Sunday, October 9, 2011

Roger Kerr: Does Workfare Work?

Work-for-the-dole or ‘workfare’ schemes frequently appear on the menu of measures considered by welfare reformers. Indeed the Welfare Working Group proposed one in its final report, currently being considered by the government as part of its election manifesto. Do such schemes work, and what are they intended to achieve?

Work-for-the-dole usually entails continuation of a benefit payment in return for undertaking some community service activity. The idea often finds favour with taxpayers who want both a return for their money and a moral, mutual obligation enforced.

But the Working Group’s Options paper found that “Job creation schemes in the public sector appear to be ineffective for most adults and unemployed youth. …although there may be some scope to use these programmes to increase the non-financial incentives to find work”. These findings were based on broad OECD research into what works and what doesn’t across a variety of countries.

Yet some countries persist with such schemes. Australia’s work-for-the-dole scheme (WfD) adds $20 a fortnight to a participant’s unemployment benefit and covers such activities as heritage, the environment, tourism, sport, and community care and services. Placements are temporary and voluntary, but may be used to meet eligibility requirements. In other words, no work, no support.

WfD is controversial but has survived for 14 years and a succession of governments. Why? While the scheme slightly improves prospects of further employment, University of Melbourne research found those who went through the scheme actually stayed longer on welfare. Other research suggests that unpaid work has a ‘chilling’ effect on job search activity but that delivers some ‘soft outcomes’, such as increased self-esteem and improved interpersonal skills.

In the United Kingdom, a new mandatory workfare programme was implemented from April this year, to “help customers discover for themselves the expectations of work including: attending on time and every day, following instructions and working in teams.” Participation is compulsory or sanctions will apply, and placements are contracted out. However, with only 10,000 placements expected annually, it appears the scheme is reserved for the hardest to place beneficiaries or the most artful dodgers.

Workfare programmes also operate throughout the United States and Canada, ranging from work-for-the-dole to undertaking subsidised work, work experience or training. The US programmes form part of the Temporary Assistance for Needy Families (TANF) national scheme funded by state and federal government money. While schemes vary widely, all states must engage at least 70 percent of their welfare populations in work-related activities for at least 30 hours a week. A large proportion of family assistance funding goes to workfare schemes, but subsidising work in the private sector is preferred.

Though it is difficult to isolate the effects of workfare from other elements of welfare reform, its adoption in the US has contributed to a dramatic reduction in welfare rolls. Part of the decline is the deterrent effect, with many potential applicants deterred from applying for welfare by the prospect of mandatory work.

A 2008 comparative review of workfare programmes in the US, Canada and Australia commissioned by the UK Department for Work and Pensions confirmed the deterrent effect and concluded that subsidised job schemes that pay a wage can achieve better employment outcomes than work-for-the-dole schemes, and that workfare is least effective for people with multiple barriers to work.

In the 1990s New Zealand created work-for-the-dole schemes which were evaluated in 2004. A joint report from the Department of Labour and the Ministry of Social Development found, “…participating in Community Work Experience programmes with no wage subsidy decreases the probability of becoming independent of [Work and Income] assistance in the first two years after starting a placement.”

Despite this, and their own reported findings, the Welfare Working Group recommended, under Signals, expectations and consequences of not meeting obligations, that “……a credible work for welfare scheme be established, in order to test the willingness of a small group of recipients to comply with their job search obligations, such as in situations of six months on welfare for no apparent reason, or earlier if there are successive work test failures.”

Anecdotal evidence suggests that for many of the most intractable cases envisaged in this proposal, the biggest barriers to employment placement are their chaotic lives, and the absence of simple daily disciplines involved in rising early and going to work. So rather than using work-for-the-dole as an ongoing employment scheme or a means of dealing with people with multiple barriers to employment, the Group appears to see it, like the British approach, as having a twofold purpose: to teach some vital personal discipline and to act as a deterrent to malingerers.

If that is so, New Zealand will have benefited from international experience, using workfare mainly to begin signalling that only the truly needy should apply for welfare. And surely that is exactly what the architects of New Zealand’s social security system envisaged.


