Today, Inclusion publishes a new report, Making the Work Programme work for ESA claimants, which sets out the problems with the funding model for Employment and Support Allowance (ESA) claimants, and what could be done to fix it. The report is a part of a wider project called Fit for Purpose, supported by 22 organisations and looking at the future of employment support for people with health conditions and disabilities. The final report will be available in the summer.
Specifically, we argue that a toxic mix of a weak economy, low referrals to the programme, changes to the rules on who is referred, under-performance and setting the targets too high in the first place have combined to lead to big shortfalls in funding and support for those on the programme.
Our calculations suggest that around 11% of ESA claimants that are required to take part in the Work Programme would have achieved a ‘job outcome’ if the Work Programme had not been introduced. The DWP, however, set their estimate at 15%. These targets have been missed in every contract, and as a consequence – because the Work Programme is a ‘payment by results’ programme – funding to support ESA claimants has been substantially lower than DWP anticipated.
Of course, you could see this as a policy success; performance has been below expectations, but the DWP has not had to pay so much to providers, so the risk of failure has been successfully transferred away from tax payers. But this would be a pretty short-sighted view. The state still picks up the tab through the benefits bill, and lower funding means more people out of work for longer, and receiving less support. We estimate that the money available to providers to deliver services to ESA claimants (based on DWP spend on ESA customers) is likely to be about 40% lower than was originally planned, with DWP likely to spend on average £690 per ESA claimant compared to an estimated £1,170 when the programme was designed. And this is expected to get worse; as of April 2014 there are no more ‘attachment payments’ paid to providers when customers join the Work Programme, meaning that, at current performance the DWP will pay providers on average only £550 per participant – which needs to cover two years of support.
When these figures are grossed up, taking into account lower referral numbers as well as lower performance, we estimate that the Government will invest less than half of what it intended to on supporting ESA customers through the Work Programme - with spending around £350 million compared to the £730 million expected.
In the event, we find evidence that Work Programme providers are actually spending a bit more than they receive from DWP on ESA participants, in order to maintain some levels of service. In effect they are cross-subsidising from outcome payments for Jobseeker’s Allowance participants. Whilst this may be helping to paper over the problems with the payment model, it is clearly neither satisfactory nor sustainable in the longer term.
Our report sets out an alternate model that we argue should be implemented for the remainder of the programme. This new funding model is based on four key assumptions:
Our proposed payment model is below.
Without reform, in our view the funding model for the Work Programme is set up to fail ESA claimants, particularly those joining over the next two years. Whilst we and many others are rightly thinking about what should come next with ‘Work Programme Mark 2’, it is critically important that the Work Programme Mark 1 works for ESA claimants. Our report shows the failings of the current payment model for ESA groups, and a way forward that is achievable and would cost no more than the Government had planned.
On the 3rd April Inclusion and BTEG held our second annual Ethnic Minority Employment conference. We think this event is particularly important because we are concerned that reducing the inequalities between ethnic groups has fallen off the agenda of the current government and we want to do what we can to drive up the profile of the debate. After all, the employment rate for ethnic minority groups is a whole 13 percentage points lower than for the white population, and this gap in employment rates is actually up around 2 percentage points since May 2010, having fallen steadily over the previous decade. Clearly this gap needs to narrow. As Omar Khan, Director of the Runnymede Trust, pointed out at the event, this is not just a matter of social justice, but also an economic imperative for the country.
Employment rate gaps between BME and white population
This blog present some key themes that were discussed by the 60 delegates who attended the event.
The DWP and Jobcentre Plus
In February 2012, the Government published its integration strategy, Creating the conditions for integration. This strategy rejected a Whitehall dictated approach of national programmes working with particular groups, instead focussing on support determined and delivered locally and based on the individual needs of customers. For the DWP this means that national programmes will not necessarily deliver support targeted at the particular needs of BME customers, but that Work Programme providers and JCP, through the Flexible Support Fund, could commission such targeted support if they felt it was needed. (The complete lack of transparency about how the Flexible Support Fund is spent and what it achieves doesn’t help us determine how far this is happening).
