A team effort: role of employers in improving welfare outcomes
Speech by Mark Hoban, Minister for Employment.
Thank you very much for inviting me here this morning to start what I am sure will be a fascinating discussion about the role of employers in improving welfare outcomes.
There is a great deal of ground that I could cover in this introductory speech, for we see employers playing a pivotal role in the welfare state. My colleague David Freud has been leading our work on how, in partnership with employers, we can keep people in work who are suffering from ill health. Esther McVey would make an impassioned plea for employers to build on the inspiration of last year’s Paralympics and recruit more disabled people.
Later on this afternoon in the House of Commons, we will be debating the Pensions Bill which, by creating the framework for single tier pensions, will ensure that saving for your pension through a good quality workplace pension makes good sense. Employment allows people to achieve their full potential, enables them to meet their aspiration to look after themselves and their family and provides an opportunity through workplace saving to build up long term savings.
These reforms help tackle the cost of welfare. They ensure that we have a welfare state that is affordable and targets support on those in most need. But they go beyond this by tackling dependency on the state and restoring fairness between those in work and those out of work. Pivotal to this and to the goals of my ministerial colleagues is getting more people into work and enabling them to build the long term sustainable employment patterns that achieve prosperity for families, local communities and the country as a whole.
To achieve this goal we need to ensure that we have a benefit system that provides the incentive to work, the right support to enable those who are out of work to find employment as quickly as possible and a vibrant private sector that creates the opportunities for work.
Reform
It is not, I am afraid, immediately obvious under the current benefits that getting into work or increasing your earnings in work means that you are better off. I have sat with claimants in Jobcentres whilst they go through a 50 minute long better off in work calculation. If it is not obvious that you are better off in work, the problem is not with the claimant but with the system. But it gets worse, we all like to enjoy the fruits of our labour, Ian Cheshire tells us that some of his staff return their bonuses because it affects their tax credits.
Under Universal Credit all this inflexibility and complexity will be swept away. In work or out of work, you get the same benefit. It should be obvious that you will be off working and better off earning more.
A person’s payment is not suddenly stopped if they work more (or less) than 16 hours a week. It ensures work will pay more than benefits – encouraging more people back into work and rewarding them for every extra hour they do.
This makes it easier for employers who need to respond rapidly to short-term high demand or seasonal pressures because their workforce will have the incentive to work more as it will be worth working.
This approach will change the labour market. Employers will know their employees can more easily shift working patterns and employees will know they won’t be unfairly penalised or even have to ‘sign-off’ if they take on additional work.
It will be a huge cultural shift in terms of the labour market but we are determined to achieve positive behavioural changes and put the right support in place to provide strong work incentives.
Previously when someone moved into work, we stopped showing any interest in them. Under Universal Credit we estimate there could be around 1 million people working but their reduced hours or low income means we think they could be supported to do more. So we will still show an interest in some people who find work.
We’ll be testing new ways to help and support people to earn more or aspire to move up the career ladder and to become more financially independent. This benefits organisations by encouraging a culture of career progression and advancement.
I know many organisations, especially larger companies welcome that approach as it will give them more flexibility during peak trading times.
Over the coming months we will work with businesses and others to find out how best we can encourage people to earn more. Is it through increased training? Adapting the measures we use to help the unemployed into work for use with those on low incomes? Is it the carrot or the stick? But importantly we need to work with employers to see what works for them. What goes with the grain of their business model? What will encourage business to give its staff the chance to earn more to help their employees move from dependence to independence.
Universal Credit is a major project replacing a series of complex interlocking benefits but to be successful it needs to go beyond this by changing behaviour to support people into work and, once in work, increasing their earnings. Our reforms will have a significant impact on people’s lives but it will also help business by creating a workforce that is flexible and hungry for more work and more opportunities.
Universal credit forms part of a contract between the taxpayer and the unemployed. We will stand alongside you whilst you are looking for work and provide you and your family with financial support whilst you are looking for work. In return for that, we expect you to take up our offers of support to help you find work.
