IPR Blog

Expert analysis, debates and comments on topical policy-relevant issues

Topic: employment

Skills and global value chains: a story of winners and losers

📥  Economy, education, employment

Professor Hugh Lauder is Professor of Education and Political Economy at the University of Bath

Two weeks ago, the OECD launched the newest instalment in its biennial Skills Outlook series, which focusses on the impact of skills and education on economies and employment in OECD countries.

OECD Skills Outlook 2017: Skills and Global Value Chains broke new ground for the OECD in that it reported the relationship of skills to the global economy. This is the first time that the organisation has extended its analysis of skills to the global economy: in the past, it has focussed on national competitiveness through education and skills, but here the focus was on the role of skills in the development of global value chains.

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There were two key messages to the report: firstly, that a skilled workforce enables countries to compete for work in global value chains and, secondly, that there would be winners and losers in that competition – workers who are less skilled, in particular, are likely to remain excluded from the global economy.

Policy challenges

There are a number of problems that national governments have to confront when thinking of policies that relate to global value chains. The primary problem is that, in many sectors, global value chains are footloose: transnational companies will always shift their supply chains to wherever they can find a cost advantage – and where technology can be substituted for workers, however skilled, technology appears to win. Two good examples of this come from the manufacturing and service sectors, respectively. First, much of East Asian manufacturing is based on low-skilled assembly work – but with the advent of smart factories, workers are no longer needed; they can be replaced by robots. The announcement by Adidas that it will establish such a smart factory in Germany is a straw in the wind, and will raise fundamental problems for the strategies of developing countries. An example from the service sector concerns the discovery work that was once undertaken in London and New York by young lawyers, who were paid high salaries. That work was subsequently offshored to lawyers in developing countries where it could be done at a fraction of the price the same work would cost in Western capitals. Now, that work is undertaken by the use of algorithms.

As Phil Brown, David Ashton and I argued in our book The Global Auction, employers do not wish to pay for brain power and skill if they do not have to; it is too expensive. The error here is to believe that we live in a knowledge economy, when it is actually knowledge capitalism that drives the strategies of cost reduction.

This is not to reject the importance of education and skills, which we should avoid doing for two reasons. Firstly, without skilled workers, small and medium enterprises that may become corporations in the future will not be able to enter the market. In emphasising skills, therefore, we need to build industrial policies within countries that enable fledgling enterprises to flourish. Skills may also be needed as an insurance policy, however, a form of resilience when transnational companies decamp from one country to another in the search for cost advantage, or when new forms of technology make firms unviable. Costa Rica developed a skilled workforce to attract Intel, for example, and for a while the strategy worked – but then Intel exited to Vietnam, where labour was cheaper. In Finland new technology from Microsoft made the Nokia phone redundant, with resultant job losses – although the company is now seeking a comeback. In both cases, the host countries were hit hard. What we don’t know is whether having skilled workforces will enable these economies to be resilient in recovering from these meteorite-like shocks.

A timely report

The OECD’s new report has involved considerable cooperation between Andreas Schleicher, Director of Education and Skills, and Andy Wyckoff, Director of Science, Technology and Innovation – as well as their respective teams. The extension of skills analysis to global value chains is a major breakthrough for the OECD and for the international research and policy community.

The report was launched at an event in London with support from the Institute for Policy Research (IPR), and included a panel discussion in which I participated, alongside Torsten Bell of the Resolution Foundation, Toni Fazaeli of the Institute for Learning and both Wyckoff and Schleicher. It was a productive discussion, and touched on many of the points raised above.

But there were some important concerns that weren’t discussed explicitly at the launch, although their shadows loomed large over the debate. The political implications of the role of global value chains are a crucial consideration, particularly in the context of Brexit and the rise of nationalist parties across the Western world. It is not only the attempts of transnational companies to cut costs that pose a threat to policymakers: economic nationalism can do the same, and a hard Brexit may see the breakup of global value chains in motor manufacturing as well as in services.

In this respect, the OECD report could not be more timely. To undertake research of such complexity required an organisation with the resources of the OECD and this report is, therefore, to be welcomed.