We were grateful to a number speakers at the event who talked us through what is happening at the moment. Junior Johnson, Head of Work Programme Division, demonstrated that ethnic minority customers are actually doing better in the Work Programme than white customers, and Renae Lowry from Shaw Trust London, a Work Programme Prime doing particularly well at supporting BME customers, explained what she thought was the key to Shaw’s success, including ensuring her staff represented the local communities they served and challenging local employers to do the same. Prathiba Ramsingh and Michelle O’Connor from Jobcentre Plus in London talked us through an excellent pilot Flexible Support Fund project in Brixton that aims to link up young black men and employers. And Tim Conway, explained how IDS’s focus social justice also helps ensure that policy understands and tackles the root causes of poverty rather than just its symptoms.
However, concerns remain. Treating people as individuals is great, but if this means you fail to strategically tackle common issues faced by certain groups of individuals (for example, employer discrimination on the grounds of ethnicity, language barriers to work) then it’s less great. Whilst the Work Programme is doing well with BME customers, the Work and Pensions Select Committee report on the Work Programme found that there is much less specialist support on offer to customers than expected. Similarly, whilst the targeted programmes being piloted by JCP look very interesting and could end up being rolled out more widely, the Brixton programme we heard about only supports 16 young people. Clearly, whilst these initiatives are to be welcomed, there’s a huge amount left to do.
The DWP is not the only public sector body interested in employment rates of BME groups – local government has a huge role to play as well, particularly with the Government’s desire that action is taken a local, rather than national level. However, the resources available to local authorities have and will continue to decrease as austerity continues to bite. And there is the concern that the localism approach, whereby decisions about spending are devolved to the lowest appropriate level, may negatively affect BME communities that do not actively participate in local politics and are therefore not “at the table” when decisions are made.
So, what can local authorities do given the increased responsibility but decreased resources they have? Shilpi Akbar, Assistant Director for Employment at Birmingham City Council, gave a few ideas. First, local authorities still have hefty budgets to commission a range of services, from highway maintenance to cultural activities, and should make the most use of their procurement powers to make sure employers play their part. Second, local authorities can make better use Section 106 agreements in planning policy to the same effect. Finally, better joining up of different pots of local money can be effective; the Brixton project noted above was possible in the form it took because JCP and Lambeth Council both contributed money. Islington Council current has an independent Employment Commission to plan a local approach to reducing unemployment in the borough, bringing together the Council, the local FE College and JCP (amongst others) – forums like this seem to present the perfect opportunity to think strategically about how to join up local budgets.
But the public sector can do all it wants if employers continue to discriminate against ethnic minority jobseekers. Liz Mackie and Claudine Reid talked respectively about how negative perceptions of young black men and ethnic minority women limit their ability to enter and progress in the labour market. Omar Khan discussed how supposedly positive ethnic stereotypes (‘Asian guys are good at IT…’) can limit their success in the workplace (‘…so they should stick to this rather than becoming a manager’).
And the research evidence backs this up. A study found that those applying for jobs with names that suggest they are from ethnic minorities are significantly less likely to be called for interview compared to those with ‘white sounding’ names. Once in work, ethnic minority groups on average have lower hourly earnings and are disproportionately over-represented in routine and semi-routine occupations. These differences still apply when other characteristics, such as qualification levels are controlled for, suggesting discrimination from employers.
So, many employers would benefit from unconscious bias training, encouragement to use nameless application forms or even using external interviewers / progression panels in some cases. Some, however, have queried whether voluntary action from employers is enough to achieve greater equality, given that many private companies (and SMEs in particular) do not seem to consider discrimination to be a problem (the public sector, on the other hand, has a legal duty to proactively promote racial equality).
So where does this leave us? The short answer is: a long way from where we should be. Omar Khan suggested that, in one way, the situation now is more depressing now than it has been for a while, in part because gains in educational attainment in school and higher education participation for BME groups have not translated into greater parity in the labour market (notably, a recent study found that “After controlling for personal characteristics, all minority ethnic groups make better average progress in attainment through secondary school than do white students” ).
