Since You Asked

The lesson from Poundland: work pays

The UK government is in a muddle over employment schemes, says Tim Harford

‘Ministers are trying to get back-to-work schemes on track after a university graduate won a court ruling that making her work for no pay at a Poundland store was unlawful.’

Financial Times, February 13

A blow struck for human rights against forced labour!

Hardly. That sort of talk was dismissed by an earlier court ruling. Cait Reilly had argued that the European Convention on Human Rights forbids “forced or compulsory labour”. The back-to-work scheme does not say “work in Poundland or go to prison”, but “work in Poundland or have your benefits withdrawn”. The courts felt there was a difference. (The Department for Work and Pensions tried hard to lose the case by referring to some of these schemes as “mandatory work activity”.)

So why are we hearing that the government lost the case?

The new ruling comes from the appeal court, which agrees that nobody’s human rights have been violated, but argues that the regulations underpinning these schemes are too vague. The government has responded with new rules. Let’s see how it works out. An interesting question is whether such schemes are a good idea.

How would you propose to produce an answer?

I don’t need to. The DWP has an answer for the Community Action Programme, which is the obligatory six-month work placement that was the scheme experienced by Ms Reilly’s joint appellant, Jamie Wilson. The CAP was subjected to the fairest evaluation available, a randomised controlled trial. It concluded CAP participants were no more likely to find a job than the control group. Perhaps the CAP could be regarded as a success in other ways, but a failure to help people find jobs is hardly an endorsement.

What would you suggest instead?

This is where the data speak volumes. Take the Future Jobs Fund, for example. It had similar aims to the CAP – to give six months’ work experience – but it worked differently, by subsidising employers who gave young people a job that pays at least the minimum wage. The subsidy lasted for six months, and a lot of the jobs disappeared when the subsidy did. Yet a DWP evaluation showed impressive effects, with participants more likely to have a job 18 months after their subsidised work had ended. The cost-benefit analysis of the FJF was favourable, too. Perhaps it was more effective than the CAP because the FJF jobs were, well, real jobs, with pay for the employee and a cost to the employer.

And the Future Jobs Fund was, presumably, legal?

Who cares? It was scrapped before the evaluation had been completed – the prime minister told the BBC it was “one of the most ineffective job schemes there’s been”.

Awkward.

Yes. It is ironic that this is one of the few areas where the government is carrying out rigorous tests of what works, and yet few people seem interested in what those tests discover.

There’s a moral issue here: we can’t allow people to mooch around on benefits without looking for a job.

Agreed, and that seemed to be what was behind the mandatory work activity. But the DWP seemed confused. The MWA was used to remind disengaged benefit claimants that job-seeking is a serious business, and yet official policy was that it was never to be used as a threat.

So it was some kind of punishment that could neither be introduced after a warning, nor introduced with no warning?

No wonder the courts thought it was too vague. But on the “mooching” point, Jobcentres can always threaten to withdraw benefits. Workfare schemes can’t be justified as a threat, then, only as a way to help people find jobs. The evidence they do doesn’t look encouraging. Intriguingly, the government’s Behavioural Insight Team has been running a trial with a Jobcentre in Essex, where the advisers on the ground floor use the old approaches and the advisers on the first floor use a new approach, and jobseekers are randomly assigned to the two floors.

What are the new approaches?

First, to streamline form-filling so that advisers can use the first meeting to talk about jobseeking strategies. Second, to discuss specific jobseeking actions over the coming weeks. Third, some touchy-feely stuff about expressive writing. The trial suggests this combination of approaches is effective. In fact the whole thing looks so successful that it can only be a matter of time before the programme is cancelled.

Also published at ft.com.