Getting the long-term unemployed back to work under Universal Credit

October 10, 2014

The plight of the long-term unemployed continues to be a big problem – even in a much improved labour market. From 2008 to 2012, the number of people unemployed for more than a year increased by over 520,000, or 137%. Though this number has fallen somewhat since, for many this prolonged period of unemployment will have resulted in barriers to work becoming more substantial, falling morale and other problems developing. The effect on the public finances, in terms of ongoing benefit expenditure as well as additional public services will be very significant – not least since the hardest-to-help claimants are also likely to be the most costly on an ongoing basis in the absence of appropriate support.

Getting the ‘Work Programme’, the government’s main delivery mechanism for helping the long-term unemployed back to work right, will thus be crucial. Welfare-to-work schemes involving payment-by-results have evolved significantly over the past decade, ending with the Work Programme’s aim of an entirely outcomes-based, payment-by-results model of outsourcing. This is a welcome reform – avoiding the legacy ‘bums on seats’ contracts where private companies were paid regardless of a poor record of getting claimants back into sustained work. Nevertheless, as the government considers the renewal of the Work Programme, it should also recognise its existing limitations.

The main problem is that the level of support provided still largely corresponds to the primary type of benefit a person has, and how long they have claimed it. Too many claimants still sit in jobcentres for up for a year without significant action to address unidentified barriers to work – barriers that only get worse due to the delay. Others are given support they do not really need. This system is replicated when claimants reach the Work Programme – both overpaying provider firms for some claimants and underfunding necessary support for others who really need it. Businesses long ago learned that they needed to profile their customers better to be successful – it is time Jobcentre Plus did as well.

It is also crucial that the Work Programme works hand-in-hand with the new Universal Credit – a revolution in the welfare system intended to ensure people are always better off in work than on benefits. But Universal Credit is a long-term reform which will not be rolled out fully before the Work Programme is renewed. This means there is a danger that the ‘moment of opportunity’ to reform provision for the long-term unemployed could be lost.

Our new report, Work 2.0, makes some suggestions to avoid this. In particular, real time information on a claimant’s earnings will provide a golden opportunity to build a more tailored and personalised employment support system. Getting claimants into ‘mini-jobs’ below sixteen hours a week and incentivizing skills development, progression of wages and hours will be a key part of this.

The new Work Programme can also be more sophisticated about providing different levels of help according to the strength of the labour market and economic conditions. New flexibilities in EU procurement regulations provide an opportunity to assess different providers according to their performance and weed out those who fail. It may be tempting for a government with many other things on its plate to hold back on reform to what has been, on the whole, a successful programme. But by seizing the moment to tackle some of these problems, we can ensure a better deal, not only for the taxpayer, but to improve the lot of some of the most vulnerable in society.

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