Anonymous said...

"workfare is least effective for people with multiple barriers to work"

In my experience, WINZ does nothing for such people other than bullying them, actively devaluing them and further lowering their self-esteem, while doing nothing to actually try and help them.

WINZ is also inflexible. WINZ does not react positively to proactive self-assessment and help seeking, despite claiming that they are there to "help" their "clients".

And they will not bend their rules that may well have a good basis in general but impede certain individuals.

For instance, they will only provide funds for interview clothing after an interview has been secured, while many of the unemployed already have the barrier of being overweight and therefore often have difficulty finding suitable clothes - especially men - and when they do find suitable clothes they often need altering.

Consequently, the simple need to have suitable clothes to attend an interview can be an additional barrier, especially for the long/er-term unemployed.

WINZ staff have argued that one can and must postpone the interview, but is that a realistic option? I think not.

While abuse of a previous system might well justify the current approach in general, inflexibility over something most people take for granted can create a significant barrier and a disincentive to apply for jobs.

Furthermore, WINZ staff are often the source of misinformation. For instance, telling long-term unemployed people that do not have recent work references that they cannot apply for government jobs simply because two verbal work references are required, yet appropriate personal referees may be accepted in lieu.

If WINZ actually "helped" more, responded more positively to requests for "help", were more careful not to further demoralise their "clients", who are often existing under extreme financial/psychological/emotional/physical stress, were flexible enough to consider exceptions and exceptional circumstances, especially for those "clients" that do not have a history of abusing the system or milking it for as much as they can possibly get at every opportunity, and tried to empathise more, maybe WINZ would feel less inclined to wield the big stick, which for many "clients" is completely counter-productive.

Sure, the discipline of simply getting up in the morning can be lost and it is a necessary discipline to keep a job, but it is not a necessary discipline to actually get a job. It is like putting the cart before the horse.

People need assistance in removing or mitigating their barriers to real jobs that pay enough for them to afford proper housing and have a dignified private life, rather than jobs that pay so little that they have little choice but to live in one of the increasing number of hostels for the working poor, unless of course they have children that guarantee a much-improved lifestyle for their parents, as opposed to the single poor.

The climate of increasing enforcement and jobs that are either exploitative and/or artificially created, which do not provide enough money to rent a house/flat and pay all necessary expenses, is creating an underclass and a society not too distant from that which existed in the Victorian era and its system of workhouses, etc. The growing number of hostels testifies to that.

And while women are increasingly affected directly, men are still very much disproportionately represented in the growing underclass of single working poor and unemployed, and their societal alienation and disaffection is a time bomb for society as a whole!

Anonymous said...

It is amusing that a former chair of the Business Round Table is commenting on work for te dole etc.
The main problem in NZ is the greed of those affluent. Employers have said for years they cannot compete with overseas companies because they are too distant from them. Crap. Big business only wants bigger profits for themselves. Too much work gone to Asian workers and too much work ezported offshore Present govt also to blame. Give people work and pay a meaningful wage and we would solve unemployment.

Anonymous said...

All we ever seem to hear is "solutions" which will involve even more expense for the long-suffering taxpayer! What is actually needed is more jobs, and this should be done by the private sector, not the state. So what can be done by the state to help the situation? It is obvious to all except the socialists amongst us that the minimum wage and abolition of youth rates is a cause of much of the unemployment. And yet I suggest most of us sympathise with those on low hourly rates. So I suggest a new approach. The minimum hourly rate should apply only to those adults who have been employed for a period of, say 3 years or more. Newer employees should be free to accept any rate they can agree with an employer, but after they pass the 3 year threshold the rate must be no less than the minimum hourly rate. Minimum hourly rates should not apply to anybody below the age of, say, 20 so that they transfer to the minimum hourly rate at the age of 20. This would encourage employers to create jobs because the cost would be acceptable, and young people would get a foot on the bottom rung of the ladder, leading to better things. Who could possibly object to this novel approach - apart from power hungry unions who have no interest in the unemployed!

Anonymous said...