You can read more about the launch event in the IPR's coverage here, and the OECD report can be downloaded here.

 

Trump’s First 100 Days Have Triggered Political Activism in Corporate America

📥  employment, Trump, US Presidential Elections

Professor Andrew Crane is Professor of Business and Society and Director of the Centre for Business, Organisations and Society at the University of Bath.

President Trump’s first 100 days have not been good for the planet. While the question of whether he will fulfil his campaign promise of rolling back the US’s commitment on the Paris climate deal is still to be settled, he has stuffed his cabinet with climate change sceptics. Most notably, the appointment of Scott Pruitt to head up the US Environmental Protection Agency met with a storm of criticism. This was hardly surprising given his ties with the energy industry, his denial of man-made climate change, and a long history of fighting the very agency he has been appointed to lead.

corporate protest

 

Trump and his cabinet have not been slow in rolling back environmental regulation introduced during the Obama presidency. As part of an effort to revive the coal industry, an executive order last month started unravelling Obama’s clean power plan (CPP). As The New York Times reported, the order effectively ceded the US’s leadership in addressing climate change and turned “denials of climate change into national policy”.

While such developments were hardly unexpected, what has been interesting has been the corporate response. Last November, nearly 400 US companies including Nike, Levi Strauss and Starbucks demanded that he leave in place low-emissions policies. In the wake of the CPP announcements in March many companies again took a public stand against the policy reversal. For example, Mars Inc. expressed disappointment at the policy change while tech companies including Apple, Amazon and Microsoft signed a joint statement supporting the CPP.

It is rare to hear companies, and US companies in particular, arguing to keep regulation. They are also usually unwilling to take explicit political stands in the public eye, preferring to use lobbying and more covert forms of political influence to sway governments to act in their interests. But the corporate response to the climate rollback seems to be part of a broader change of heart among senior executives to take public positions against what they see as undesirable policy shifts.

This change was first noticeable following Trump’s immigration ban back in January that saw wholesale restrictions banning refugees and others from predominantly Muslim countries from entering the US. As Business Insider reports, “Before the day was over, Facebook's CEO had published a post denouncing the order. By the end of the weekend, Starbucks' CEO had outlined plans to hire 10,000 refugees. And, within a week, Uber's CEO had quit Trump's economic team as thousands deleted their accounts with the ride-hailing app.”

The response by corporate America to the immigration ban was significant and widespread. Rather than the usual caution about taking a political stand on a hot button issue, companies as diverse as Coca Cola, Google, and Ford came out against the policy. The tech industry’s response gained a lot of attention, not only because high-profile companies and their leaders, such as Sergey Brin at Google, actively spoke out against the executive order, but also because regular tech industry employees staged walkouts and protests rarely seen before in the industry. For many in tech, The Atlantic reported, this was the first time they had taken part in political activism in their lives.

bi-graphicshow companies reacted to trump

 

So what does all this mean? There are a number of ways of looking at this, but the big change for me is that US companies are starting to acknowledge a meaningful role for themselves as explicit political actors. In the past, few company executives would ever admit that their actions were in any way political. “We don’t do politics” was the mantra, despite the billions of dollars spent on lobbying and trying to buy influence in Washington. However, as companies have more openly started addressing issues traditionally thought of as government responsibilities – protecting human rights, providing public goods, enforcing social and environmental standards, and the like – the cloak has gradually slipped.

Scholars of corporate responsibility such as myself have been analysing these developments over the past couple of decades, labelling these new corporate behaviours variously as “corporate citizenship”, “political CSR”, or “private governance”. So the response by corporate America to Trump’s first 100 days is not so much a sudden change in their core corporate responsibility behaviours, more a newfound willingness to start acknowledging what has been increasingly apparent all along: corporations do indeed play an explicitly political role.

