Welfare to work programmes have been used by governments since the 1980’s to articulate a desire to replace passive support for unemployment and active measures to help encourage people to get into paid work. The Labour government reiterated this principle, but took a number of new approaches building up to an ambitious programme for welfare reform for people of working age. This essay will study the origins and rationale of New Labour’s welfare to work programme. It will also examine the impact it has had on people and unemployment since the programme has been introduced.
While there is evidence that welfare to work programmes has been around before 1997 (when Labour came into power), their results were patchy and they had not been continuous. When the Conservative’s were in power, their policies were criticised because it was more concerned with minimising fraud than maximising work, and it encouraged dependency and trapped people in unemployment. By 1995, Gordon Brown, the then Shadow Chancellor of the Exchequer, argued that government could not simply create jobs, but “its role was to promote macroeconomic stability and provide economic and employment opportunities for all” (Field & White, 2007). He then proposed that the future government should launch New Deal for under 25’s.
Subsequently, 1996 the unemployed in Britain were redefined as “jobseekers” by the 1996 Jobseekers Act (HMSO, 1994). To qualify for the new jobseekers allowance (JSA) required that unemployed individuals to enter an agreement indicating the steps they intended to take to look for a work and the minimum wages they would accept. Jobseekers were given guidance in looking for jobs in a particular way, to take other steps to improve their employability or participate in training schemes. Under the JSA agreement, claimants have to commit to active job seeking behaviour, and they had to sign a declaration to which they understood that their benefit eligibility would be affected if they do not do enough to find work, are deemed unavailable for work or act in any way to reduce their chances of getting work. Failure to comply with the jobseekers agreement will ultimately result in benefit sanctions. It was believed that most unemployed looked for jobs but the JSA system was designed to intensify activity and put pressure on those who were genuinely not looking for work. However, following the introduction of JSA there was increased job search activity with the newly unemployed but it was less effective with the long term unemployed.
New Labour’s welfare to work programme is based on a typically American “workfare” approach. Workfare refers to the requirement that people who are judged able to work and available to work must seek and accept work in the regular labour market. The reforms have which have taken place have originated and been influenced by US-styled workfare. However, this move towards a US-styled welfare is not a new trend, the British policy makers have been influenced by US welfare systems in the past when the Conservatives were in power. Governments have always been cautious and resistant about being referred to as a US-styled workfare, opposed by both the right and left for different reasons: “the right disliked the expense involved setting up training schemes and the left sees any element of compulsion as anathema” (Daguerre, 2004). Nevertheless, just before Conservatives lost office, they moved more towards workfare through a proposed large-scale extension of “Project Work” (A programme requiring the long-term unemployed to work part time in community projects). The start of the programme Restart, The Stricter Benefit Regime and Employment Training programmes was also a step closer to a US-styled workfare (Peck, 2001).
New Labour’s flagship was New Deal, it placed more emphasis on training than any previous policies, and it also promoted compulsion for target groups. The new welfare system under New Labour appears to have strong echoes and similarities to the US-styled workfare and this can be clearly seen from the Labour Party’s policies which indicate strong emphasis on making work pay and not the other way round, in which dependency on benefits would pay for people. Moreover, the redesign of New Deal in 2001, Labour’s second term, was working more towards moving as many people of working age into the labour-market. This is influenced by American ideas in a few ways. Firstly, the government was promoting a “work first approach” and getting people to work and not rely on benefits. Secondly, the formation of the “Jobcentre Plus”, which is a single point of service to all benefit claimants. This is partially based on American Administration. Alistair Darling, the Chancellor of the Exchequer quoted that the Jobcentre Plus is there to provide everyone with the help they need to find work, quickly as possible, and it is a work first approach (Daguerre, 2004). Thirdly, the greater compulsion is based on the American approach. This involves the introduction to work-focused interviews for benefit claimants, particularly for lone parents.
In 1997, the future Prime Minister Tony Blair spoke about New Labour’s approach to welfare reform would focus on services, not just cash benefits, and would be designed to help people meet change in an increasingly insecure world. New Labour would increase the employability through education and skills and an active employment service. Labour came in to power in 1997 and one month after winning power, the Prime Minister Tony Blair confirmed that the greatest challenge to his “welfare to work” government was to refashion the institutions to bring new workless class back in to society (Finn, 2003). Shortly following this speech, in 1997, New Deal for 18-25 years old was introduced. It became something of a political mantra for New Labour, in which there would be “no fifth option” of a life on benefit; and those refusing to comply with the rules would be docked 40 percent of their benefit (Peck, 2001). New Deal represents the first real attempt to implement activation policies for the unemployed in Britain.
