Tagged: unemployment

Lower unemployment benefits imply less labour market participation, not more

A blog from Tim Worstall at the Adam Smith Institute claims bizarrely that the way to cut unemployment is to cut unemployment benefits.  That’s like blaming hospitals for broken legs – though I suppose that if there weren’t as many hospitals we’d not get to count the broken legs quite so thoroughly.

I threw together this graph fairly rapidly from OECD figures I had to hand: the axis on the left shows replacement ratios (how much unemployment benefits replace of salary during the first 60 months, assuming housing costs are allowed for), the bottom axis shows labour market participation, the points on the graph are all major OECD countries.  If there is a relationship, it’s in the opposite direction to the claim made by the Adam Smith Institute.  I’m sceptical, however, that there is a direct relationship.  There is no good theoretical reason to suppose that unemployment benefits trump economic and social conditions in determining labour market participation.

ue-and-lmp

Italy proposes a European Unemployment Benefit Scheme

The Italian Government has proposed the introduction of a European Unemployment Benefit Scheme, applicable to all the members of the Eurozone.  The benefit would provide 40% of previous salary for 6-8 months.  The purpose of the benefit scheme would be to provide solidarity when countries experience a surge of unemployment; the amount of benefit payable in a country would be limited to 200% of its contribution to the scheme.

I suspect the scheme is a non-starter.  The Italians have shrewdly put the proposal in a way which is not subject to treaty change or isolated vetoes, but it will be hard to get this past the presumption of subsidiarity.  Some of current arrangements within the Eurozone are based on independent and non-governmental arrangements – the Ghent system, based on trades unions, is used in Denmark, Sweden and Finland  (see this link by Clasen and Viebrock), and  the French scheme, Unédic, is administered by a ‘convention’ of employers and trades unions.   The Italian scheme is noteworthy, however, in three ways.  It shows that there is still continued interest in promoting the idea of a Social Europe.  It  reinforces the view that there is now a two-speed Europe, the Eurozone and the rest.  And it shows how very far the UK is out of step with the rest of the European Union, both in the objectives and in the level of benefit offered.

 

The World Day of Social Justice

The Secretary General of the International Social Security Association has sent out a message to go along with the UN’s World Day of Social Justice on 20th February.  The article begins by reminding us that

social justice is inseparable from the full respect of fundamental freedoms and human rights – including access to social security … It is worth remembering that the legal basis for access to the right to social security is clearly defined in international human rights instruments.

One of the instruments was the  Social Security (Minimum Standards) Convention, 1952 (No. 102).  The UK did not sign up to all of this – it has only ratified sections II-V, VII and X.  That, however, includes undertakings about benefits for unemployment, including an upper waiting period of 7 days (art 24(3)) and a level of benefit that is 45% of previous earnings for a person with two children (arts 22(1), 65 and 66).   On the face of the matter, the UK is currently in breach of its international obligations in relation to the second condition, and has started to breach the conditions of the first with the introduction of Universal Credit.

 

The PAC criticises the Work Programme

The Public Accounts Committee has been reviewing the operation of the Work Programme.  The tone of report is muted – 9 of the 14 members are government supporters – but looking at what they say selectively, there are some strong criticisms nevertheless.  These are all quotations from the report:

Performance  for  people  who  have  completed  the  full  two  years  on  the  Work Programme  has  been  similar  to  previous  welfare-to-work  schemes. (para 1)

The  measurements chosen by the Department distort real performance.  (para 14)

There  is no clear  relationship  between  payment  groups  and  the  nature  of  the  support participants  receive. (para 7)

Data  prime contractors …  are,  on average,  spending  less  than  half  what  they  originally  intended  on  harder-to-help groups. (para 12)

Differential payments have not been effective in preventing contractors from focusing on easier-to-help claimants and parking the harder-to-help clients.(para 7)

Almost  90%  of  Employment  and  Support Allowance claimants on the Work programme have not moved into employment. (para 8)

The number of sanctions  was  increasing …  (para 13)

Previous attempts to develop ‘welfare into work’ programmes suffered from a range of problems. The most obvious was that once contractors commissioned sub-contractors, the government, as principal, lost control of what the programmes were doing. The same has happened again. This time, the DWP told us, no-one would get paid if they didn’t deliver results, but they haven’t, and they are being paid nevertheless.