Acknowledging something is the first step to dealing with it. And the role of business in politics is something that we certainly do need to address as a matter of urgency. Most business leaders may not be completely comfortable yet with admitting their political role, but many do want to start thinking more seriously about their impact on the world, as Mark Zuckerberg’s recent 6,000 word manifesto exemplifies. Further radical announcements from the Trump administration are likely to incite yet more corporate political activism. So while we may not be able to thank President Trump for his impact on the planet, he may yet be responsible for a breakthrough moment in companies’ understandings of their changing role in society.

This post first appeared on the Bath Business and Society blog.

 

Timing it wrong: Benefits, Income Tests, Overpayments and Debts

📥  employment, future, policymaking, Welfare

Professor Peter Whiteford is a Professor in the Crawford School of Public Policy at the Australian National University and Professor Jane Millar is a member of the Institute for Policy Research (IPR) Leadership Team, in addition to her role as Professor of Social Policy at the University of Bath.

Unexpected bills can be a challenge for any household. But for people who rely on social security payments, unexpected news of a significant debt – sometimes dating back years – can be bewildering to say the least. This is exactly what tens of thousands of Australians have experienced in recent months.

Since just before Christmas, Centrelink’s use of a new automated data-matching system has resulted in a significant increase in the number of current and former welfare recipients identified as having been overpaid and, thus, being in debt to the government. The data-matching system seems to have identified people with earned income higher than the amount reported when their benefits were calculated.

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Many of these people were alarmed when Centrelink contacted them about the assumed debt. Their stories have been recounted over the past two months in the mainstream media and social media. The controversy prompted the Shadow Human Services Minister Linda Burney to request an auditor-general’s investigation. After receiving more than one hundred complaints about problems with the debt-recovery process, independent MP Andrew Wilkie asked the Commonwealth Ombudsman to step in, and he has since launched an investigation. The Senate Community Affairs References Committee will also examine the new process.

This is by no means Australia’s first social security overpayment controversy. The last storm was sparked by the expansion and fine-tuning of family tax benefits in 2000. Under that new system, families were given the option of taking their payments as reductions in the income tax paid on their behalf by their employer. To ensure that this group was treated in the same way as those who received cash benefits from Centrelink, the government introduced an annual reconciliation process. Before the beginning of each financial year, families were asked to estimate what their income would be in the subsequent tax year; later, after they had filed their tax returns, an end-of-year reconciliation process would bring income and family benefits into line.

This seemed like a rational system. People who had been underpaid could receive a lump sum to ensure their correct entitlement. People who had been overpaid would pay back the money that they weren’t entitled to keep. The reconciliation would correct any mistakes people made when they estimated their income for the year ahead (not necessarily an easy task to get right!) and make the system responsive to changes in income during the year.

But many families’ estimates at the start of the year proved to be poor guides to income received during the year. This happened in both directions – some estimates were too high, some too low – but most often real annual incomes were higher than predicted. The result was a very large increase in overpayments and, thus, in debts. Before the new system was introduced, just over 50,000 families had debts at the end of each year; in the first year of the new system, an estimated 670,000 families received overpayments. Overall, around one third of eligible families incurred an overpayment in the first two years of the new system.

This is how the system was designed to work. But for the families who found themselves owing sometimes large and usually unexpected debts, the experience created confusion, stress and anger. It also generated considerable controversy in parliament and the media. So, in July 2001, just before an important by-election, the Howard government announced a waiver of the first $1,000 of all overpayments, which reduced the number of families with debts to around 200,000. Further fine-tuning came in 2002, also aimed at reducing overpayments and debts. Then, in 2004, an annual lump sum was added to family tax benefit A with the aim of offsetting any overpayments.

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At around this time, Britain was designing and introducing a new system of tax credits for people in work (the working tax credit) and for families with children (the child tax credit). The system had some features in common with the Australian approach, had some features in common with the Australian approach, including an end-of–year reconciliation. The British government was keen to avoid the sort of controversy that had blown up in Australia, so it included a mechanism for changing the level of tax credit not just at the end of the year but during the year as well.

The assessment for credits was initially made on the basis of gross family income in the previous tax year. If recipients reported changes in income and circumstances during the year, then the award was adjusted, and at the end of the year total credits and income were reconciled. But many changes in income and circumstances went unreported during the year and so, in practice, considerable adjustment was required. Over the first few years of the system, about 1.9 million cases of excessive credits occurred each year.