Labour’s first term in government highlighted the performance of the economy and an increase in employment. At a time when there was a much needed change in the welfare state, New Labour came in to power and did just that. The Prime Minister Tony Blair promised employment opportunities for all and committed the government towards full employment over the next decade. When the Conservatives were in power, their policies made people dependent on benefits and trapped them into unemployment. New Labour’s welfare to work programme would put a stop to this and make work pay, and not make benefits pay. Labour’s reasons for a reform on welfare state is to bring the workless class back in to society. Blair made a speech saying; “Now at the close of the 20th century, the decline of old industries and the shift to an economy based on knowledge and skills has given rise to a new class: a workless class. … A large minority is playing no role in the formal economy, dependent on benefits and the black economy … Today the greatest challenge for any democratic government is to refashion our institutions to bring this new workless class back into society and into useful work, and to bring back the will to win.” (Tony Blair, speech at the Aylesbury Estate, June 1997) The rationale of New Labour’s welfare to work programme is set to help those that are disadvantaged into employment and reduce the reliance of benefits; the end result would be an increase in employment and reductions on people living off benefits. Blair insisted that there would be “no no-go areas for New Labour” and at the heart of all the policy changes, welfare reform was on the top of the list. Welfare to work is defined by New Labour both as political and as an economic project; it is concerned with rejoining the poor in to paid work, and help people get into real jobs to tackle poverty. The task of the Labour government was seen one of radical and work reinforcing reform, and the task for welfare recipients would be to cooperate and respond enthusiastically to the new opportunities (Labour Party, 1997).
The New Deal programme was introduced after two decades in which child poverty had doubled; the number of people on incapacity benefit had risen by 1.5 million; and more than 80,000 young people had been on unemployment benefit for more than a year (DWP, 2008). New Labour had promised to get 250,000 under 25 years-olds off benefits and into work. The welfare to work budget was funded by the way of a ?5.2 billion through a “windfall tax” on the profits of privatised utilities (Peck, 2001). The first priority was to tackle long-term youth unemployment. The New Deal for Young People (NDYP) was introduced to begin with; then New Deals for the long-term unemployed (New Deal 25 Plus); New Deal for Lone Parents (NDLP); New Deal for partners was introduced for the partners of the unemployed; New Deal 50 Plus; and New Deal for Disabled People (NDDP) was introduced, which was largely provided by voluntary and private sector. The objectives of the New Deals were to increase long-term employability and help young and long-term unemployed people, lone parents and disabled people into real jobs.
NDYP is a mandatory programme for 18-25 year-olds who have been claiming jobseekers for six months. However, it is at the six month stage, benefit becomes conditional and claimants enter another stage of New Deal. New Deal has three stages; a gateway, an options and a follow through. Each of these stages aims to enhance the chances of people landing a job. The gateway period comes after six months of unemployment and lasts up to four months. At this stage, individuals are assigned to a personal advisor, who helps claimants find work and provides guidance. If after the four month gateway period participants fail to find work, they then enter the option stage. During this period each individual is required to take up the following four options: employer placement, voluntary-sector work, education or training, or a membership of an environmental task force (Field & White, 2007). These stages on the New Deal programme are in place to aid people to gain knowledge, experience, skills, and therefore better their chances of finding real jobs. The purpose of the New Deal programme is to improve employability, because in the end employment goes to the employable and in this increasing global competition, individuals need to be able to adapt to learning new skills.
New Deal has promoted work for lone parents and disabled people, for whom job search is a condition of receiving benefit. Work-focussed interviews have become mandatory and it is an approach to which all working age individuals who are living on benefits consider the possibility of entering the labour market (JRF, 2004). Until recently in the UK lone parents were not obliged to register for work until their youngest child was 16. However, this has now changed and as proposed by the Green Paper, from October 2008 lone parents with older children will no longer be entitled to Income Support solely on the grounds of being a lone parent (DWP, 2007). Instead those who are able to work can claim Jobseeker’s Allowance and they will be required to look for work. From October 2010, lone parents with the youngest child aged 7 or over will no longer be able to receive benefits on the grounds of being a lone parent.
