Work after Welfare, Benefits, number 34, volume 10, issue 2, June 2002

This edition of Benefits suggests that the agenda has moved on – or rather, that it ought to do so. As Robert Walker writes in his editorial, “getting people from welfare to work is last year’s problem, and a comparatively easy one at that, certainly when compared to the task of keeping job entrants in employment … Sustaining people in rewarding employment is a much greater challenge” (p.83).

Richard Dickens, in his article ‘Is welfare to work sustainable?’, discusses the increases in both relative and absolute poverty which have taken place between 1979 and today, commends the government for taking a variety of steps to remedy the problem, suggests that the current work-based policy is not enough because it “may shift individuals into long-term in-work benefit dependency and possibly in-work poverty” (p.88), and concludes that those who move in and out of low-paying jobs will remain in poverty because job retention is low and there is little progression into higher-paid jobs. “Perhaps another strategy that the government should take more seriously is to tackle the primary earnings distribution” (p.89).

In response to the problem which Dickens discusses, there are new policy initiatives here and in other countries aimed at supporting people in employment through a case-work approach. Karen Kellard’s article, ‘Job retention and advancement in the UK: a developing agenda’, examines new policy in the UK, and in ‘The road to sustained employment: lessons from a US job retention intiative’, Anu Rangarajan discusses new developments in the USA. Both articles conclude that flexible schemes tailored to individuals’ needs are what is required.
A rather different approach is ‘Workfare’: compulsion to accept employment (State-provided if necessary), the refusal of which results in loss of benefit. In ‘Rhetoric and retrenchment: ‘common sense’ welfare reform in Ontario’, Dean Herd finds that, far from being the success it is claimed to be, a Canadian workfare scheme has removed large numbers of people from benefits by “reducing welfare services and tightening eligibility requirements” (p.105).

When read together these well-researched articles argue for an entirely ‘carrot’ approach: that is, if work doesn’t pay (literally), then ‘making work pay’ won’t work as a means of ‘welfare to work’. An important means of making work pay must surely be to reduce the marginal tax rates which people suffer. Tax credits have reduced these to between 60% and 70% for most low-earners. This is not low enough. The problem is, of course, that if, under the present structure, they are reduced further, then disincentives are moved further up the earnings scale. The only answer to this particular part of the problem is to replace tax allowances and tax credits with an unconditional cash payment and then to tax all or most earned income at rates lower at the bottom of the earnings scale than at the top.