Moreover, the indications are that the current government doesn’t take race equality as seriously as it should. The Equality Impact Assessment for the Benefit Cap expected that 40% of households affected would be BME families, compared to 17% of JSA claimants, 16% of the lone parents claiming IS and 9% of ESA claimants. However, it offered no additional support to help ethnic minorities affected by the cap. The Government also “called time” on Equality Impact Assessments, and in 2011 decided not to implement ‘dual discrimination’ regulations in the Equality Act. The justification for the latter was that, along with cutting other regulations, it would save UK businesses £350 million a year.
But one would have hoped that £350 million across the whole economy was a price worth paying for closing a loophole that could make it effectively legal to discriminate against someone on the basis of, for example, the combination of their race and gender. One must be very suspicious about a government that considers this acceptable.
Our event on the 3rd of April was one of three we’re arranging this year looking at the issues facing BME groups, with generous support from the JRF and Roast Restaurant. The next two will examine Entrepreneurship and Apprenticeships. They will be well worth attending.
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
Whilst the Work Programme is now performing broadly in line with expectations for most JSA claimants, its ability to support those further from the labour market – and in particular those with health conditions and disabled people – remains a cause of real concern. At Inclusion we have been doing a lot of work on the causes and consequences of this for a few different projects, and will be publishing more in the next few months on what we can do about it. But in the meantime, recent research by us shines a light on some good practices in supporting those furthest from work.
Recently we evaluated a programme, Want to Work, that shows what a properly resourced programme can offer to those furthest from the labour market. Want to Work is financed by the European Social Fund and run by Jobcentre Plus, offering employment support to inactive people in Wales. It is a voluntary programme, with some overlaps with the ‘voluntary’ access groups in the Work Programme. Supporting these customers presents significant challenges. Over 40% of customers were disabled, nearly a quarter were lone parents, and 30% were not claiming benefits and therefore not receiving any mainstream support to get into work. One in ten had been out of work for over a decade, and the programme was targeted at the most disadvantaged wards in Wales, such as the Valleys, where weak labour markets make finding work hard even for those without these barriers to work.
Despite this, the programme got 49% of customers into work. We conducted impact analysis and found a propensity score matched control group of similar inactive people in the Labour Force Survey were significantly less likely to get into work than Want to Work customers. Moreover, 80% of Want to Work customers sustained work for 10 months or more, and further impact analysis again showed that this was significantly better than a control group.
So what was the secret of success? Well, the main factor in the programme’s success is not that surprising; a customer-focussed advice and guidance regime delivering holistic support to tackle all of the barriers keeping customers out of work. Personal advisers were able to spend enough time with customers to give them the support they needed, and had the flexibility to see customers with more or less frequency depending on their needs (or constraints) at any particular time. A strong focus was put on building trust with customers and 97% of customers thought that PAs were friendly and approachable, making them probably the most popular group of Jobcentre Plus advisers in the country. Advisers were accessible, giving mobile phone numbers to customers and responding quickly to questions and requests. Moreover, there was a strong focus on supporting them to work towards jobs that they wanted to do – and enough flexibility in the use of discretionary funds to make some of the more unusual aspirations of customers realities (helping one customer to set up a mobile dog grooming service comes to mind).
But while Want to Work is lucky enough to be in the position to do the basics well, it does do other things that others should learn from. In particular, wherever possible, it embedded its services within the communities it served to ensure that it could support customers who didn’t normally interact with employment services. Staff were based in libraries, community centres, housing associations, and even religious establishments, including a mosque. Being embedded in the communities they served meant that PAs had excellent knowledge of, and strong personal relationships with, a range of other services on offer meaning they could refer customers to the specialist support they needed.
It had also made real efforts to link up to health services. Some PAs were based in GP surgeries and strong links had been established with a range of other healthcare services. These other services noted that it was very unusual for them to have any links with employment services but found it was beneficial for their customers. A real strength of the programme was that PAs had been seconded from a range of different backgrounds, including the NHS.
All of this came together when supporting those furthest from the labour market, those customers who had not worked for years and who had serious barriers to work. For these customers, the first key stage was engaging them. It was noted that talking about work too early could actually be harmful, frightening customers and making them disengage. PAs talked about building trust and building confidence as the key early aim, rather than focusing on job search. This at first meant small steps, like getting customers to attend short, free training courses delivered by other partners, to build confidence and show them that they could interact in a group setting. This was often a big step for customers, so PAs would call them on the morning of the training to bolster their confidence and make sure they turned up. After these small steps, PAs would begin picking up the pace when customers were ready, reacting always to their judgement of how quickly customers were ready to go. The fact that PAs took the time and effort to react to customers’ needs engendered trust and spurred customers on to intensify their job search. Of course, they were not successful for all customers, but this level of personalised support often led to a range of soft outcomes that benefitted customers.
