SMF calls for the entire welfare to work system to be contracted out to tackle revolving door of "low pay, no pay"

In a new Social Market Foundation report launched on Friday 10th July, the think tank says that the Government's efforts to get people off benefits and into long term work are failing. It argues that the solution is not more piecemeal schemes but a radical overhaul of the structure of welfare-to-work provision. The think tank says that all the existing schemes, including the work of Job Centre Plus, should be contracted out to private, third sector or state organisations. Contractors would be paid strictly by results, with a greater financial reward for finding and keeping in work the most difficult to help clients. Employment advisers would be given the freedom to identify what will work for an individual jobseeker, rather than having to fit them into a one size fits all employment package.

The project focuses on how government can best focus its efforts on ensuring that the work it funds, aimed at getting people off benefits and into work for the long term, succeeds. Administrative data on Jobseeker's Allowance suggests that two out of five claimants who find work are back on JSA within six months - trapped in a vicious cycle of low pay, no pay. In other words the claimant count masks a huge amount of churn involving millions of repeat claimants each year. While the existing system recognises that once an individual has been out of work for a year they will need extra help if they are to get back into long term work, it has no way of identifying those millions stuck in revolving door employment, despite the fact that these people clearly have unmet support needs.

The authors propose a system that can find and help people early on in their benefit claim, rather than waiting until it is too late.

The report's recommendations include:
• Replace the many different employment support programmes provided by Jobcentre Plus, Pathways to Work, Flexible New Deal and others, with a single contracted-out support system for all jobseekers, from the first day of their claim.
• Providers must be paid by results for getting people into sustained employment.
• Providers should be incentivised to find work for the hardest to help by receiving increasing payments for placing a larger proportion of jobseekers into work and thus enabling them to reach the hardest to help.
• Information on the proportion of the last two years a person has been unemployed should be made available to identify and help those stuck in revolving door employment.
• Outcome payments should be made for providers whose clients remain in employment for more than one year.

Commenting on the report, SMF Director Ian Mulheirn said,

"Two out of every five claimants helped to find work are back claiming Jobseeker's Allowance within six months. There is clearly something very wrong with the system as it currently stands. revolving door employment fails the taxpayer who pays for the schemes and the benefits, but it also fails the individuals as the ‘low pay - no pay' cycle has hugely detrimental effects on their future employment chances, income, health and families."

The full report can now be downloaded here (.pdf)

Read the Financial Times coverage of the report here.