Labour’s welfare to work programme has introduced major tax and benefit reforms which, in combination with new rights at work, including the national minimum wage, are targeted at making work pay. The development of tax credits has expanded and transformed support for people with low incomes. The family credit was replaced by Child Tax Credit for parents with low income and the Working Tax Credit was introduced for those on low earnings. Together with the minimum wage, it has given people the incentive to work. Tax Credits have been linked to a wider objective of reducing child poverty, and it lifted relative child poverty by half a million (Finn, 2003). The government believes work is the best route out of poverty, and by introducing Tax Credits, the government is improving incomes for all children with parents that are not in paid work or in low-paid jobs. Tax Credits have improved unemployment and poverty traps, by ensuring individuals are entitled to more from working than from benefits. However, this policy has been criticised for increasing dependency on employment, extending means testing up the salary scale and the potential impact on work incentive and employer wage-behaviour.
The New Deals have been subject to an intense evaluation programme. The impact of New Labour’s welfare to work programme has been significant in reducing unemployment, and figures illustrate that “the number of people claiming Jobseeker’s Allowance is at its lowest for over 30 years. The number of long-term claimants unemployed has fallen from more than half a million to 125,000; while for young people it has fallen from 85,000 to fewer than 7,000” (DWP, 2008). By the end of 2001, it was suggested that half a million people had found jobs through the various New Deals and 53 percent of NDYP leavers were entering jobs (Finn, 2003). The most dramatic impact was with those who were unemployed for over a year, where the number fell from 90,700 to 5,100, a falloff almost 95 percent (JRF, 2004). Various independent researches confirm that New Deal has been successful in helping people find work. Research by the institute of Fiscal Studies found NDYP increased the probability of finding a job by 20 percent (IFS, 2001). Also the introduction of personal advisors (NDPAs) has had a positive effect on participants, and evidence consistently has recognised the individualised help given by the NDPA as the key element of success.
Even though findings done by independent researches imply that NDYP has reduced long-term youth unemployment, some people say the reduction of unemployment has merely reflected the strength of the economy, as since 1997 the economy has produced an additional 2.9 million jobs (JRF, 2004). The impact of New Deal has not been as significant as it was predicted and set out to be. Figures prove that youth unemployment is higher than when Labour was elected in 1997, and rising. Since 2001, figures on youth unemployment have been increasing, and those who are on NDYP and unemployed under six months has grown. This is because little seems to happen in the first six months of unemployment, and JSA’s conditionality is increasingly ineffective as New Dealers and staff simply wait for the programme to start, which is six months into unemployment. Figures illustrate that by 2007 there was an increase of 82,000 young adults unemployed since 1998 (Field &White, 2007). Similarly, the number of jobless young people, unemployed between six to twelve months is increasing and it stands well above the level at the start of the New Deal in 1998. What is more shocking is the level of unemployment for those who have been out of work for over 12 months; it has also increased dramatically since 1998, and the same applies for those who have been unemployed for more than two years. Overall, the number of young people unemployed, whether it is short-term, or long-term, it is on the increase.
Claimants who have completed their New Deal, and still have not found work, are required to re-enter the New Deal, and then they are known as “retreads” (Field & White, 2007). The number of retreads has continued to grow with some claimants entering New Deal not only for the second time, but a third, fourth or even fifth time. New Deal has been unsuccessful in finding work, and people are left jobless and dependent on benefits. This shows a structural weakness of the Government’s New Deal programme, and data suggests that New Deal seems incapable of adapting to the needs people who find it difficult to find work, i.e. the very group which is most reliant on the New Deal for this purpose. Given that the government believes that the New Deal programme is to be the most effective way to ensure that there is no fifth option of remaining on benefits, why is there a growing number of people going on to New Deal for a second, third, fourth or fifth time? The government is contradicting itself here.
Long-term statistics suggest that men increased employment in the first six months after qualifying for NDYP. However, this disappeared over the following twelve months (Wilkinson, 2003). Women, do not do as well as men, and they tend to go the whole way up to the follow up period, implying a lower level of increase in employment. In 2007 there were 1,043,000 young people not in education, employment or training (Neets), which is a rise of 131,000 since 1997. However, despite the rise in youth unemployment, the proportion of young people on the New Deal is falling.