My response to those who argue against the minimum wage, etc:

I do not believe that a dignified life for any adult/couple/family unit wanting to be independent is possible on the current minimum wage. Period. But of course, those with children will receive tax credits and housing assistance for the working poor, so to some extent having children can save parents. What a wonderful 'system' of welfare that discriminates against/alienates single adults and encourages poor adults to have kids in order to improve their own lots in life. What a 'system' that inherently acknowledges that many people do not earn enough and/or are being taxed too much. And it is unbelievable how much a couple can earn before they become totally ineligible for a welfare handout! Surely this tells us something is rotten, yet many people want to abolish the minimum wage and further entrench the growing underclass into our society. I guess for many that as long as they do not have to witness the problem it does not exist. Just as the police now move the homeless on so others do not have to see them.

However, I believe that an adult should be able to negotiate a 'proving' period with an employer, but this period should be no longer than three months, after which a truly liveable net wage should apply. For youth workers, I believe that if they are receiving *proper* and approved training from/though their employer, the employer has a right to expect a discount off the minimum wage and/or a tax credit. However, subsidies must be available to independent youth workers to enable them to live independently. Furthermore, employers should expect a short-term wage subsidy or tax credit if they employ an unemployed adult who requires training over an extended period in order to adequately perform the job. I know that WINZ already offers wage subsidies for those who have been unemployed for some time. Unfortunately, such schemes facilitate employers to abuse the system and get rid of those employees no longer receiving subsidies or enabling tax credits to the employer. I think it is certainly reasonable that the taxpayers subsidise by some means the (re-)entry into the workforce of the long-term unemployed. It would surely be reasonable to think in terms of a year's welfare payment, which for those earning the average wage would be recovered in less than two years through income taxes, and can be seen as a very good medium to long-term investment.

Anonymous said...

The real solution is purposely encouraging the development of an economy based on the production of high-profit manufactured goods. New Zealand should have an advantage in developing the likes of agricultural technology and value-added agricultural products. Winston Peters may not have been right about much, but he was right that NZ needs to become the Switzerland of the Asia-Pacific region. I do not think it can otherwise continue to claim to be a member of the first world. Developing technologies that people can develop just as easily in any country they might live, or manufacturing what others manufacture much more cheaply is not the right path. Most, if not almost all of NZ's niche technology companies that have been successful could have readily succeeded in another country.

NZ must exploit its difference, rather than simply ignoring its weaknesses and promoting NZ as a good place to raise kids, retire, or base your family while you pursue business interests elsewhere. Let's face it, NZ is nowhere near as clean and green as it claims and the weather in most parts is far from what it is cracked up to be. There are surely only so many people that will be taken in by the scam before it is exposed. Just as the growing underclass will soon no longer be able to be swept under the proverbial rug. And even NZers will only take so much. They will protest just like others are doing. And they will be demanding more than the current minimum wage. They will demand jobs that enable a dignified life. I simply cannot believe how many advocate against the current minimum wage and ultimately for a society that further entrenches a growing underclass that is alienated and excluded from the good life. Many on the minimum wage are expected to work extremely hard and are treated poorly. I doubt if any of their employers would do the work expected and accept the same treatment. And anyone who thinks working hard all one’s life guarantees or even almost guarantees one’s security has avoided meeting the kind of people I have met. All the current minimum wage guarantees to almost all recipients is a lifelong struggle and exclusion from the good life NZ prides itself on. And we should all know what pride goeth before.

Anonymous said...

I doubt whether there are very many people being paid the minimum wage rate who are of greater value to their employer. It's simple - you need to put yourself in the position where an employer can see that you will earn him more than you cost him. The sad thing is that so many young people leave school having fooled around, not studied, not passed exams, unable to read and write properly, yet seem to think they deserve a good standard of living. Actually, they don't. What they deserve is the chance to start out in the world of work, and the chance to make something of themselves by working diligently and impressing their employer. To continually throw money at them, as the above contributor thinks, is to continue to encourage further irresponsibility on the part of the young person. It will not be many years, if we follow our politicians' path of electoral bribery, before we too are in the same situation as Greece, etc. Anybody who borrows money just to pay everyday living costs, will inevitably end in catastrophe!