Dan Finn analyses the figures DWP published on benefit take-up - after a gap of three years.
After a break of three years the DWP finally published take-up estimates for most means-tested benefits. They were released on the same day as the child poverty data and received less attention than usual. HMRC’s pre-Xmas release of tax credit take-up also attracted little attention.
The data on benefit take-up matters, as was shown in the strength of criticism that forced the previous government to drop its proposal to cease publication of the annual statistical series. Robust estimates of take-up give an insight into the actual delivery of cash transfers and low take-up can exacerbate hardship and undermine public policy objectives.
The latest statistics show that take-up rates did not improve under the Coalition government. In 2012/13 Pension Credit take-up was between 61% and 64%; for Income Support and Employment Support Allowance between 77% and 81%; for Jobseekers Allowance (Income-Based) between 55% and 61%; and for Housing Benefit between 79% and 82%. The only significant change was an estimated 17% increase in take-up of Housing Benefit amongst claimants in work between 2009/10 and 2012/13, possibly reflecting increased rents and the squeeze on wages of the low paid. The separate HMRC ‘central estimate’ of the caseload take-up rate for child tax credit in 2012/13 was 88% dropping to 66% for working tax credit which was received by only 34% of eligible households without children.
Although take-up rates measured by expenditure are higher the evidence shows that many households are not receiving significant amounts which if claimed could help reduce child and pensioner poverty. The increased income associated with greater take-up would also contribute to improvements in other outcomes, such as health, family well-being and employment participation and retention.
Why people do not claim what they are entitled to is the result of the interaction between social and economic circumstances, administrative structures and complex eligibility rules. Findings from a comprehensive evidence review confirm well-established factors that continue to shape non-take-up. The most significant, from the eligible claimants’ point of view, concern the level and accuracy of knowledge about an entitlement and its eligibility rules, linked with the perceived cash value of the benefit when compared to the effort involved in claiming and maintaining entitlement.
Take-up is undermined by poor benefit design and problems with service delivery and it has also been explicitly discouraged for some groups. In particular, increased conditionality, and related sanctions, are designed to get people into work as quickly as possible and as a result, make their claims to benefits relatively short-lived. However, a side effect has been that eligible unemployed claimants have become ‘disconnected’ from the benefits and employment services system.
A further recent factor is likely to have been the character of the public debate and media coverage of welfare dependency, which has increased the stigma attached to those claiming benefits, especially people of working age. Research findings suggest that this stigma is linked to reductions in take-up and a reluctance to claim among potential beneficiaries.
Means-testing will remain at the centre of the British welfare system and take-up of benefits will be a significant factor shaping the impact that welfare reforms will have on future poverty. The introduction of the Single Tier Pension from 2016 may reduce means-testing for many pensioners, but even when it is fully implemented up to a third of pensioners will rely on Pension Credit and support with Council Tax and rent costs. Universal Credit is expected to increase benefit take-up, especially amongst the poorest households, but it seems unlikely that it will not also have negative effects. There is a risk that digital delivery, for example, may reduce and deter take-up amongst people who do not have the skills, capacity or means to navigate digital channels.
Whatever the welfare cuts announced by the Chancellor in the emergency budget the Government itself clearly has the primary responsibility to ensure that potential claimants are informed of their eligibility, the claims process is facilitated and that services are targeted adequately at the many disadvantaged groups (who the evidence shows are less likely to claim their entitlements). The UK’s devolved administrations, councils, health authorities and voluntary organisations will also continue to have an interest in promoting take-up of benefits. Investment in take-up services and targeted campaigns typically generates far more in additional benefit income for poor households than they cost to deliver with the greater income increasing expenditure and economic activity in low income communities.
While there are contending views about why some take-up rates are low it should be possible for all to agree that households on low incomes should be encouraged to take-up the in-work and out-of-work means-tested benefits they are entitled to. It is important, therefore, that the Government monitors the impact of welfare reforms and commits to annual publication of take-up data, including in future Universal Credit, and for the series to estimate take-up of Council Tax support. If Universal Credit does not improve take-up rates, which the Government has claimed, the DWP should consider setting and committing to an independently assessed indicator giving the level of take-up it wishes to achieve, which would help drive future improvements.