Lone parents have suffered a complex range of barriers to work, ranging from attitudes of employers, access to childcare, to difficulties with meeting housing costs and the complexity of the welfare system. Findings were complemented and confirmed by a study of non-working lone mothers, which found that the majority of them had a general desire to work but were constrained from doing so by slim financial gains or by lack of suitable or affordable childcare (JRF, 2004). Paying for childcare was a significant barrier to work for lone parents. With the new policies which are being introduced in October 2010 for lone parents, it is most likely to increase unemployment rates with this target group and create further barriers.
The increasing rate of unemployment is questioning New Labour’s rational of New Deal and its attempt to reduce dependency on benefits. Currently, unemployment is rising and New Deal has been criticised and been labelled as a failure. New Deal relies heavily on assisted job search and as we can see it is far from recession proof. This is why Labour has a new development which is called, Flexible New Deal. This new programme came in to force in autumn 2009, and it replaces the New Deal 18-24 and 25+ and Employment Zones programmes (DWP, 2008). Flexible New Deal has set out to provide an opportunity for Prime Contractor organisations from the private, public and third sectors to work together in partnership to deliver this new programme across all Jobcentre Plus districts. There are five core principles of the Flexible New Deal:
A stronger framework of rights and responsibilities to move benefit customers from being passive recipients to active jobseekers.
A personalised and responsive approach to individual customer needs which will provide tailored employment and skills support to meet the needs of both customers and local employers.
A partnership approach with public, private and third sector organisations working together to maximise innovation, leading to more and better outcomes.
Devolving and empowering communities for future sustainable employment which will be at the heart of neighbourhood renewal.
Not just jobs, but jobs that pay and offer opportunities for progression, with an emphasis on sustaining and progressing in work to ensure all customers who need help to develop their skills have access to the relevant pre-employment and in-work training.
The goal of Flexible new Deal is to eradicate child poverty by 2020, but this is not going to be an easy task. We are yet to see how successful this new programme will be in ensuring we move towards full employment and opportunity for all.
In conclusion, New Labour’s welfare to work programme has helped to overcome unemployment at a time when the labour market was expanding and on a boom. Employers are more likely to take on the unemployed, as they desperately need staff to fill the vacancies. New Deals have helped more than 1.8 million people get into work in the last ten years. However, figures demonstrate how the rate of unemployment, particularly with the 18-25 year olds, has risen and is continuing to do so. The very rationale of New Labour’s welfare to work is being contradicted, as the unemployed are not being given realistic employment opportunities, and people are still signing on for benefits, not for work. The New Deal programme is clearly not adapting to fit the needs of participants or the labour market, as people are entering New Deal not only for the second time, but a third, fourth or more occasions. New Deal should be implemented from day one of unemployment for young people, as the largest group are those who unemployed for up to six months, which is before the New Deal programme kicks in. More of the same will not work, and the government needs to change the way New Deal is programmed and fit it around the needs of individuals and help them back into the labour market. We will have to wait and see how the development of the Flexible New Deal helps to reduce unemployment, but if the current situation is anything to go by, the government has a lot to prove.
Daguerre, A. (2004) Importing Workfare: Policy Transfer of Social and Labour Market Policies from the USA to Britain under New Labour, Social Policy & Administration. p41-50.
DWP (2008) Transforming Britain’s Labour market: Ten years of the New Deal, Department for Work and Pensions, London. p2-10
Field, F. and White, P. (2007) Welfare isn’t working The New Deal for Young People, Reform, UK. p7-23
Finn, D. (2003). Employment Policy. In N. Ellison & C. Pierson (Eds.), Developments in British social policy 2 (pp. 111-128). Basingstoke: Palgrave Macmillan. p111-128
Peck, J. (2001). Another New Deal: Workfare, United Kingdom style. Chapter 7 In J. Peck (Ed.), Workfare states (pp. 261-340). New York: Guilford Press. p261-315
Kay, J. (1998) Evolutionary Politics. Prospect July: 31-35
Wilkinson, D. (2003) New Deal For Young People: Evaluation Of Unemployment Flows, Policy Studies Institute, London.
JRF-Joseph Rowntree Foundation. (2004) Labour’s welfare reform: Progress to date http://www.jrf.org.uk/publications/labour%E2%80%99s-welfare-reform-progress-date (Date Accessed: 11/04/10)
IFS- Institute for Fiscal Studies. (2001) Evaluating the employment impact of a mandatory job search assistance program. http://www.ifs.org.uk/publications/1734 (Date Accessed: 11/04/10)