So, the lessons from Want to Work are, in a sense, obvious. A well run, appropriately resourced programme, well networked with other local services (including health services), providing holistic, customer-centred advice and guidance is successful and is valued by customers. Our analysis suggests that Want to Work led to a significant positive impact on participants compared with those who did not take part. The key question is whether we now learn from this, both within the Work Programme and after it’s gone.
Today’s announcement that Labour would extend to the end of the next Parliament their jobs guarantee for long-term unemployed young people is welcome. As I said in 2012, the Coalition’s impact assessment of the Future Jobs Fund shows that the last jobs guarantee worked: with those who took part far more likely to be in work and off benefits fully two years after taking part, and a ‘cost per job’ that would bear scrutiny against programmes before and since.
The only surprise is that Labour hasn’t announced this sooner. Part of the reason for the delay will be the relentless briefing by Conservative politicians that the ‘numbers don’t add up’ – often hiding behind ‘official’ figures that are at best deeply flawed and at worst deliberately misleading.
The Government’s estimate can be found here (the second attachment), which states that the Jobs Guarantee for young people would cost £1.04 billion for one year. These figures are wrong in three important ways:
Taking this all together, we would estimate that the actual cost of delivering a youth Jobs Guarantee – even allowing for inflation and higher National Minimum Wages – will be in the region of £200 million per year.
Three years ago I was at HM Treasury and responsible for policy costings for employment programmes. So I find it particularly troubling that figures could be published as ‘official’ estimates that are so obviously flawed and that do not follow any of the normal conventions for policy costings – conventions that were followed in the last Autumn Statement and will be followed again at the Budget. The figures used by the Government are simply misleading. If political parties want to publish misleading statistics, that’s their choice. But governments of all colours have a responsibility to publish costings that are fair and impartial – and that hold opposition parties to the same high standards that they would hold themselves to.
Leaving costings to one side, £200 million is still clearly a lot more than nothing, and the Conservatives are right that Labour has a responsibility to explain how it will fund its five-year Guarantee. A bankers’ tax may more or less do it (although bear in mind that Labour is also committing to a wider guarantee for long-term unemployed adults). However there’s also two other ways that we could help meet these costs.
First, Europe. By coincidence, the European Union has set aside €3 billion of European Social Fund money for Member States to deliver job guarantees for young people. Most Member States have submitted plans for how they will spend this money. The UK, however, has not. The amount available? €193 million. To deliver a jobs guarantee in the UK.
Secondly, the Youth Contract. Two weeks ago the Government published its latest statistics on take-up of the Youth Contract wage subsidy. (This was alongside other research on the Youth Contract, our summary here.) So far, the Youth Contract has delivered 10,000 subsidy payments over eighteen months, against a target of 160,000 over three years. On its current course, the figure will probably rise to around 30,000 – which will be an underspend of £300 million. We called this in 2011 and again last summer, and virtually nothing has happened in the meantime.
So a Guarantee is affordable, likely to be effective, and there’s even money available from Brussels. The sums add up.
First, the good news: from 2015 employers will usually pay no National Insurance for employees aged under 21. Ok it’s not great news for graduates, but for younger school-leavers and those trying to combine work with study this is undoubtedly welcome.
We’ve been arguing for some time that the collapse in youth employment begins when young people are still in school. Employment rates for teenagers have halved since the mid 1990s, with unemployment rising. The same is true whether young people are in full time education or outside it. The result is a growing number who have never worked, and employers who are not prepared to give them a chance. Until recently, it looked more likely that government would respond by cutting the minimum wage – which would have pushed young people even further away. The effective abolition of National Insurance is far better. And it learns from previous attempts to fiddle with NI for small businesses or the unemployed, which have been dogged with complexity and low take-up. No ifs, no buts – you employ someone under 21 (and pay them less than £40,000) you pay no NI.