Dan Finn is a Professor at the University of Portsmouth and the evidence review which was commissioned by the Joseph Rowntree Foundation can be found here
Dan Finn, Professor at the University of Portsmouth, writes:
In the UK, despite some variation in Northern Ireland, Scotland and Wales, government ministers and Whitehall control most aspects of welfare to work (WtoW) policy. In contrast to other OECD countries, local government plays only a limited role. As the General Election approaches, and following the decision to give more welfare powers to Scotland, the debate on devolving such powers in England has intensified.
The approach of the Coalition Government to WtoW devolution in England has been mixed. City and Growth Deals empower local authorities and partnerships to analyse employment and skills needs in their areas, identify priorities and develop better coordinated approaches. But such negotiated deals are a comparatively weak form of devolution and it is unclear whether they will translate into substantive changes, not least due to the conditional commitment of government departments.
The DWP, in particular remains wedded to a strong ‘centralised’ approach to localism, worried that national priorities should not be eclipsed by divergent local priorities or capacities. Local flexibility given to Jobcentres is constrained by national targets and intended only to complement mainstream activity. Joint working is largely restricted to provision for people ineligible for or poorly served by existing programmes. Greater flexibility has been extended only through centrally-commissioned payment-by-results programmes delivered by prime providers who are themselves weakly connected with local authorities.
Calls for more radical approaches to devolution have increased. Many proposals suggest devolution of the Work Programme and other DWP employment programmes, with others proposing the devolution of benefit budgets with local government actors free to set their own benefit conditionality and payment rates.
A Joseph Rowntree Foundation report published today reviews these devolution proposals in the context of the experience of four countries with a strong tendency towards decentralisation – the USA, Canada, the Netherlands and Germany. In each country devolution has involved changes in the financing of welfare benefits and responsibilities for employment and skills programmes. In three of the countries lower tiers of government can design and organise benefits and WtoW service delivery financed through devolved block grants. In Germany devolution has driven improved inter-institutional collaboration between the Public Employment Service and local government.
Comparative findings show that devolution has contributed to service integration, welfare caseload reductions and increased employment, although views differ on the quality of the outcomes secured. It seems that allowing lower tiers of government to fund services, finance benefit payments and implement programmes has encouraged innovation and facilitated better targeted and co-ordinated services. Additionally, it has incentivised lower tiers of government to keep unemployment low.
The success of WtoW devolution relies on managing critical challenges.
The first issue concerns accountability. WtoW policies have national significance and central government is accountable for setting priorities and managing public finances. National objectives often are the basis for negotiated agreements and targets with local government actors, and, as in the USA or Canada, may be monitored and managed through performance reporting systems; central or regional scrutiny and evaluation; and the incentives and sanctions embedded in conditional central funding. Such mechanisms are important to mitigate the potential for misaligned or conflicting incentives that exist in multi-tiered policy systems.
Funding too may be a challenge. Most proposals suggest that where local councils or partnerships in England become responsible for particular claimant groups, especially the most disadvantaged, they should offer higher performance and, by investing some of their own resources, assume greater financial risk for service delivery. The most radical propose that, in return, local areas would receive a significant share of the central benefit expenditure saved. Such an approach is analogous to block grant funding and the model in the Netherlands illustrates how such devolution may be secured whilst retaining strong national benefit entitlements.
There are issues too about the role of the Jobcentre network in any devolution of local WtoW services. The role of Jobcentres is changing but there are variations in how DWP Districts and Jobcentres engage with partnerships, councils and contracted providers. The development of local Universal Credit support services will require greater partnership working and fuller integration of employment and benefits services. Greater devolution of how Jobcentres work with local government is required and more coherent partnership agreements, as exist in Germany, would help facilitate integrated and more locally accountable service delivery.
A further challenge concerns differential capacity in terms of management, resources, and the appetite for devolution amongst local stakeholders. It would not be feasible for most areas to immediately acquire the DWP’s expertise in designing payment, procurement and performance management systems. Canada’s differential approach to ‘labour market agreements’ and the use of state-based ‘waivers’ in the US allowed provincial and state governments to negotiate and test different levels of responsibility before moving to fuller devolution. This differentiated and experimental approach to WtoW devolution should be an explicit national policy for City and Growth Deals, rather than a tacit local objective.