There is another problem, however, which is more basic.  The reason why welfare to work, and Pathways, and the Work Programme have all failed is that they’ve been trying to do the wrong things in the wrong way. Look, for example, at the lamentable results for ESA claimants, less than half the initial target figures. The reason that ESA claimants don’t move to work is straightforward: they’re too sick. They get ESA because it’s “not reasonable” to expect them to work – that is what the statute says, and the reason they qualified for the benefit in the first place. So it’s not altogether surprising if some sub-contractors have found it’s more practical to get people off their hands by sanctioning them.

New Work Programme stats

A new set of Work Programme Statistics have been released, with rather more detail than the figures I was considering last week.   They show that

  • 1.5 million people have been referred to the Work Programme
  • nearly 300,000, one fifth, have been the subject of ‘job outcome’ payments
  • just under 75,000 of those who have been the subject of ‘job outcome’ payments also were the subject of the maximum number of sustainment payments
  • over 520,000 have been referred back to JCP at the end of the two year programme.

The figures are difficult to make sense of, because it’s not clear from this how this differs from the return to work that might normally be expected, and so what difference the Work Programme has made.  There are about 1.2 million people on JSA.  Half of them will be gone in six months, two thirds in a year, leaving roughly 400,000.  Another 150,000 or more would normally leave benefit in the next year after that, leaving a fifth.  The Work Programme seems to be doing worse than that – but the point of the Work Programme, of course, is that it’s supposed to pick out the people who are likely to be difficult to place, and besides it includes people on ESA who aren’t up for work, so that’s not a fair comparison.

There are other reasons to doubt that the Work Programme is performing adequately.  A recent IPPR report comments that any apparent gains are flattening out; that the results for people who are most disadvantaged are poor; and that the performance is very uneven.  The problems with the Work Programme seem to me to be much more fundamental.   The most basic problem with the programme is the assumption that the problems of unemployment are essentially down to the behaviours and competencies of the job-seeker, so that they can be corrected by addressing individual circumstances.   If that was true, then prior to this sort of programme unemployed people wouldn’t have found jobs; but overwhelmingly, they did.  The biggest group of people without a job are not job-seekers; they’re people on ESA, with severe restrictions of their capacity.  Very few people who are able to work are continuously unemployed for several years at a time; the numbers are increasing, because the jobs aren’t there, but it’s still less than one in thirty.  It seems likely that the Work Programme is carrying a large proportion of deadweight – services to people who, left to their own devices, would find a job anyway.

‘Welfare reform’ has been driven by an obsessive focus on employment as the basis for a benefit system serving millions.   Most benefits, even for people of working age, have nothing to do with people’s work status.  What most people need when they are unemployed is protection of their income while they’re unemployed.  Some people may also need to develop new skills, but that’s a separate issue.  I commented earlier this week that the Work Programme “ties specialised work support to the receipt of benefits, and ends up serving the needs of neither”.   Even if the Work Programme was able to provide intensive work support – there are doubts as to whether it actually does so in practice – there is precious little evidence to show that such work support is appropriate or useful for a substantial majority of unemployed claimants.

A report on Work Programme statistics

Two years ago, I raised questions with the UK Statistics Authority about the figures that had been released on the Work Programme.  My concerns at the time were that

  • political claims had been made for the success of the Work Programme that could not be scrutinised by outsiders
  • it was not clear what the criteria were for success, and
  • the cohort of ‘early’ service users had been selected.

The current crop of figures,  which has information to the end of 2013, is not much better.  It covers only ‘job outcome payments’,  and doesn’t include information about referral, speed of placement, or sustainment payments.  It also doesn’t refer to sanctions for non-compliance, which David Webster has noted is larger than any other outcome of the Work Programme.

