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

This article first appeared in the 26 July 2010 issue of the New Statesman, Wanted: leader of the Labour party

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The secret anti-capitalist history of McDonald’s

As a new film focuses on the real founder of McDonald’s, his grandson reveals the unlikely story behind his family’s long-lost restaurant.

One afternoon in about the year 1988, an 11-year-old boy was eating at McDonald’s with his family in the city of Manchester, New Hampshire. During the meal, he noticed a plaque on the wall bearing a man’s face and declaring him the founder of McDonald’s. These plaques were prevalent in McDonald’s restaurants across the US at the time. The face – gleaming with pride – belonged to Ray Kroc, a businessman and former travelling salesman long hailed as the creator of the fast food franchise.

Flickr/Phillip Pessar

But this wasn’t the man the young boy munching on fries expected to see. That man was in the restaurant alongside him. “I looked at my grandfather and said, ‘But I thought you were the founder?’” he recalls. “And that’s when, in the late Eighties, early Nineties, my grandfather went back on the [McDonald’s] Corporation to set the history straight.”

Jason McDonald French, now a 40-year-old registered nurse with four children, is the grandson of Dick McDonald – the real founder of McDonald’s. When he turned to his grandfather as a confused child all those years ago, he spurred him on to correct decades of misinformation about the mysterious McDonald’s history. A story now being brought to mainstream attention by a new film, The Founder.


Jason McDonald French

“They [McDonald’s Corporation] seemed to forget where the name actually did come from,” says McDonald French, speaking on the phone from his home just outside Springfield, Massachusetts.

His grandfather Dick was one half of the McDonald brothers, an entrepreneurial duo of restaurateurs who started out with a standard drive-in hotdog stand in California, 1937.

Dick's father, an Irish immigrant, worked in a shoe factory in New Hampshire. He and his brother made their success from scratch. They founded a unique burger restaurant in San Bernardino, around 50 miles east of where they had been flogging hotdogs. It would become the first McDonald’s restaurant.

Most takeout restaurants back then were drive-ins, where you would park, order food from your car, and wait for a “carhop” server to bring you your meal on a plate, with cutlery. The McDonald brothers noticed that this was a slow, disorganised process with pointless costly overheads.

So they invented fast food.

***

In 1948, they built what came to be known as the “speedy system” for a fast food kitchen from scratch. Dick was the inventor out of the two brothers - as well as the bespoke kitchen design, he came up with both the iconic giant yellow “M” and its nickname, the “Golden Arches”.

“My grandfather was an innovator, a man ahead of his time,” McDonald French tells me. “For someone who was [only] high school-educated to come up with the ideas and have the foresight to see where the food service business was going, is pretty remarkable.”


The McDonald brothers with a milkshake machine.

McDonald French is still amazed at his grandfather’s contraptions. “He was inventing machines to do this automated system, just off-the-cuff,” he recalls. “They were using heat lamps to keep food warm beforehand, before anyone had ever thought of such a thing. They customised their grills to whip the grease away to cook the burgers more efficiently. It was six-feet-long, which was just unheard of.”

Dick even custom-made ketchup and mustard dispensers – like metal fireplace bellows – to speed up the process of garnishing each burger. The brothers’ system, which also cut out waiting staff and the cost of buying and washing crockery and cutlery, brought customers hamburgers from grill to counter in 30 seconds.


The McDonald brothers as depicted in The Founder. Photo: The Founder

McDonald French recounts a story of the McDonald brothers working late into the night, drafting and redrafting a blueprint for the perfect speedy kitchen in chalk on their tennis court for hours. By 3am, when they finally had it all mapped out, they went to bed – deciding to put it all to paper the next day. The dry, desert climate of San Bernardino meant it hadn’t rained in months.

 “And, of course, it rained that night in San Bernardino – washed it all away. And they had to redo it all over again,” chuckles McDonald French.

In another hiccup when starting out, a swarm of flies attracted by the light descended on an evening event they put on to drum up interest in their restaurant, driving customers away.