A final challenge concerns equity. There is a potential conflict between the norm of equal treatment and devolution of employment services or benefit entitlements. Variety should be accommodated but underpinned by national minimum standards, especially where programmes are mandatory. Devolved budgetary systems must also balance performance-related incentives and sanctions with the necessity for maintaining investment in and provision of support for all welfare claimants, especially in areas with weak labour markets or which experience ‘economic shocks’.
Dan Finn is a Professor at the University of Portsmouth and the JRF report can be found here.
There are more clues emerging about where we are in the recovery as far as job-filling is concerned. The Bank of England has been looking at trends in job to job moves. So has the Office for National Statistics, in its October Economic Review. The Bank looked at the headlines, while the ONS has dug more deeply.
The headline finding is that the proportion of those in employment who move to new jobs each quarter is still well below pre-recession levels. In the last three months before the recession began, 2.6% of people in jobs moved to new jobs. In the latest quarter, 2.2% did. While this is a substantial recovery from the pit of the recession, when the proportion of those moving to new jobs fell to 1.7%, it still remains well below where it was.
To put this another way, the proportion of workers moving jobs fell by 35% in the recession. It has since recovered, but remains 15% below pre-recession levels.
Chart 1 shows the trends in the rate at which people find new jobs for those who were already in work, were unemployed (looking for work and available for work) or were inactive (not looking for work and/ or not available for work). I have put these on a common scale with the pre-recession job-finding rate at 100, so the lines represent the per cent of the Jan-Mar 2008 rates for all three groups.
The recession collapse in the rate for those moving from one job to another was larger than the change for those moving from unemployment or from inactivity into work. Perhaps unsurprisingly, all the trends share in both the recession and the recovery, with the timing of changes very similar.
The rates for the inactive are rather more jumpy (technically, volatile) than the others, which could be randomness as well as different changes affecting different groups that are inactive, such as students, the long term sick, and returners from caring for family.
However, when we go a little more deeply into the figures, the relationship between the job-finding rates for the employed and the unemployed look remarkably stable over the period since 2003 (the period ONS give us the figures).
Chart 2 shows the job-finding rates for employed (along the bottom) and for the unemployed (up the side), with the line representing the path over time. Starting from the top right of the chart (2003), job-finding rates slide down towards the bottom left (i.e. rates fell for both the employed and the unemployed), recover slightly, slide again (the recession) and then recover.
A number of things stand out from this.
First, the data is almost a straight line – with a coefficient of determination of 0.97. This is almost a perfect fit, and shows that the changes over the recession are consistent with those both before and after.
Secondly, it is clear that the decline in job-finding rates began well before the recession, with rates falling between 2004 and 2006 before seeing a mini-recovery in 2007-8. Some have attributed the fall in job-finding rates among the unemployed as being due to issues inside Jobcentre Plus at the time, followed by a re-imposition of the full JSA regime with tighter conditionality.
However the third thing that stands out is that the falls in job-finding rates are remarkably similar between those in-work and those unemployed. Does the parallel fall in job to job moves disprove the theory that changes for the unemployed were being driven by Jobcentre Plus? Possibly, but some of those job to job moves may actually be people moving through unemployment (as they are only surveyed every three months).
Fourthly, finally, looking across the whole period, it is striking that job finding rates have only regained half of the ground lost on the boom years of the early 2000s. In terms of job-finding, we are still a long way from recovery.
Given that the job-finding rates for the employed and the unemployed are closely linked (and those for the inactive slightly less so), are they linked closely to other economic indicators, and what does this mean for economic management and for expectations for programmes? Watch this space…
But, these figures are not the highest published working age figure - that would be 75.9% in Summer-Autumn 1974. Even leading up to the 2008 recession, the employment rate peaked at 74.9%.
So, the latest 'records' are about two percentage points below those before the recession.
Why are employment rate records being claimed? The answer is that what is meant by 'working age' changed in 2010 when women's state pension age started being raised towards 65 - a process that will not be complete until 2018 - after which pension ages will rise for both men and women.