As in Australia, the system caused significant hardship and generated adverse media coverage and much concern. In 2005 and 2006, the British government introduced a number of changes designed to reduce overpayments, including a very substantial increase in the level of the annual income “disregard” from £2,500 to £25,000. This meant that family income could rise by up to £25,000 in the current award year before tax credits were reduced. The amount has since been brought back to the original £2,500, which will probably mean overpayments will start to rise again. Processes exist for recovering overpayments of tax credits and housing benefits, and these sometimes attract some media attention, most recently in relation to the use of private debt collectors.

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Together with the current Centrelink controversy, the experience of these earlier cases offers four main lessons for social security policy.

First, getting payments “right” in any means-tested system is a complex process necessarily involving trade-offs between responsiveness and simplicity. If the aim is to precisely match income and benefit in real time, then there must be constant updating and checking of income and adjustments of benefits. But such a system would be very intrusive and administratively complex. So systems are designed to pay first and reconcile later, which makes overpayments almost inevitable.

Governments can minimise the impact by disregarding some overpayments, as both Australia and Britain have done in the past. But that is not part of the design of Australia’s latest program of debt recovery. People are being chased partly because the Budget Savings (Omnibus) Act 2016 toughened repayment compliance conditions for social welfare debts. New conditions include an interest charge on the debts of former social welfare recipients who are unwilling to enter repayment arrangements, extended Departure Prohibition Orders for people who are not in repayment arrangements for their social welfare debts, and the removal of the six-year limitation on debt recovery for all social welfare debt.

People ardently dislike systems that they don’t understand and feel are unfair, or that seem to create debts beyond their control. A very stringent approach to collecting overpayments can cause real hardship and generate controversy. It has even been suggested that there may be a punitive element to this, with Centrelink staff not encouraged or required to help people to correct errors.

Second, IT systems are not by themselves the cause of these problems. It is easy to blame the technology when things go wrong, and some problematic factors do indeed appear to be technological. The names of employers provided to the Australian Tax Office and Centrelink don’t always match, for example, and it appears that in some cases the same income is counted twice because the assessment process matches names rather than Australian Business Numbers.

More significantly, Centrelink’s formula can produce false estimates of debts when individuals are asked to confirm their annual income reported to the Australian Tax Office, because it simply divides the reported annual wage by twenty-six. That overly simplified calculation will only produce a useful figure if individuals receive exactly the same income each fortnight, which is often not the case, especially for casual workers, students and other people with intermittent work patterns.

But these problems are not necessarily the fault of the IT, which is only doing what it has been designed to do. More checking by humans would probably reduce errors, but outcomes that result from the design of the policy can’t be resolved by technical fixes.

Third, IT systems are not by themselves the solution either. It is possible that the earlier problems with overpayments of family tax benefits may recur very soon. In early February, the federal government introduced a new omnibus savings bill to parliament, combining and revising several previously blocked welfare measures into a single piece of legislation in order to save nearly $4 billion over the next four years, after allowing for increased spending on childcare and family tax benefits. By far the most significant of the projected savings in the bill – $4.7 billion over four years – results from phasing out the end-of-year supplements for family tax benefit recipients, which were introduced to solve the overpayment and debt problems referred to earlier.

So why would the government think that the overpayment of family payments and the subsequent debt problem will be resolved, as this saving seems to assume? The answer is not entirely clear, but seems to relate to the update of Centrelink’s computer system announced in 2015. “The new technology to underpin the welfare system will offer better data analytics, real-time data sharing between agencies, and faster, cheaper implementation of policy changes,” Marise Payne, then human services minister, said at the time. “This means customers who fail to update their details with us will be less likely to have to repay large debts, and those who wilfully act to defraud taxpayers will be caught much more quickly.”

Complementing the Centrelink update are proposed changes in reporting systems at the Australian Tax Office, particularly the introduction of a single-touch payroll system. Under the new system, when employers pay their staff, the employees’ salary or wages and PAYG withholding amounts will automatically be reported to the Tax Office, which can then share this data with Centrelink.

