jobcentres lack the incentives and capacity to help people retain their jobs and progress. Staff are rewarded only for getting people into jobs – regardless of whether they keep them or not. Their ability to use money flexibly to tailor support to the needs of jobseekers is limited. Coordination between jobcentres and the existing training system, although improving, is inadequate.

These challenges matter politically. In welfare, the Conservatives see an opportunity not only to exploit fears about economic insecurity, delivery and fraud but also to put Labour on the wrong side of a fundamental argument about families and the nature of the welfare state. Recent evidence suggests that public attitudes on poverty are hardening, with only a third in favour of more spending on welfare benefits, down from almost 60 per cent in 1991.While almost three-quarters of the electorate remain concerned about the gap between rich and poor, the majority of that group – 45 per cent of all voters – support welfare only if it is linked to responsibilities.

David Cameron is seeking to win over this middle ground by framing welfare as a debate that pits a ‘Labour approach’ of top-down bureaucracy and wasteful handouts that rewards idleness and discriminates against traditional families against a work-focused ‘Tory approach’ modelled on the ‘Wisconsin’ system. This would make benefits almost totally conditional on work, use the charitable and private sectors to improve performance and would invest the putative savings to boost tax credits for working couples.

The Tory position should worry progressives. Beyond its electoral impact – for a variety of reasons, Labour’s poll lead on unemployment issues has fallen to its lowest for almost 20 years – by tarring help for the poorest as inherently wasteful and anti-family, Conservative policy may have the effect of chipping away at public support for the cherished goal of eradicating child poverty.

The government is acutely aware of these challenges and has introduced a dizzying array of initiatives to address them. To name but a few, it has announced the introduction of compulsory work-focused activity for all new IB claimants and lone parents with children over seven and has introduced new in-work benefits. It has begun further expansion of the role of the private and non-profit sector in delivery and has launched initiatives to improve the accuracy of the tax credits and benefits. It has announced an advancement agency to give careers advice to the low-skilled. It has greatly expanded training and employers’ involvement in it. And it has brokered deals with major companies to open up more jobs for the disadvantaged.

These are all significant steps in the right direction and should be welcomed. But four extra ingredients are needed if they are to have a transformative effect.

The reforms to IB should be extended to cover everyone who currently receives the benefit and is capable of work. They currently apply only to new claimants and the under 25s.

The career progression offer should be broadened and made more proactive. A passive careers information service similar to current programmes is unlikely to enjoy more than limited success. Evidence suggests that the advancement service must actively seek out and follow up with workers if it is to engage the low-skilled. This will have the most impact if it is accompanied by initiatives that help create promotion opportunities, such as career ladders.

The value of in-work credits and benefits should be further increased to sharpen the incentives for second earners to find work. One option would be to follow the ippr proposal of raising the value of the working tax credit by a third and extending some personal allowances.

And finally, the government should pursue thoroughgoing reform of the Jobcentre Plus agency. Staff should be given formal incentives to prioritise job retention and much greater flexibility over how they spend money to tailor services to individuals. Money should follow individuals, as in the training system. A much greater integration of employment and training services should be pursued – including possibly a merger of parts of the system.

Besides being practical and critical to the accomplishment of its policy goals, this reform agenda could unlock the politics of employment and poverty for the government. For it will allow it to focus debate on the extreme, if not downright nasty, nature of some of the Tory proposals. Voters support tying rights to responsibilities. But they also favour generosity where people face serious barriers to work such as disability. And they remain worried about poverty.

A ‘Wisconsin’ system may make for a good soundbite but it is not so clear that the public will be keen on the small print of time-limited benefits, high barriers to claiming and lack of any support for job retention. Moreover, Conservative proposals are silent on key issues of practical and political salience. For instance, what would they do on skills and advancement? Or about those who cannot find work? They do not say.

Pushing welfare reform further will enable the government to capture the centre ground on this crucial issue, leaving the Conservatives nowhere to go but to the extremes. It gives them the opportunity to transform the debate into a fight about good jobs versus McJobs, about giving people the skills to build permanent self-sufficiency versus just trying to dump them off of benefits, about real change versus sound bites.

Most importantly of all, however, it will give the government opportunity to change lives. It’s an opportunity that should be grasped with both hands.