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6 November 2013

Why benefit sanctions could end up costing the taxpayer more

Sanctions push people into insecure, badly-paid jobs that leave them back on welfare soon afterwards.

By Helen Barnard

The welfare system is now tougher than ever. Figures out today show there were half a million sanctions against Jobseeker’s Allowance (JSA) claimants between 22 October 2012 and June 2013.

Sanctions and conditions in the benefits system that are clearly communicated and fairly applied make an important contribution to a well-functioning welfare-to-work system. But they must go hand in hand with measures to support people into good, sustainable jobs. Together these actions can promote behaviour that is in the interests of claimants and taxpayers.

But JRF’s systematic review of the international evidence on the impact of sanctions shows that in practice they often create perverse effects. These can cause severe hardship and create higher costs in the long-term. Evidence from the US shows that sanctions can be an effective tool for getting people off benefits, but this is partly because people drop out of the system altogether. This may reduce the welfare bill in the short-term but can cause destitution and cost the public dear in other ways.

Evidence from Europe shows the use of sanctions can increase people moving into work, but it tends to be lower-paid, insecure work, which sees people quickly back on benefits again. This is because the threat or use of sanctions makes people take poorer jobs than if they had been allowed to wait for better opportunities. JRF is conducting a review of the impact of welfare sanctions, which will cast more light on this in the future.

New targets for jobcentres encourage them to focus on keeping people in work and helping them progress to better-paid jobs and move off in-work benefits; this is exactly what all the evidence says they should be doing. But it seems sanctions are not being used to support this. Rather, they undermine it by pushing more people into insecure, badly-paid, dead-end jobs. 

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The welfare system as a whole needs to be refocused to concentrate on getting people into work that they can sustain and that will allow them to increase their hours and pay to a point where they no longer need the state to top up their earnings. At the moment, bits of it have been reformed to achieve this, while other bits still have the old approach of ‘get a job, any job!’ Let’s get the whole system pulling in the same direction.

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Helen Barnard is Poverty Research Manager at the Joseph Rowntree Foundation