However, big gestures come with big costs. In this case, the Office for Budget Responsibility estimates a cost of around £500 million a year, most of which will inevitably go to employers who would have employed those same young people anyway. There are around 1.4 million under-21s in work – if the additional impact is to shift the dial by 5% (which would be optimistic, given also that many of these young people will earn below the existing NICs threshold) then each of those extra jobs would have cost us £7,000. Cheap at the price in my view, but this same government has abolished plenty of programmes - and plenty for unemployed young people - that cost less than that.
So that’s the good news.
The worse news, however, is that the Autumn Statement bundles together a series of small initiatives for young people without creating a coherent whole.
Jobcentre Plus will (finally) be funded to support 16 and 17 year olds – but only into apprenticeships and training, with a fraction of the resource that existed until 2011 (in Connexions) and with accountabilities for these young people remaining fragmented and confused.
Young people starting traineeships will get means-tested financial support. But instead of doing this through a dedicated training allowance (like the successful Education Maintenance Allowance) they’ll need to claim Jobseeker’s Allowance – with Jobcentre Plus policing the system.
Taking this further, the Government will pilot making traineeships compulsory for some young jobseekers (alongside work experience and community placements) – an approach that isn’t working with ‘skills conditionality’, hasn’t worked with Mandatory Work Activity and won’t work again. This is still a very long way from the old ‘Six Month Offer’, and further still from the (successful) ‘Young Person’s Guarantee’. In fact it looks much more like the older (and unlamented) Youth Training Scheme.
What’s most disappointing is that the Government (or at least, many of its officials and advisers) were undoubtedly starting from the right place. We all recognise the problems. We have a disjointed, complex and incoherent system for young people: accountabilities are confused, objectives don’t line up, funding is fragmented. As a result, too many young people slip through the gaps. We need to fundamentally rethink the way that we support young people to achieve, to stay engaged and to get into sustained employment. We set this out in our 2011 report, the LGA made similar proposals at the start of this year and the ippr has also taken this on .
It is not clear, yet, whether the ‘Heywood review’ that is looking at how we support young people (and that we and others have contributed to) will now address these issues, or whether the moment has again passed. Either way, we’ll be returning to them in the new year – with a new report, and then our Youth Employment Convention in the spring. Join us.
Elsewhere in the Autumn Statement, you may have missed that the Government also ‘scored’ its new support for those who are still unemployed after completing the Work Programme (‘Help to Work’). Old news? Yes, but importantly the ‘scorecard’ sets out both the costs of the measure and the assumed benefit savings. Over the next two years it will cost £420 million, but the Government has been allowed by the OBR to score £295 million in savings. This is the ‘DEL/ AME’ link in action – investing in programmes to generate savings in benefits. Amazingly, this is only the second time the Government has been permitted to count benefit savings on its scorecard – and the first was in this year’s Budget. There was no ‘DEL/ AME link’ for the Work Programme (despite some claims) nor for anything else since.
This is great news, and will fundamentally change the way that DWP and HMT (and people like us) approach future discussions on employment programmes – including what comes after the Work Programme. So well done to the team at HMT who got this through – it will be the least-reported thing there, but one of the most important.
Paul Bivand, Inclusion's Associate Director of Statistics and Analysis, blogs on the recent publication of the sanctions statistics by the Department for Work and Pensions.
DWP has, after a long break, re-started publishing figures for 'sanctions' on jobseekers. Some of this analysis is the work of Dr David Webster, of Glasgow University.
Chart 1: JSA sanction rates since 2000
The proportion of sanctions decisions in favour of the claimant has been dropping. The proportion of decisions in favour of sanctioning has also dropped a little - from 50% to 43%. What is driving these changes is the sharp rise in the number of people ceasing to claim when they have been referred for sanction.
Chart 2: Sanctions - in favour of claimant as % of total decisions
The new JSA sanctions regime is clearly driving people off benefits. The question to be answered is whether they are leaving because they have found work and, if not, what income are they surviving on? It is not just a matter of losing JSA because if people have a Housing Benefit claim, this will also be automatically stopped.