Before the recession, employment rates were calculated on the state pension age that was current at the time - 60 for women and 65 for men. Since 2010, figures have been published on the basis that retirement is at 65 - so is automatically lowered because women's state pension age is not 65 yet.
Chart 1: Employment rates on age definition used up to 2010 and currently
We estimate that around 1 percentage point of the recent employment and inactivity rate rise is due to state pension reform, not any other part of welfare reform. There is another 1 percentage point rise in employment rates, and fall in inactivity rates, 'baked in' due to further pension reforms.
In 1995, legislation was passed to equalise state pension ages at 65 between 2010 and 2020. This process started on time, and was in train before the 2010 election. The Coalition Government legislated to speed up the change so that pension ages will be equalised at 65 in 2018, and then pension ages will start to rise to 66 in 2020.
This means that we are half way through the process of equalising pensions at 65 by 2018.
Chart 2 shows the gap in employment rates between the 16-64 working age measure and the current pension age measure. Before the implementation of pension reform, employment rates on a 16-64 base average 2 percentage points below those on a current pension age (then 59/64) basis. As pension reform has come into force, the employment rate gap fell to 1 percentage point.
Chart 2: Gap between 16-64 and 16-current State Pension Age employment rates
Chart 3 shows the position for economic inactivity (retired people are included as economically inactive). It shows the other side of the coin to that for employment rates. We can conclude that 1 percentage point of the fall in 16-64 inactivity rates is due to pension reform, and there is another 1 percentage point to come when pension equalisation is completed in 2018.
Chart 3: Gap between 16-64 and 16-current State Pension Age inactivity rates
So, is it fair for the Government to claim employment rate and inactivity rate records? It is clear that the previous Government's record should be judged against the working age measure then in force, including the start of implementing pension reform, while this Government's record should be judged against the (moving) current state pension age.
Therefore, we haven't yet achieved record employment rates. We are not far off, but not there yet. If Pension Reform (implemented by Labour and accelerated by the Coalition) is part of welfare reform, then these changes are due to welfare reform, but this isn't the message given by the media - it's about being tough on all working age claimants.
Paul Bivand compares US and UK performance in the long-term unemployed getting sustained jobs
Only 11 percent of those who were long-term unemployed in a given month returned to steady, full-time employment a year later.
This is the headline that has been appearing in the media all across the United States - but usually shortened. It comes from a Brookings Institution study looking into whether the long-term unemployed have the same impact on earnings and inflation as the short-term unemployed do. It finds that the long-term unemployed have about a one in ten chance of moving into employment in the next year.
So, how does this compare with performance in the UK Work Programme?
The US study uses as a data source the US equivalent to the Labour Force Survey, so their long-term unemployed are equivalent to our ILO unemployed (not just those on Jobseeker’s Allowance).
What the US team means by ‘long-term unemployed' and 'steady, full-time employment' is given by a footnote. This says:
“Steady employment in this context means that
For comparison, Work Programme Job Outcomes for the main group of jobseekers aged 25 or older are defined as:
So, the US study includes people who had been unemployed for half the duration of the JSA 25+ group, and the definition of a job is four (consecutive) months not six (total) months. This looks as though the US group are significantly closer to the labour market than Work Programme participants (or, previously, New Deal participants).
How do Work Programme figures compare? For the JSA 25+ group, across the programme, we estimate an equivalent figure would be 15%, rising in the latest figures to 18%. For JSA claimants aged 18-24, the average would be 18.5%, rising recently to 24%.
These figures, for longer term unemployed, and using a more testing Job Outcome definition, are much higher than the US findings.
What is evident in addition, is that the UK does not have the same issue as the USA of people leaving unemployment to economic inactivity. In the US study, more than one third (33.7%) of the long-term unemployed have become inactive.
So, there are big US-UK differences.
Behind these numbers, there are also big differences in the support and requirements that are placed on long-term unemployed people. In the USA during the recession, workers eligible for unemployment insurance could receive it for up to two years. As a condition of their benefit, claimants have to record what they have done to look for work in a ‘work search log’ and submit it as part of the benefit payment process. The precise process differs between states, as the USA is a federation, but a work search requirement is required for federal funding. It is apparently normal in the USA for the submission of the worksearch log to be electronic, and subject only to face to face meetings for occasional audit checks. (Those who exhaust entitlement to unemployment insurance may be eligible for Food Stamps, which have their own requirements – which are different in different states, but broadly require participation in programmes.)
