Tuesday, 12 June 2012

DWP analysis shows mandatory work activity is largely ineffective. Government is therefore extending it..

The Department for Work and Pensions today published an impact assessment of the Mandatory Work Activity (MWA) programme.  The analysis compares participants on the programme with "comparable" (as determined by sophisticated statistical techniques) non-participants.  Briefly, what the analysis shows is that the programme as currently structured is not working. It has no impact on employment; it leads to a small and transitory reduction in benefit receipt; and worst of all, it may even lead to those on the programme moving from Jobseekers' Allowance to Employment and Support Allowance.  

Sadly, the DWP's press release doesn't mention any of these key points. Nevertheless, one would naturally assume that as a consequence the programme would be redesigned to achieve better outcomes. However, in a Written Statement, the Minister for Employment said:  

I am also pleased to announce the Government has decided to expand the Mandatory Work Activity scheme. The expansion will enable Jobcentre Plus to make between 60,000 and 70,000 referrals to Mandatory Work Activity each year, based on the current experience of the scheme, at a cost of an additional £5 million per annum. This decision has been taken as the result of careful consideration of the positive impacts demonstrated within the Impact Assessment.

Unfortunately it is very difficult indeed to reconcile this statement with the impact assessment itself. Before I explain the details, however, I would like to congratulate both DWP Ministers and their officials for performing a detailed impact analysis, subjecting it to outside scrutiny, and publishing the results, even though they are clearly unfavourable.  It speaks well of the Department and its continued commitment to evidence-based policy, and contrasts well with the muddle over Work Experience (described here), let alone the continued distortion of data and evidence by the Department for Communities and Local Government.  

A team here at NIESR, led by Helen Bewley, and including me, performed a peer review of the analysis. As the DWP publication says:
"NIESR concluded that the methodology was sound, although the nature of the selection process for programme referrals means that it is very difficult to identify truly comparable individuals who were not referred. As a consequence, it is possible that impacts are underestimated. However, subject to this, the key conclusions - that MWA had a small and transitory impact on benefit receipt, and no impact on employment  - appear reasonable. 
The MWA programme is described here.  Briefly, Jobcentre Plus advisers can refer claimaints who they think would "benefit" from "experience of the work environment" to a compulsory four week work placement.  This is somewhat euphemistic however: as the impact assessment puts it: "Guidance to advisers indicates that a claimant suitable for referral to MWA is one who is lacking or failing to demonstrate the disciplines and behaviours needed to seek out and secure employment."

 In other words, MWA is essentially a tool for advisers to use on those they think are not playing the game: blatantly failing to look for work, or perhaps even doing something else on the side.  The hope is not so much that participants will be encouraged to get a "real" job, but that they will find the experience of mandatory work so unpleasant (and/or incompatible with other activities they'd rather be doing..) that they will sign off benefit one way or the other.  Indeed, for many the prospect of MWA may be sufficiently unappealing that simply being referred to the programme may be enough to get them to sign off. And this is certainly what the international evidence suggests

So what would expect, based on the programme rationale and the international evidence? Ex ante, I would have said this:

  • lots of those referred wouldn't show up for the programme
  • there would be a substantial drop in benefit receipt - some of this would be only temporary, but some would be permanent
  • there would be little or no impact on employment

And what happened?  Well, drop out was indeed very high; only about 55% of those referred to MWA actually started the programme.  But the impacts on benefit receipt were disappointing. Among those who did actually start the progamme, there was essentially no impact. And while there was a substantial impact on those who didn't start - as you would expect, given that the programme was compulsory and they could be sanctioned for non-attendance - this was transitory.  Overall, the maximum impact was a 5 percentage point reduction in benefit receipt, and only 13 weeks after starting the programme the impact had disappeared completely. On average, someone referred to MWA spent just 4 days less on benefit as a result.  

Chart 1: Impact of MWA on benefit receipt (source, DWP, chart 4.2 in report)

So what appears to have happened is that while some of those referred did leave benefits as result, they drifted back on quickly. There was no lasting positive impact at all. Indeed,quite the contrary: it appears that some of them returned as ESA rather than JSA claimants:

Chart 2: Impact of MWA on ESA receipt (source, DWP, chart 4.4 in report)

13 weeks after referral, those referred were 3 percentage points more likely to be on ESA.  Not  to put too fine a point on it, this is a complete policy disaster. ESA claimants are both more expensive and more difficult to get off benefit than JSA claimants. Indeed, the main thrust of welfare-to-work policy under both this government and the previous one has been to try to move ESA claimants closer to the labour market.  MWA appears to achieve precisely the opposite. We can only speculate why, although the obvious answer is that the "hassle factor" of being referred to MWA had the unintended consequence of encouraging some claimants to claim a benefit - ESA - where there is not necessarily any obligation to look for work at all. In any case, whatever the explanation, the long-run costs of moving even a few JSA claimants to ESA will clearly outweigh any possible other benefits of the programme.

Finally, what about employment: no surprises, and no impact at all, here:  

Chart 3: Impact of MWA on employment (Source: DWP, chart 4.6 in report)

There are some important caveats.  The impact estimates here are significantly less robust than those from the impact assessment of the Work Experience programme, on which I blogged here. It is just much more difficult finding "comparable non-participants" in the data.  So there is a lot of uncertainty.  It is certainly possible that the characteristics of those referred to the programme were worse, and hence the impacts, especially on benefit receipt, underestimated.  But it is very difficult not to conclude that - whatever your position on the morality of mandatory work programmes like these - the costs of the programme, direct and indirect, are likely to far exceed the benefits.  [Note: for what it's worth, my personal view is that if such programmes deliver clear and measurable benefits, either in terms of reducing benefit receipt amongst those who shouldn't be claiming, or through increased employment, they are justifiable; that does not appear to be the case here]. 

To  conclude, it is highly commendable that the Department has undertaken and published this analysis.  It would be even better if that hadn't been accompanied by a policy decision which seems to fly directly in the fact of the evidence.  At at time of austerity, it is very difficult to see the justification for spending millions of pounds on a programme which isn't working

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