Last night’s Panorama went some way to exposing the floundering Work Programme, Iain Duncan Smith’s fantasy scheme that is currently having no impact on long term unemployment beyond bullying, demoralising and sanctioning claimants.
What Panorama didn’t touch on was the reason for the shambles, which goes far beyond a few bad apples in welfare-to-work companies. The entire model of the Work Programme is broken and based on the lie that unemployment is caused by unemployed people. Ironically this has led to perverse incentives which mean that welfare-to-work companies can best profit from the scheme by doing the least work possible.
As described in Panorama, companies are paid large fees on the Work Programme should someone find a job and remain employed for six months. The fee rises considerably if somebody is disabled, or faces other disadvantages such as homelessness. Participants are mandated to the Work Programme for two years, with a further year’s tracking period under which job outcome payments can be claimed.
In three years, even some of the hardest to help may turn their lives around. Many people will find a couple of year’s job hunting finally pays off and find work completely under their own steam. A few people on sickness benefits will get better and re-enter the job market, as might single parents as their children grow up. These are all people who would have got a job without any help whatsoever from private sector poverty pimps like A4e and G4S. Despite this, every one of these job outcomes is worth thousands to welfare -to-work companies.
If that wasn’t enough, welfare-to-work companies have been receiving £400 every time someone walks through the door, rising to £600 if that person is on disability or sickness benefits. And this is where it gets profitable. Welfare-to-work companies usually induct people in groups, often quite large ones. If a welfare-to-work company inducts just ten people a week then they can earn a whopping £200,000 minimum over the course of a year. In terms of staff costs, this is about a day and a half’s work a week at the very most. There would be ample time in the week for just a single staff member to then have a one to one session with every inductee and siphon out the small percentage of participants they think they might be able to help get a job.
For this lucky few – which is probably only around ten percent – welfare-to-work companies have unprecedented powers to use workfare and benefit sanctions in an attempt to micro-manage them into employment. Usually they fail. When they succeed it’s quite likely the person would have got a job anyway. What this means is that all the resources of the Work Programme are being directed at those who probably don’t need any help.
But the welfare-to-work company has a problem, which is the 90% of people they refer to as Lying Thieving Bastards who are still on their books. In a buoyant employment market, then it might be profitable to cream off the next top ten percent. But at present the jobs market is far from healthy. Most of the alleged fall in unemployment has been down to workfare schemes, part time work and casual self-employment.
The large Work Programme contractors have been around a while now. They know, even if they can never admit it, that employers just aren’t hiring people who are sick or disabled, lack experience or have been out of work a long time. They certainly aren’t hiring heroin addicts, street drinkers, those with long criminal records or complex mental health problems – the type of people Iain Duncan Smith seemed to think the Work Programme would magically ‘fix’.
With very little chance of any further profit from the majority of Work Programme participants, welfare-to-work companies do what any other business would. They cut costs.
This is why many Work Programme participants only get phone interviews, or invited in to see providers once every two months. The less welfare-to-work companies pay out in wages, they more money they make. It is not inconceivable that a small Work Programme office, with 2 or 3 full time staff, could generate a quarter of a million a year just by creaming off the most employable and abandoning the rest. Every new staff member means taking a financial risk on the 90% who probably won’t get jobs anyway. With job outcomes so thin on the ground even for ‘job ready’ participants, it’s just not worth the risk. Better to sit on their arses and let the bucks come rolling in.
There is a problem ahead for the welfare to work companies however, which is that the start fees are reducing a by £100 a year. That means in 2013 new starts will only be worth £300 – still enough to make a profit doing nothing, but not quite as lucrative.
Predictably the welfare-to-work companies are already blaming the failure of the Work Programme on the lack of money in the system. These companies are large enough, and co-ordinated enough, to bring down the Work Programme, and both they and the DWP know it. Whether they are successful in their quest for more cash is simply a question of who blinks first.
The whole sorry saga points to the impending and inevitable social chaos being created by the neo-liberal drive to marketise and privatise all public services. Iain Duncan Smith threw open welfare-to-work provision to the free market, giving businesses unprecedented powers to control claimants lives and huge tax payer funded rewards for success. The market responded by demonstrating that it is just not profitable to devote resources to the hardest to help.
Unemployment is not caused by unemployed people, but by intense competition for jobs due to a flat-lined economy. Grasping employers don’t want to take risks on hiring long term unemployed people, especially when they don’t have to. Even in an economic boom, it would still be unprofitable to support the hardest to help – those whose lives are shattered by illness, homelessness, addiction and often desperately sad life experiences and childhoods.
The market has spoken, and it doesn’t give a fuck about the poor. The problems created by capitalism will never be fixed by more capitalism. The tragedy is that this failed model is already being exported to the probation services and social care. It is a naked wealth grab by the rich, who can’t even look at the poorest and most vulnerable without wondering how they can make a profit from them.
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