The UKSA has just published its assessment of the Work Programme statistics.  They have been critical of two issues: the incomprehensibility of referring to job outcome payments, and  the misleading press releases about the programme, which they think might undermine confidence in official statistics.

 

Another wheeze to cut benefits

The Social Security Advisory Committee is consulting  on the government’s latest wheeze to cut working-age benefits.  This time it’s a proposal to extend the number of waiting days that a benefit is payable, from three days to seven.  This will ‘save’ (that is, cut benefit by)  £40-50 per claim.  Benefits are already paid fortnightly in arrears, so in practice this will mean that people will typically have to wait three weeks for a payment.  (The references to ‘days’ and ‘weeks’ are all anomalous, because the government is supposed to be moving to monthly benefits.)     Those who are desperate will have to apply for a ‘short term benefit advance’.

The policy is due to start in October.  The equalities  assessment notes that 82% of those affected by the change to Employment and Support Allowance have protected status in terms of the Disability Discrimination Act.   Much good may it do them.

 

 

"Help to work", in inverted commas

The Government’s ‘Help to Work’ scheme is introduced today. It will require people who’ve been unemployed for two years to sign on, to go on a six-month community programme, or to get intensive support.

The evaluation of the pilot scheme was published in December 2012. It seems to show that the scheme does nothing to get people back to work, but it does claim that the pilots shifted some people off benefits.  The statistics are in a different report published a year later; the DWP apparently needed the time to find a way of presenting  the numbers so that it would  look like something positive had happened.  These stats are the source of Esther McVey’s claim that the programme speeded up re-employment by 9 days, not much of a return for a £300m programme.   The details are capably summarised, as ever, by Jonathan Portes for the NIESR.

Work for your benefit, again

There’s not much new to say about George Osborne’s announcement, for the party faithful, that people on benefits will be required to ‘work for their benefit’.  That, after all, is the name of the scheme in Labour’s Welfare Reform Act, currently attached to a range of schemes including the Work Programme, Mandatory Work Activity, the New Enterprise Allowance,sector-based Work Academies and Skills Conditionality.

The announcement relates to people who are on JSA for more than two years.  This number is creeping up, of course, and currently it stands at just over 210,000.  From the NOMIS figures it’s possible to identify how many people have been on benefits long term.  The clamaint count stood in August (slightly short) at 1,386,775 people.  Of those, 970,520 had been unemployed for less that a year.  210,685 have been on JSA for two years or more.  69,050 have been on JSA for three years or more.  After four years, it is 24,900.  After 5 years, it is 9,400 – nearly double what it was three years ago, but still far less than most people imagine.

The difference between year 2 and year 3 is worth noting.  Two thirds of people who have been unemployed for two years will not be claiming benefits a year later.  That raises an obvious question – are the people who are subject to work schemes really more likely to work as a result?  – and the answer, as Jonathan Portes has consistently argued, seems to be: no.

How sanctions can make people less likely to work

It often happens that the people I talk to can tell me far more than I can tell them, and today was another of those days: I was discussing welfare reform with a group of specialists on work and employability support.  People who don’t have a settled way of life are not outstandingly employable, and to get them to the point where they stand a chance of holding down a job,  the first task is to make sure that they can have a regular lifestyle.   However, claimants are also liable to routinely sanctions when they fail to comply with DWP instructions, to turn up to meetings, or to take the actions that are required of them.  Predictably,  people who don’t have a settled way of life aren’t very good at jumping through the hoops or complying with instructions, and it follows that they’re particularly likely to be sanctioned.  The most immediate effect of a sanction is that the rent doesn’t get paid; and if a claimant gets evicted, everything else necessary for employability collapses.  So the agencies who are supporting the claimants have to spend their time trying to save people from being evicted, and that – rather than positive support – is where their effort is currently focused.  The effect of current policy in such cases is not then to encourage people into work, but to destroy any reasonable prospect that they might be employed in the foreseeable future.