SMF’s latest report Vicious Cycles: Sustained employment and welfare reform for the next decade focuses on the direction of welfare reform for the next decade. Within six months of leaving Jobseeker’s Allowance for work, 40% of claimants are back on benefits. This vicious cycle is costly to both the individuals themselves and to the taxpayer. Rising unemployment will make these problems still more pressing.
The existing system does little to identify those stuck in revolving door employment, despite the fact that these people clearly have unmet support needs. Meanwhile, the most disadvantaged jobseekers usually have to wait for 12 months before they receive intensive employment support. This waiting period reinforces jobseekers’ disengagement from the labour market, raising the ultimate costs of helping them into work and adding to the benefit bill. To tackle these challenges, this report makes the following recommendations:
- From the first day of their benefit claim onwards, multi-client groups of jobseekers should be served by providers who are paid by results, using an escalator payment model.
- A unified employment service would replace existing services provided under Jobcentre Plus, Pathways to Work and the Flexible New Deal.
- Information on the proportion of the past two years that a person has spent unemployed should be made available to ensure that those who need help to sustain employment get it.
- Sustained employment outcome payments should be made according to the proportion of the year a person spends in employment after first finding work.
The proposals outlined in this report offer the prospect of substantial improvements in both the cost-effectiveness and fairness of the welfare-to-work system of the future. Over the coming decade, tackling high unemployment and improving public sector efficiency will dominate the agenda: this report outlines the welfare reform solution to both.