We are part way through a programme to modernise and reform the support we offer to the unemployed. Last December, we launched an online dating agency for jobseekers and employers called Universal Jobmatch. Using state of the art technology, we have made it easier for employers to search for the best qualified candidate for a job. And we will help jobseekers search and apply for a much wider range of jobs – 24 hours a day, 7 days a week and as easily from your own home as from the job centre.
Universal Jobmatch can be accessed through GOV.UK. To date there are over 2.4 million registered jobseekers and 400,000 employers using the new matching service. Try it and it’s free.
Of course, most jobseekers claim benefits for relatively short periods of time. 80% of 18 to 24 years are off benefits within 6 months of signing on. 90% of jobseekers are off benefit within a year. This is a testament to the resilience of the private sector in what have been tough economic times.
Last week’s labour market figures included record numbers in work, record numbers of women in work and record number of hours worked. To those who claim this is all down to part time or temporary jobs, the truth is that in recent months employment growth has come from full time and permanent jobs. This is not to say that part time and temporary jobs don’t have a role to play in getting people into work.
The resilience of the private sector has meant that over the last 3 years, for every job lost in the public sector, 3 have been created in the private sector. This confounds the sceptics who 3 years ago argued that the private sector couldn’t create the jobs to offset those lost in the public sector. The reality is that the economy is rebalancing and the labour market is proof of that with 1.3 million jobs being created in 3 years.
The flexibility of the private sector has created the right conditions for people who had been out of the labour market to return to work. That’s why we have seen a drop of 300,000 in the number of people claiming the three main out of work benefits – Jobseeker’s Allowance, Income Support for lone parents and sickness benefits. As we have reformed benefits and moved people closer to the labour market, employment and self-employment have been routes back towards independence from the state for so many.
But getting people into work is a challenge, for the 1 in 10 jobseekers who on are on benefit a year after signing on or those who have been out of the labour market through ill health but can see the chance to return to work, we need to provide support. To fulfil the bargain between us and those looking for work. It is part of our bargain to remove the complex barriers to work for those furthest away from the labour market.
But we are not shying away from radical reform in this area. Previous welfare to work schemes made generous upfront payments to providers with little regard to how effective they were in getting people into sustainable employment. Whilst that was good news for providers, it wasn’t great for the unemployed and was poor value for money for taxpayers.
The payment by results model that underpins the Work Programme aligns the interests of providers, the unemployed and the taxpayer. Providers only get paid for getting people into long term sustainable employment.
We shouldn’t underestimate the challenges of getting people back into work. Last Thursday I was in Plymouth visiting 2 of our Work Programme providers. I met a young man who had been out of work through ill health for 10 years and was, with the help of the Work Programme, developing a business plan to enable him to go self-employed so he could work and manage his health condition. In my first week as employment minister I met a young man who suffered from mental health problems and was homeless he was days away from starting a job in a care home. I believe that the Work Programme is giving hope to people who would have been written off just a few years ago. Rather than a one size fits all approach, we have a programme that is personalised and focused on individual needs, removing these barriers.
Later this month we will be publishing the results of the second year of the Work Programme and over the past few months we have been monitoring providers closely to ensure that they deliver the much better outcomes for the unemployed.
As I said at the outset, employers are partners in welfare reform and I hope that the argument I have set out this morning demonstrates just how true that is in the field of employment. I believe that we can reform welfare to create the right incentives to get more people into the jobs market. Universal Credit will accelerate that progression from dependence on the state to independence. As we move people closer to the labour market, we need businesses there that will employ people.
The vast majority are work ready, but for others we will need to intervene through skills training, motivation and removing complex barriers to get to that point. I need employers to work with us to give opportunities – to look beyond paper qualifications to someone’s attitude. To give an ex-offender a chance and to recognise that just as we may have people who work for us currently who have mental health conditions, we are willing to recruit new employees with similar conditions. You might say that this is a big ask. But by taking someone on who has these challenges you are helping us reform welfare. You are giving hope to someone who would otherwise be written off. You are recruiting someone who can make a contribution to growing your business and growing our economy. We will never be able to compete in the global race if we leave part of the team on the bench.