In the UK by comparison, worksearch requirements are very strong. The normal UK requirement by both Jobcentre Plus and the Work Programme is for face to face meetings and sight of jobsearch activity, backed up by evidence. Alongside this, there is usually access (for jobseekers at least) to regular adviser interviews and support to look for work. There is strong evidence that ‘activation’ support of this kind for unemployed people, particularly the long-term unemployed, helps to keep people close to work and improve the speed at which people get back into work.
So, UK (or perhaps, GB, as Northern Ireland differs) performance for the long-term unemployed exceeds that found in the USA. Various factors can account for this, but work search monitoring is both more stringent in the UK and involves personal interaction. So if 'doing better than nothing' means doing better than the USA, then the Work Programme clearly meets that test. The evaluation of the programme may also, in due course, help us understand whether it’s more effective than the support available through Jobcentre Plus.
Are the Long-Term Unemployed on the Margins of the Labor Market?; Alan B. Krueger, Princeton University & NBER, Judd Cramer, Princeton University, David Cho, Princeton University, Brookings Institution, March 10, 2014
Paul Bivand, Inclusion's Associate Director of Analysis & Statistics, outlines Inclusion's take on the first figures on the Coalition's Youth Contract wage subsidy for 18-24 year olds.
The first figures are now out on the take-up of the Coalition's Youth Contract wage incentive - and so far - in the year to May 2013,
In our report 'Youth Unemployment: a million reasons to act?' in November 2011, we pointed out that this sort of employer subsidy programme had been tried repeatedly by successive governments - and had always had very low take-up by employers.
We do not yet have any estimates of deadweight - those who would have got a job without the subsidy - but for earlier programmes the figures have been high - meaning that additional jobs are even lower.
These figures contrast with the Future Jobs Fund - where the Government funded additional jobs - where 105,000 job starts were delivered in 18 months. The Youth Contract is substantially cheaper - but is clearly struggling to deliver much benefit.
Over much the same period as the Youth Contract figures, the Work Programme has delivered over 25,000 job outcomes for 18-24 year olds, over 17,000 being six-month jobs for 18-24 JSA claimants. The 2,070 Youth Contract payments are likely to be included in the Work Programme outcomes - which shows that Work Programme providers have so far found the Wage Subsidy at best a marginal help.
So, how could the Youth Contract funding be put to better use? City Deals, Housing Associations and the third sector are keen to use their knowledge and local contacts to give young people a chance of doing temporary jobs that help their communities and give young people a better chance of competing in a tough labour market. They want to work with Work Programme providers to help. Shouldn't we give them a chance?
22 July 2013
The shock fall in GDP figures announced today has largely been attributed by the Office for National Statistics to a 5.2% fall in construction output. However, trends in recruitment from the latest labour market data simply do not seem to back this up. So what is going on?
As I’ve argued before, labour market data can provide a timely and accurate proxy for what is happening in the wider economy. In May, after the last GDP figures, I showed that the 'surprise' fall in construction had actually been evident in the labour market data. By comparing construction vacancies with construction jobseekers, there is a clear slowdown from the turn of the year.
However, looking at the most recent data shows that the construction labour market actually started to recover in the second quarter of this year.
The figures we look at are the figures by occupation group. Our figures go through to 8 June 2012. They also include self-employment, which is a major feature in construction. We analyse three groups of occupations – skilled trades, operatives and labourers. Our time series are based on the balance between new vacancies reported and new Jobseeker’s Allowance claims for people whose usual occupation was in these groups. We think this gives a good indication of what’s happening in the sector – as the ratio goes down if vacancies fall, or more people sign on who would usually work in construction, or both.
While Jobcentre Plus vacancies are far from a complete record of vacancies in construction – much job-filling still goes on by informal recruitment (knowing people and hearing about possibilities in pubs) it is likely that Jobcentre Plus vacancies represent a relatively large (and constant) share of vacancies in construction.