The government seems to be assuming that computer and system updates will provide a technological fix to the problem of family tax benefit overpayments – and thus deliver a saving of $4.7 billion over the next four years. But what if the new IT systems don’t work in the ways envisaged? The Australian Tax Office’s computer system has crashed a number of times over the past year. Indeed, in the very same week that the government introduced the new omnibus savings bill, newspaper reports of this “tech wreck” suggested that the Tax Office might not be able to guarantee this year’s lodgement of returns in time for the start of the new financial year. The reports also noted that the development of the single-touch payroll system would remain one of the Tax Office’s priorities for this year.

Finally, to reiterate our first point, these problems have arisen from policy choices and design. Britain is introducing a new system, Universal Credit, which will use real-time adjustments to track changes in earnings and seek to match awards to income on a monthly basis. How well this will work in practice remains to be seen. In both countries, trends towards more insecure and variable employment patterns – and hence irregular pay packets – will make balancing accuracy and timeliness in means-tested welfare benefits more difficult. The assumption of regular and unchanging income no longer holds, and this new reality requires a policy, not a technical, solution.

This piece originally appeared on INSIDE STORY.

 

Exposing a fragile coalition: The state of the basic income debate

📥  Economy, employment, living wage, political parties, universal basic income

Dr Luke Martinelli is Research Associate on the IPR's universal basic income project.

Is it time to move beyond the polarised views that characterise the basic income debate? Universal basic income (UBI) may be an attractive solution to a host of policy problems – but advocates must recognise that moving from abstract concept to reality will involve significant trade-offs and political barriers.

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Gaining traction, growing support

In recent weeks, there have been a number of developments which appear to demonstrate the movement of UBI towards the political mainstream: in the UK, the influential Trades Union Congress (TUC) has endorsed social security reform that embodies the principles of basic income; in Canada, the Government is moving forward with concrete plans for a basic income pilot, adding to those upcoming in Finland and the Netherlands; the French region of Aquitaine is consulting on the idea; and in Germany, the single issue party Bündnis Grundeinkommen (Basic Income League) has just been established. These trends seem to suggest that UBI is gaining traction that will lead inexorably to widespread implementation.

After all, UBI is not just a good idea; it is an increasingly good idea in a world in which the nature of work, family and society is rapidly changing.  Automation of production processes, both in manufacturing and, increasingly, services; large and growing wage gaps between ‘lousy’ and ‘lovely’ jobs (Goos and Manning, 2007); the growth of zero-hour and temporary contractual arrangements; and long-term unemployment among disadvantaged groups are all problems which urgently need addressing. Nuclear families have given way to the emergence of complex and unstable family structures, and the ‘new social risks’ of lone parenthood and gaps in the provision of care for children and the elderly threaten vulnerable sectors of society.

All of these factors are feeding into the widespread failure of existing social security systems to achieve equitable and efficient settlements for growing numbers of people – exactly what UBI claims to be able to provide.

Yet despite (or perhaps because of) intensified interest in basic income, the debate has become more polarised than ever. It is an elegant balance of justice and liberty; it is the worst of all possible worlds. It is the saviour of the welfare state; it will destroy it. It can be implemented tomorrow; it is a vague and distant utopia.

All things to all people

When considering these polarised views on basic income, it is worth noting that UBI is best considered as a family of proposals, rather than a specific policy per se.

The core characteristics of UBI as an idea are that payments should cover the entire population, and eligibility cannot be conditional on income, work history, or behavioural requirements. Beyond this, there is a great deal of variation between plans in terms of a number of important aspects  – including, crucially, the level at which payments should be made, and how the basic income fits into the wider constellation of welfare and tax policies.

