How the “Work Programme” could make the poor poorer

Making work pay is a laudable goal but this scheme isn’t how to do it.

Over the past year, I have sometimes felt as if I were battling almost alone against the coalition's ineptitude. Then, into the fray strode Rowan Williams, the Archbishop of Canterbury, with his critique of government policy in last week's issue of the New Statesman. His comments put the government in a real tizzy, with David Cameron and various ministers trying to defend themselves from the suggestion that they lack a mandate for their restructuring of the British welfare state.

I was struck in particular by Williams's claims that the term "big society" is "painfully stale" and the electorate is "being committed to radical, long-term policies for which no one voted". That seems right. The plans to privatise the NHS, to take the most obvious example, were in neither the Conservative nor Liberal Democrat election manifesto.

I agree with the archbishop's criticisms of the Labour Party for failing to set out an alternative: "We are still waiting for a full and robust account of what the left would do differently and what a left-inspired version of localism might look like." The government has been so hopeless that Labour should be all over it. Tory attack dogs such as Michael Fallon have a point when they ask, "What would you do instead?" Labour needs answers to that question and soon.

The onslaught against the shadow chancellor, Ed Balls, following the leak of old documents with zero news in them, shows that the right fears him. But Balls is the only tiger on the Labour front bench; the rest have been pussycats. Ed Miliband, whose performances at Prime Minister's Questions have been lacklustre, needs to raise his game. It is no good sitting around waiting for hoped-for policy reviews: it is time to get stuck in.

Obstacles to reform

Here is a useful piece of evidence to add to the opposition's arsenal. The full results of a survey conducted by the European Commission in November and December 2010 have just become available. The survey is part of the Eurobarometer series, which asks identical questions in all 27 member countries. The 22,560 respondents were asked whether they totally disagree, tend to disagree, tend to agree or totally agree that the economic crisis "means we should increase public deficits to create jobs". In the table below, I report by country the weighted percentage of those who said they tend to or totally agree.

The high percentages suggest that there is major opposition to the policy of decreasing public deficits. Two-thirds of UK respondents were in favour of increasing public deficits to create jobs - a much higher proportion than in all the other major western countries. This looks like a potential support base for Labour, whose strategy in opposition should be all about the need for jobs, jobs and more jobs, especially for the young.

The coalition's "Work Programme", which was launched on 10 June, is more likely to make the poor poorer than it is to get Britain back to work. To make work pay is a laudable aim but is this the way to do it? The Work and Pensions Secretary, Iain Duncan Smith, and his employment minister, Chris Grayling, face three main problems in implementing their reforms.

First, they promise that the programme will give 2.4 million unemployed people help to find jobs over the next five years, which seems unlikely, given that there are so few jobs available. At present, there are 2.43 million people who are unemployed and a further 2.4 million who are out of the labour force - those who are neither employed nor unemployed but want a job. The Office for National Statistics reported that, on average, there were only 469,000 vacancies available from February to April, which implies only one vacancy for every ten jobseekers. The number of jobseekers per vacancy is likely to be much higher in areas of high unemployment. There remains no evidence that the private sector will deliver the large numbers of jobs the coalition is hoping for.

A

Jobs for the jobless

Second, the reforms are largely untested and on too small a scale to make a serious dent in the problem. Under the scheme, approved providers - primarily private companies - will try to find work for claimants of benefits in the UK. Seven-year contracts have been agreed and are on a payment-by-results basis, so the worry is that these companies will pick the individuals who are more likely to get jobs and ignore unemployment black spots. The withdrawal of PricewaterhouseCoopers after losing out on contracts amid suggestions that the scheme was commercially unviable was not a good start.

Third, the evidence is that the unemployed are not just a bunch of lazy bastards. The vast majority are unemployed involuntarily. Many have the wrong skills and are in the wrong place. The housing market makes it hard for them to relocate. Some are simply too ill to work. Being jobless makes people unhappy and the longer they are without work, the less happy they are. Being without work is bad for self-esteem and mental health.
Based on my calculations using the 2010 Labour Force Survey, the unemployed are three times as likely as those who are employed to report that they are suffering from depression and bad nerves. It doesn't matter for policy whether their poor mental health is a cause or result of their unemployment. They deserve compassion.

David Blanchflower is NS economics editor and a professor at Dartmouth College, New Hampshire, and the University of Stirling