The figures discussed here are national – trends will differ in different localities – and they form one small part of the statistics package that we offer to the welfare to work sector (right down to local authority level, across all the main occupation groups).
Chart 1 shows the trends for skilled trades. This updates the data from my May blog, but following the downturn in early 2012 the figures have stabilised and slightly improved. Although there are still fewer vacancies than jobseekers, new vacancies represent 91% of new Jobseeker's Allowance claims on the most recent data.
Chart 2 shows the pattern for labourers. While the broad pattern is the same, following the slowdown in early 2012 the ratio has actually bounced back more strongly in the second quarter – to a point where there are now more new vacancies than new Jobseeker's Allowance claims.
Lastly, Chart 3 shows the pattern for operative builders. Here the recovery since early 2012 has been even stronger still.
So what is going on? It’s possible that both the labour market data and the GDP data are both right – for example the sector could have unmet recruitment needs and still be contracting if the labour market isn’t responding quickly enough to demand for labour. But this doesn’t seem likely in the current market. Alternatively it could be that there are fewer jobseekers with a usual occupation in construction, which is pushing the ratios up – but the absolute numbers of claimants and vacancies don’t back this up either.
Another, plausible, explanation is that the ONS figure is wrong – and that GDP therefore did not contract by as much as is first estimated.
The DWP analysis relates to the first 28,600 participants in the Work Programme - June 2011 starters.
JSA 18 to 24 JSA 25 and over JSA early entrants Others
15% 59% 24% 3%
At this stage, the early entrants included large numbers who had come off previous programmes, and therefore had some previous support.
DWP estimates that 48% of these had a break in benefit up to the beginning of March 2012.
This is broadly consistent with our estimates drawn from Jobseeker's Allowance flow data, given the balance of Work Programme starters.
The data DWP presents roughly cover the same time interval as the ERSA figures for job entries - which estimated that 27% of June starters had achieved a job entry (to March 2012).
The difference between DWP's 48% and ERSA's 27% will include job starts that providers are not informed about (and so cannot claim) as well as leaving benefits for other reasons (including sanctions). Previous evidence from the old new deals and recently from the Northern Ireland Steps to Work programme shows that additional jobs exist and will be identified from HM Revenue and Customs evidence of tax payments.
To March, the starters analysed were 35% of the way through their service period. Analysis must therefore take into account that more job outcomes could be achieved in the remaining 65% of the period.
DWP provides evidence on 13 and 26 week gaps in benefit claim (including unfinished gaps). These are not known to be jobs, but may be more likely to be jobs than gaps in claiming for other reasons.
This shows that nearly one in four (24%) had a 13 week gap in benefits up to March, and 14% had already recorded a six-month gap in benefits.
DWP provides a short analysis of the 14% of starters who were off benefit 10 weeks after joining the Work Programme and went on to remain off for 13 and 26 consecutive weeks.
Of this 14% of starters, 60% had experienced a 26-week (or more) gap in benefit - if they were working, these jobs would count as 'job outcomes' under the Work Programme. In addition, job outcomes can be accumulated over several jobs. Seventy-one per cent of the 14% off benefit at 10 weeks had a 13-week break in benefit.
As these figures relate only to the June 2011 starters, we cannot calculate a valid percentage to compare with the minimum performance level of 5.5% for the first year yet.
The information presented is not in the same form as that presented for previous programmes, which makes comparisons hard.
Comparing the results presented with the Flexible New Deal, 19% of FND participants were recorded as achieving a three-month job by nine months after the start (source: Parliamentary written answer by Chris Grayling: HC Debates, 20 January 2012, c1023W).
If the 24% of June 2011 Work Programme starters who had three-month breaks in benefit claims were in work, then the Work Programme was achieving at a higher level than Flexible New Deal. However, the new figures are off-benefit and include other reasons for being off benefit. This would imply that the Work Programme is operating at, or around, FND performance.
The Work Programme period covered has had only one quarter of economic growth, while the FND period from Q4 of 2009 through to Q1 of 2011 (six quarters) had five quarters of growth.
Therefore, the Work Programme was operating in a worse economic environment than FND.
9 July 2012