Matthew Oakley: Workfare is fair. The challenge is to make it effective.

Matthew Oakley, Head of Economics and Social Policy at Policy Exchange.

In recent days there has been a renewed cry of outrage over the use of workfare type schemes for the unemployed. The schemes, which have been in use in the US for decades and have been tried in various guises in the UK since the 1990's, essentially ask claimants of unemployment benefit to work for their benefit. Much of the criticism (for instance, see here) seems to be that the schemes are unfair as they allow the government and firms to exploit people. The argument is that requiring people to work for benefit is akin to slave labour. It is hard to understand this argument.

Firstly, people on these schemes are not getting nothing: while they are on the scheme, their benefits and tax credits are still paid. It does not seem unreasonable to expect that claimants of benefits should do something in return for the money they receive. Indeed, 'something for something' is a theme that we hear repeatedly from both sides of the House. In the case of the recently announced trial of community-based workfare for the very long-term (over three years) unemployed claimants are being asked to help out and put something back into their community. Hardly unreasonable after three years of financial support.

In its other guises (for instance the Mandatory Work Activity and work experience programmes run through Jobcentre Plus) the schemes are about building attachment with the jobs market and ensuring that claimants are not shying away from the requirements to seek work. Indeed, in some cases, claimants are guaranteed an interview for a more permanent paid position after a four week placement. This latter point highlights an important benefit of the schemes. When the labour market is relatively slack, firms have a larger pool of candidates to choose from. This means that long-term unemployed can be pushed to the back of the queue, not because they are unsuitable, but because others have more recent work experience which makes them a surer bet for firms (see this interesting report from CIPD on this issue). The government schemes allow firms to test out workers they might not have previously considered, giving those on the scheme opportunities they might not have otherwise had. This hardly seems unfair.

Of course, another argument in favour of the schemes is that they weed out benefit claimants who are working in the black economy, cash in hand, while also taking from the government. The available evidence points to this being a sizeable group. This is a case that Polly Toynbee made effectively when commenting on the 1996 test of workfare in the UK. In an article titled "Workfare really works" she commented on the large proportions of people eligible for a test of a workfare scheme that moved off benefit before their workfare arrangements kicked in:

"What became of the 3,100 who have signed off? Only 920 announced that they had got jobs. Where are the others? Did they find the prospect of three months’ compulsory work so terrible that they chose to starve instead? Have they been frightened by bullying interrogators out of drawing the dole rightfully due to them? Opponents of workfare put these propositions forward, but rather sheepishly. More likely, many were claiming falsely. Either they already had full- time jobs paying them above benefit levels (we are not talking here about earning a little extra on the side) or they were well able to get jobs once pushed. The Low Pay Unit complains that many have been pushed into unsuitable work, but after two years, is that so unreasonable?"

We would argue that this is not unreasonable at all and, again, rather than suggesting that the schemes are unfair, this evidence suggests that a welfare system without workfare would be unfair. The public certainly understand this. In a recent report Policy Exchange revealed results from a poll we commissioned on fairness and welfare. We found that 80% of the public thought that "People who have been out of work for 12 months or more, who are physically and mentally capable of undertaking a job, should be required to do community work in return for their state benefits". This is a staggering degree of support for workfare in the UK.

Indeed, with such widespread public support and strong arguments over the fairness of such schemes we should question why they are not used more widely. This is a question that Policy Exchange covered in another recent report. The problem is that the schemes can be expensive: firms often need (financial) incentives to take part or the government has to "create" worthwhile community projects for claimants undertake and has to monitor activity. We also know relatively little about the long-term success (in terms of increased employment) of the schemes and about the types of claimants they are most effective for. That is why we have suggested a full randomised control trial of the scheme. This needs to be much more comprehensive than the government's recently announced trial. With that evidence in hand, as well as arguing that workfare is fair, we can start to assess how and where it is most effective.