These design features vary in relation to the precise goals that basic income is intended to achieve, which themselves are contested. Although it can be seen as a prosaic way to simplify a complex welfare system, alleviating administrative costs and bureaucratic intrusion while reducing marginal tax rates – and thus eliminating the poverty and unemployment traps that pervade means-tested systems – it has also been touted as having the potential to fundamentally alter how we think about ‘work’. Releasing individuals from the compulsion to enter paid employment – and the exploitation and domination this entails – in order to survive, and liberating them to pursue a variety of socially valuable and creative activities, UBI has been mooted in radical terms as “a capitalist road to communism” (Van Der Veen and Van Parijs, 1986).

Multi-partisan support

The protean nature of basic income helps to ensure that the concept appeals across traditional party lines. One of the striking things about this idea is the wealth of favourable theoretical arguments which appeal across the political spectrum, leading to the popular description of UBI as 'not right or left, but forward'. In isolation, these arguments apply to other ways of organising social security – but few if any such systems so effectively marry the priorities of the social democratic left (equality, solidarity and redistribution) with those of the libertarian right (small government, freedom and efficiency). By both left- and right-wing proponents, UBI is viewed as the saviour of a broken welfare system which is stigmatising and intrusive yet unfit for purpose.

For basic income advocates on the left, the focus is on the failure of the system to provide security for all in an adequate and dignified fashion, as socio-economic conditions have made the Beveridgean system increasingly untenable. Gone are the days – if they ever existed – when male breadwinners provided for their families with stable, well-paid jobs. The Trente Glorieuses, that period of yet unmatched growth and prosperity following WWII, gave way to deindustrialisation, structural unemployment, rising wage inequality, and the increasing prevalence of precarious employment.

For the right, the welfare system is seen as the cause of dependency and societal breakdown, as the complex array of means-tested benefits reduces work incentives and discourages family formation. The bloated government bureaucracy which administers the intrusive work tests and financial conditions creates higher taxes, which act as a drag on the efficiency of the economy as a whole.

Basic income, perhaps miraculously, seeks to balance these competing goals and priorities. But does this congregation of political views mean that it is universally and normatively desirable? Clearly not.

Cross-party opposition

There is an equivalent (and possibly more significant) meeting of minds across the political spectrum that finds basic income a deeply discomfiting notion. Social democrats believe that welfare should be generously available for all, and those on the right that it should be a residual safety net – but both agree that the right to an income comes with a responsibility to work (however this responsibility is actualised). Notwithstanding the claims of political philosophers such as Philippe Van Parijs that “even surfers should be fed”, Bowles and Gintis (2000) demonstrate that people “support the welfare state because it conforms to deeply-held norms of reciprocity and conditional obligations to others”. Of course, this goes beyond the simplistic equality of contributions and receipts – but the belief that everyone has an obligation to contribute to society if they can, and that only those unable to work through incapacity, involuntary unemployment or caring responsibilities are deserving of state support, provides a philosophical foil to the arguments of basic income advocates (Anderson, 1999). Bay and Pedersen (2006) show that support for universal welfare drops when respondents consider the possibility of foreign immigration. Data on attitudes to welfare, which have hardened in recent years, appear to uphold these insights – as analysis of the British Social Attitudes Survey by Eleanor Taylor and IPR Director Professor Nick Pearce serves to demonstrate.

For progressive opponents of UBI, welfare should be restricted to those most in need, since the wealthy do not need it; if you are going to spend more on welfare, why not make payments more generous for the poor? Thus, basic income is likely to be seen as ineffectual by the progressive left, as demonstrated by reactions to Compass’ UBI proposals stating that “a powerful new tax engine will pull along a tiny cart”, and that feasible UBI schemes are “not generous enough to achieve the aim of replacing wages in an increasingly automated world; or they are not funded properly; or both”. The concept of uniform benefits also appears to conflict with the principle that levels of support should correspond to the needs of claimants – which are complex and varied, and therefore might be seen to justify an equally complex range of benefits.

At the same time, conservative opponents argue that UBI would be prohibitively expensive, require huge tax rises, and significantly damage work incentives. Although the unconditional nature of UBI leads to lower marginal effective tax rates (as the benefit is not withdrawn as income rises), if payments were pitched at subsistence level or higher, there would be a significant negative labour market response as individuals opt for more leisure.

