The long road from welfare to work

Will the government’s proposals to change the way training providers are paid really help solve the

In one of the upstairs rooms at the Rathbone training organisation's facilities in Oldham, Greater Manchester, Josh Duffy is leaning back on a chair that is too small and totting up the organisations that have tried to help him get a job. Rathbone is the sixth training provider with which Josh, who's just become a dad, has had contact since leaving school two years ago.

We count them up: first, there was North Lancs Training, where he studied construction. He left to go to Oldham College, where he was enrolled on a Level 1 bricklaying course. Then, after he decided that wasn't for him, a company called Work Solutions provided him with a mentor and some help writing a CV. "I didn't see them often. I didn't have much chance of getting a job. I was young and I had no experience," Josh explains.

After about six months without progress, he applied for plumbing. But that was with a private training provider and Josh couldn't afford the £2,500 fee. Next, he embarked on an "entry to employment" course with the YMCA. After eight weeks there, things seemed to be looking up. He had certificates in first aid, manual handling and safety, and the YMCA had moved him on to something called a "foundation modern apprenticeship" in retail, with a placement at an Ethel Austin clothing store. A couple of months down the line, he was told there wasn't any prospect of a job – the chain was cutting the hours of permanent staff and later went into administration.

So, Josh washed up at the door of Rathbone, which found him a work placement at a local store called B&M Bargains. Despite his ropey training history, the charity was prepared to give him a go, secure in the knowledge that it would be paid for its work. In future, it might have to think harder about doing this. The new Work and Pensions Secretary, Iain Duncan Smith, proposes that organisations delivering his welfare-to-work programme should be paid by results. That, according to Paul Fletcher, Rathbone's director of youth engagement, will leave them with tough decisions to make about whether to carry on doing what they do best – taking the most disaffected young people off the streets and setting them on their feet – or to focus on the easy-to-help and a healthy bank balance. There's nothing intrinsically wrong with payment by results, he tells me, it's just that it doesn't seem to have been adequately thought through.

“Principles are good, but the consequences for the financial balance sheet can be messy," Fletcher concedes. "The big question for organisations like ours is: do we start to be more selective and drive our performance in terms of who we are going to get paid for, or do we stick with our mission and risk not actually getting paid? The way a lot of providers will respond is by being selective at the front door. That means the most vulnerable and the most marginalised could end up going underground, losing their benefits and going into the black economy."

Revolving door

Duncan Smith's proposals are an extension of rules that began to be implemented under the last government. Under Labour's Flexible New Deal, providers were paid 20 per cent of their fee – typically about £1,400 in total – upfront, 30 per cent when clients had found a job and stuck at it for three months, and the rest after they'd been working six months. Now, it's likely that the full payment will not come in until they have stuck with a job for a year.

In some ways, what is happening is a fundamental shift in the way we deal with the young unemployed. Previously, the critical target of government programmes was to get people off the books of organisations such as Jobcentre Plus, so the end result was less important.

Julie Bird, the Rathbone tutor who brought Josh to the centre, sums up the old approach: "Everybody has targets to meet and as long as [the clients] are in some kind of training, it makes the statistics look good." The problem with this, she explains, is that these programmes become an end in themselves. Lots of people, like Josh, end up in a kind of revolving door, spat out by one provider, then sucked in by another. "There's quite a few in that situation," Bird says. "There's not always a guaranteed job at the end of it. Once the young person's off that book, there's no follow-up."

So well recognised is this phenomenon that there's even a word for it in the trade – "churn". There is no requirement for training organisations to monitor how many times their recruits have been around the course before, so there are no statistics to back up the sense that these short-term fixes haven't been working. Yet a major study on disengaged youth published in 2008 by the Nuffield Foundation and Rathbone estimated that four out of ten young people who were out of work were caught in a repeating cycle of short-term courses, casual employment and joblessness.

Rebuilding walls

Duncan Smith's payment-by-results plan is designed to deal with this. The question for the new government will be whether, by such a simple expedient as not paying the providers of back-to-work schemes until they deliver long-term results, it can reverse decades of labour-market casualisation and even the age-old tendency of the young to drift from one job, or one course, to another.

With youth unemployment hovering at the one million mark, and reports that there will be 70 applications for every graduate job this year, the issue looks unlikely to go away in the near future.

Fletcher has a different solution, which is gaining currency among many of those who work with the young unemployed. We should, he says, return to the glory days of Margaret Thatcher's Youth Training Scheme (YTS). One of Fletcher's first jobs was running such a scheme. "We rebuilt people's garden walls with old tradesmen passing on their skills, so there was job satisfaction and understanding," he says. "The key thing is, it's got to be perceived as real. At the time, I thought it was just OK, but with hindsight it was a good scheme."

YTS, he points out, was a 12-month placement – later extended to two years – with a non-means-tested allowance of around £30 a week – the same as today's education maintenance allowance, and in real terms about three times as high. Most of the participants progressed into real jobs.

Josh, after many false starts, has almost managed to do the same. He's just been told B&M Bargains is prepared to take him on as an apprentice. He talks with enthusiasm about his workplace, where he has been getting a £30 allowance for a 30-hour week since last November. "I'm looking after the furniture department. I build displays and do merchandising. It's great – I like hands-on work," he explains. As an apprentice, he'll still be on a low wage: "It's rubbish, but it's got to be done," he says, cheerfully. For him, finally, there should be a happy ending. It is much less clear how the legions of similarly unlucky or confused young people will fare under the new system.

The lost generation

Unemployment rose from 1.3 million to more than 3.4 million during Margaret Thatcher's premiership. Families were hardest hit in Northern Ireland, where unemployment reached 20 per cent, and in Scotland and the north-east, where the jobless rate was roughly 15 per cent.

In response to the persistently high rates of youth unemployment, Thatcher founded the Youth Training Scheme, a programme offering on-the-job training to 16- and 17-year-olds. The scheme was praised by some as an effective replacement for apprenticeships, but others argued that it enabled employers to exploit school leavers as cheap labour.

Many historians view the rise in unemployment as a regrettable but necessary consequence of the Tories' economic policies. Others, however, contend that the Thatcher government deliberately raised unemployment in order to destroy trade union militancy. Sir Alan Budd, who recently resigned as head of the Office for Budget Responsibility, said in 1992: "Raising unemployment was an extremely desirable way of reducing the strength of the working classes, if you like . . . What was engineered there in Marxist terms was a crisis of capitalism, which recreated a reserve army of labour and has allowed the capitalists to make high profits ever since."

George Eaton