Pathways to Work - Can it deliver?

Although reform of labour activation measures is much needed, Pathways to Work will not deliver unless the economy is growing and creating jobs. By Sinéad Pentony.

Pathways to Work was launched last week and it sets out to achieve some much needed reform in relation to labour market activation measures. The ambition “is to develop a new approach to engagement with people who are unemployed which meets international best practice”. Plans to increase the level of engagement with people who are unemployed and greater targeting of activation places are essential ingredients of an effective active labour market policy. Pathways also includes measures aimed at ‘incentivising’ unemployed people to take up employment opportunities and incentives for employers to take on unemployed people. The final element focuses on reforming institutions to deliver services to people who are unemployed. But can it deliver?

Pathways to Work rightly draws on international best practice which has increased levels of engagement with unemployed people as a central plank in its active labour market measures. These measures will be rolled out through the National Employment and Entitlement Service (NEES). This will take time, resources and institutional reform if it is going to achieve the objective of a work-focused welfare payment and effective and targeted service delivery. 

Unfortunately, it appears that increased levels of engagement will only target those who are newly unemployed and in a number of pilot areas, in the first instance. This means that the vast majority of people currently on the live register will not benefit from an improved service. There are also plans to target activation measures at approximately 15,000-20,000 people who are long-term unemployed per year, up until 2015. Again, the scale of the interventions planned for the long-term unemployed is not sufficient to deal with the scale of the problem, with over 180,000 classed as being on the Live Register for more than one year.

To get an idea of the scale of investment as a percentage of GDP by countries that have highly developed active labour market measures - in Ireland (2009) we spent 0.87% of GDP on active labour market measures, while countries such as Denmark and Sweden spent 1.62% and 1.13%, respectively. This spending also needs to be put in the context of the fact we have many more people unemployed and long-term unemployed than these countries. 

International best practice is drawn from countries that have highly developed activation measures. Nordic labour policy fosters the human capital of the population, while at the same time deploying activation mechanisms that also include an obligation to work. The services provided place a strong emphasis on quality – and the occupational and skill requirements with regard to the staff are high. Regular evaluations and examinations of their knowledge are the norm.

Institutional reform

The institutional reform required in Ireland cannot be underestimated. If Pathways to Work is going to achieve best practice, this will require a different set of skills and capacities within the NEES, which may not currently exist. The ESRI report on Activation in Ireland shows how far we need to go in providing the types of training that are needed to improve people’s prospects of re-entering the labour market. The report highlights the predominance of general and low-skill training activity, which is unlikely to have strong positive impacts on employment prospects. The research also found that training provision is out of sync with the educational profile of unemployed people and that it does not address the structural employment among former construction workers. Finally, the report calls for a radical restructuring of training provision.

If the NEES is focused on providing a quality service where people are supported through individual progression plans, there should be very little need for ‘sanctions’ to be applied, because the vast majority of people are desperate to find a job. However, there is a danger that rolling out such a service in the absence of building the institutional capacity and the capacity of those delivering the service may result in the over-use of ‘sanctions’ on those who are considered to be ‘not engaging’ with the service because there is little/no emphasis put on finding out why a person may not be engaging with the service or if there are aspects of the service that are not meeting the needs of the service user. 

Incentivisation

Another element of Pathways to Work is ‘incentivisation’ – of those who are unemployed to take up jobs, along with incentives for employers to take on unemployed workers. In the case of employers there are a range of measures that reduce the cost of employing people, which make sense in times of recession and high unemployment. 

In the case of ‘incentivising’ unemployed people, a number of reforms are planned to streamline working-age payments, child income support and disability allowances. These reforms include moving lone parents onto working-age payments over time. However, the main barrier preventing lone parents from accessing education and training opportunities and/or employment opportunities is the provision of affordable childcare and afterschool care, and the absence of jobs with flexible arrangements. So, what will happen to lone parents who are expected to be ‘available for work’ but are unable to take up education/training opportunities or employment because of the absence of flexible arrangements and affordable child/afterschool care? Will they be sanctioned? 

Other changes include increasing the USC threshold to €10,036, which is welcomed, but the benefits of this are likely to be offset by reducing the social welfare week from 6 to 5 days. In general, the last number of years have seen cuts in direct and indirect social welfare payments, which is having a devastating impact on low-income households. This is reflected in growing numbers of families at risk of poverty and experiencing poverty along with growing income inequality - as evidenced by the latest SILC statistics. The recently published report on A Minimum Income Standard for Ireland also clearly demonstrates that many households in situations of reliance on social welfare or the national minimum wage live on an insufficient income. It is essential that reform of tax and welfare measures should not be equated with cuts, but that reform results in the better targeting of resources and supports at those who need them the most. Only then will we see a reversal of the current poverty and inequality trends.

'Payment by results'

The final element of Pathways to Work is institutional reform, which has been mentioned above. This includes plans to introduce ‘payment by results’, whereby the private sector is contracted to provide activation services for long-term unemployed. The report cites experience in the UK and Australia, asserting that it has “proven effective in supporting the unemployed to secure employment”. This system has been operating for less than a year in the UK and there are no independent evaluations available at this point in time. 

However, the UK National Audit Office recently published a report on the introduction of the Work Programme in the UK, which examines ‘payment by results’. Some of the findings include “a significant risk that ministers’ assumptions about the numbers who can be found jobs may be over-optimistic”. The contractual arrangements with private providers are also questioned because of the programme’s demanding targets, which “may encourage providers to target easier-to-help claimants while not helping others... and reduce the level of service provided in order to reduce costs...” There are also issues identified in relation to private providers operating in areas of high unemployment and how “they may struggle to meet nationally set targets”. The report clearly articulates a whole host of other ‘risks’ associated with the Programme, which highlight the complexities behind what can often appear straightforward ‘payment by results measures’, which can actually result in diminished services and ‘cherry picking’ people who are easier to place in employment. 

The Report also identifies the future state of the economy as a key indicator of success and this means the availability of jobs. While Pathways to Work will hopefully deliver some much needed reform, its success will depend on whether or not the economy is growing and creating jobs. Unemployment is primarily a ‘demand-side’ problem, which needs demand-side solutions, and central to this is investment, along with measures that protect low incomes, which maintain aggregate demand in the domestic economy.

Sinéad Pentony is Head of Policy at TASC. This piece orginally published on progressive-economy@TASC, republished with permission. 

Image top: The Labour Party.