An original McDonald's restaurant, as depicted in The Founder. Photo: The Founder

***

These turned out to be the least of their setbacks. As depicted in painful detail in John Lee Hancock’s film, Ray Kroc – then a milkshake machine salesman – took interest in their restaurant after they purchased six of his “multi-mixers”. It was then that the three men drew up a fateful contract. This signed Kroc as the franchising agent for McDonald’s, who was tasked with rolling out other McDonald’s restaurants (the McDonalds already had a handful of restaurants in their franchise). 

Kroc soon became frustrated at having little influence. He was bound by the McDonalds’ inflexibility and stubborn standards (they wouldn’t allow him to cut costs by purchasing powdered milkshake, for example). The film also suggests he was fed up with the lack of money he was making from the deal. In the end, he wriggled his way around the contract by setting up the property company “McDonald’s Corporation” and buying up the land on which the franchises were built.


Ray Kroc, as depicted in The Founder. Photo: The Founder

Kroc ended up buying McDonald’s in 1961, for $2.7m. He gave the brothers $1m each and agreeing to an annual royalty of half a per cent, which the McDonald family says they never received.

“My father told us about the handshake deal [for a stake in the company] and how Kroc had gone back on his word. That was very upsetting to my grandfather, and he never publicly spoke about it,” McDonald French says. “It’s probably billions of dollars. But if my grandfather was never upset about it enough to go after the Corporation, why would we?”

They lost the rights to their own name, and had to rebrand their original restaurant “The Big M”. It was soon put out of business by a McDonald’s that sprang up close by.


An original McDonald restaurant in Arizona. Photo: Flickr/George

Soon after that meal when the 11-year-old Jason saw Kroc smiling down from the plaque for the first time, he learned the true story of what had happened to his grandfather. “It’s upsetting to hear that your family member was kind of duped,” he says. “But my grandfather always had a great respect for the McDonald’s Corporation as a whole. He never badmouthed the Corporation publicly, because he just wasn’t that type of man.”

Today, McDonalds' corporate website acknowledges the McDonalds brothers as the founders of the original restaurant, and credits Kroc with expanding the franchise. The McDonald’s Corporation was not involved with the making of The Founder, which outlines this story. I have contacted it for a response to this story, but it does not wish to comment.

***

Dick McDonald’s principles jar with the modern connotations of McDonald’s – now a garish symbol of global capitalism. The film shows Dick’s attention to the quality of the food, and commitment to ethics. In one scene, he refuses a lucrative deal to advertise Coca Cola in stores. “It’s a concept that goes beyond our core beliefs,” he rants. “It’s distasteful . . . crass commercialism.”

Kroc, enraged, curses going into business with “a beatnik”.


Photo: The Founder

Dick’s grandson agrees that McDonald’s has strayed from his family’s values. He talks of his grandfather’s generosity and desire to share his wealth – the McDonald brothers gave their restaurant to its employees, and when Dick returned to New Hampshire after the sale, he used some of the money to buy new Cadillacs with air conditioning for his old friends back home.

“[McDonald’s] is definitely a symbol of capitalism, and it definitely sometimes has a negative connotation in society,” McDonald French says. “If it was still under what my grandfather had started, I imagine it would be more like In'N'Out Burger [a fast food chain in the US known for its ethical standards] is now, where they pay their employees very well, where they stick to the simple menu and the quality.”

He adds: “I don’t think it would’ve ever blossomed into this, doing salads and everything else. It would’ve stayed simple, had quality products that were great all the time.

“I believe that he [my grandfather] wasn’t too unhappy that he wasn’t involved with it anymore.”


The McDonald’s Museum, Ray Kroc’s first franchised restaurant in the chain. Photo: Wikimedia Commons

Despite his history, Dick still took his children and grandchildren to eat at McDonald’s together – “all the time” – as does Jason McDonald French with his own children now. He’s a cheeseburger enthusiast, while his seven-year-old youngest child loves the chicken nuggets. But there was always a supersize elephant in the room.

“My grandfather never really spoke of Ray Kroc,” he says. “That was always kind of a touchy subject. It wasn’t until years later that my father told us about how Kroc was not a very nice man. And it was the only one time I ever remember my grandfather talking about Kroc, when he said: ‘Boy, that guy really got me.’”

The Founder is in UK cinemas from today.

Anoosh Chakelian is senior writer at the New Statesman.