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policies-for-2010-workfare

Workfare is another policy idea whose time finally seems to have come, with both Labour and the Conservatives signed up to its basic principles, which are largely derived from the United States’ welfare reforms of the 1990s. Our 2007 report Working Welfare by Katharine Hirst provides an excellent guide to these reforms, and the lessons the UK can learn from them.

The primary feature of ‘workfare’ is that all unemployed people seeking state support should face immediate work requirements – no work, no benefits. Subsidized jobs and compulsory work experience should be the preferred options, but if no such employment can be found then welfare claimants should have to do community service. Those with severe education deficiencies may undergo training, while claimants with alcohol and drug problems would be expected to undergo treatment. The key here is to make taxpayer support something which must be earned – not something to which one is simply entitled. The point is to prevent dependency becoming pathological, and to get unemployed Britons working again.

The other main feature of workfare is that it involves contracting out welfare provision to competing private and voluntary agencies, who would be paid according to their results. In other words, for each individual claimant they would receive part of their payment only when that claimant has found work and kept a job for a specified period of time. The longer someone had previously been without work, the greater the performance bonus for the provider would be. Thus there would be a strong incentive towards active, individually-tailored welfare provision that focused on re-entry into the labour market.

This much seems to be well-understood among policymakers. There is also an appreciation of the importance of simplifying the benefits system – perhaps replacing the current 50-or-so separate benefits with just two or three basic ones – while paying particular attention to marginal tax rates for those moving from welfare to work, to ensure that work always pays. But one thing which has largely been overlooked, and which played an important role in the success of the American reforms, is decentralization. Since the cost of living varies across the country, so too should benefit levels (and, indeed, the minimum wage, if we must have one). Over time, this ought to become one of the functions of local councils.