Some may have been working already - whether odd jobs for cash or regular work. Jobcentre Plus systems have always checked for this - benefit fraud hotlines are not new and the old New Deals involved 30 hour per week of activity, which the Work Programme does not.
Chart 3: Sanctions: Decisions reserved/cancelled on dropped claims (thousand)
What we do know is that the proportion of the unemployed (on the international standard definition) who were not claiming JSA was falling up to the start of the new sanctions regime – see Chart 4. But since October 2012 (the new sanctions regime) there has been a very sharp rise in the gap between JSA and unemployment. This has been puzzling economists for some time.
So it is valid to ask whether the rise in the gap between unemployment and the claimant count is due to dropped JSA claims. This question will no doubt be analysed more deeply in the coming weeks.
On launching the new sanctions regime DWP said that it would 'encourage people to engage with the support being offered by Jobcentres'. The question is open as to whether it has achieved that, or has pushed people away from Jobcentre support.
Chart 4: Per cent of the unemployed not claiming JSA
Today sees the publication of Work in Progress: Low pay and progression in London and the UK, a report commissioned from Inclusion by Trust for London. This report brings together a wide-ranging body of work we’ve been doing over the past year to explore the extent of low-paid work, the barriers to progression, ‘what works’ in supporting progression, and how policy and delivery could be improved in the future.
The findings have already had some coverage today, and the report itself brings together an enormous amount of new analysis that is well worth a detailed look (which I would say as one of the authors). As a taster, what follows is a brief summary of the challenges and opportunities our work identified.
The headline recovery in the jobs market disguises key social and economic challenges: falling earnings, declining living standards, more working poverty and increasing job insecurity. Our research finds that there are over five million people in the UK who have been ‘stuck’ in low pay for more than a year, and that numbers working in the lowest paid occupations are increasing while pay in these occupations continues to fall in real terms. The challenges for the low paid are set to become more acute in coming years, with Universal Credit entailing over one million low-paid workers ‘doing more’ to increase their hours and earnings, according to Resolution Foundation estimates.
Increasing the National Minimum Wage and encouraging employers to pay living wages are an important part of the answer, but only a part. We argue that ensuring our employment and skills systems better join up to support retention and progression is more important now than at any point in the last two decades.
Our research involved in-depth data analysis uncovering the groups and sectors where the challenge is most acute. We found that many of the same groups have high risks of cycling in and out of low-paid work, being in low pay, and being stuck there for a year or longer. The lowest qualified, young people (especially in London) and those with caring responsibilities would all appear to be key priorities, as are workers in customer services occupations and the distribution, hotel and restaurants sector.
We found that the gains from getting the solution right are potentially significant. We estimate that supporting progression from National Minimum Wage to living wages for those living in low-income households would lead to net gains to the Exchequer of around £2.8 billion a year.
We surveyed 100 active practitioners in the employment and skills fields to find out how retention and progression fit into what they do. We found that a wide range of service provision is offered by different providers, but that this is not explicitly aligned to delivering either job retention or progression. Approaches are constrained by the relatively low priority attached to retention and progression by programme commissioners and the limits on innovation and testing within employment and skills programmes. We spend £2.9 billion a year on mainstream employment and skills support, yet virtually none of this is used to support people in low-paid work to increase their earnings.
While the mainstream employment and skills system isn’t currently focusing on these issues, there is emerging evidence from the UK and internationally on what may work in improving pay and progression. This includes supporting people to stay in work through mentoring, personalised support and financial incentives; supporting people to progress in their careers through job-related training and the development of career goals; and providing the right (business to business) support to employers to grow their workforce and their business – including HR, training, and building a stronger ethos around progression at senior levels.
There is a way to go to ensure that our employment and skills system is geared up to support people to progress from low pay, and the report concludes with a number of recommendations to take this agenda forward. A step that could be taken relatively quickly would be to unlock the Adult Skills Budget for progression by allowing skills providers to use it to support workers most at risk of being stuck in low pay, including all in-work Work Programme participants. But we also call for longer-term testing and reform, and our report sets out an ‘Employment Plus’ approach that we recommend is developed and implemented to support people to find work, stay in work and progress in work.
So that’s where we’ve got to, and we look forward to seeing progress from here.