Thus, while basic income has supporters across the political landscape, it also has detractors – and the large family of basic income proposals provides a wide target at which to direct criticism.

A fragile coalition

The multifaceted nature of basic income enables detractors to criticise the least desirable type of basic income (from their particular perspective). Thus, basic income’s association with ‘undesirable’ political views permits left-wing opponents of basic income to attack UBI as an alternative to decent public services and a project to dismantle the welfare state, while simultaneously allowing right-wingers to criticise it for inflating the role of government in welfare provision and dampening incentives for self-provision.

Exacerbating the political challenge of UBI is what De Wispelaere (2015) calls the “problem of persistent political division” among supporters. While agreed on the general principle, UBI advocates on each side of the political divide have different ideas about the key parameters. When UBI is operationalised in a specific scheme, divisions appear; as De Wispelaere observes, a residual scheme such as that proposed by Murray (2006) is “entirely unacceptable to anyone supporting basic income on progressive grounds”. At the same time, libertarian UBI advocates would only support basic income schemes that sought to replace the entire welfare system. Thus, support from the ‘opposite’ political side may taint the concept of basic income by association: progressives cannot get behind a policy supported by right-wingers, and vice versa.

Although steps to realise basic income show signs of progress, therefore, this ultimately hinges on the extent to which meaningful coalitions of interests can be built and sustained around concrete proposals. This prospect is a lot more distant than appears at first glance; the apparent unity of the basic income movement masks a multitude of deeply divided actors, and a highly fragile coalition.

To end on a more positive note, these political difficulties are not necessarily intractable – but it may be that advocates have to sacrifice their broad coalition in favour of congregation around specific schemes. This would give lie to the idea that basic income is ‘all things to all people’, but it might garner new and more enthusiastic supporters as well.

 

References

Anderson, Elizabeth S. (1999). "What Is the Point of Equality?" Ethics, 109(2): 287-337.

Bay, Ann-Helén, and Axel West Pedersen. "The limits of social solidarity basic income, immigration and the legitimacy of the universal welfare state." Acta Sociologica 49(4): 419-436.

Bowles, Samuel, and Herbert Gintis (2000). "Reciprocity, self-interest, and the welfare state." Nordic Journal of Political Economy, 26(1): 33-53.

De Wispelaere, Jurgen (2015). "The struggle for strategy: On the politics of the basic income proposal." Politics (2015): 1467-9256.

Goos, Maarten, and Alan Manning (2007). "Lousy and lovely jobs: The rising polarization of work in Britain." The review of economics and statistics, 89(1): 118-133.

Murray, Charles. (2006). In Our Hands: A Plan to Replace the Welfare State. Washington, DC: American Enterprise Institute Press.

Van Der Veen, Robert J. and Philippe Van Parijs (1986). "A capitalist road to communism." Theory and Society, 15(5): 635-655.

Van Parijs, Philippe (1991). "Why surfers should be fed. The liberal case for an unconditional basic income." Philosophy and Public Affairs, 20: 101-131.

Have you been in a Jobcentre lately?

📥  employment, future, political parties, Welfare

Dr Rita Griffiths is Research Programme Lead for the IPR.

“Anyone who thinks Jobcentres are like [those in The Full Monty] … would be pleasantly surprised by visiting [one today],” quipped Damian Green, Secretary of State for Work and Pensions in his address to the Conservative Party Conference last week; “no screens, no queues … no sense of sullen despair.” He is right in his observation that Jobcentre Plus offices today look very different from how they did in the 1980s and 1990s, when The Full Monty – along with films like Billy Elliot and Brassed Off – depicted the humiliation and shame wrought on working class men forced to sign-on after being made redundant from jobs in mining, steel and other heavy industries.

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It is true that the metal security screens have gone, and dole queues no longer snake out of the doors of benefit offices – which have long since disappeared, along with the traditional industries and breadwinning jobs these men were once employed in. However, it is debatable whether, as claimed by Green, this is down to the transformative power of a modernised and rebranded Jobcentre Plus better equipped to meet the employment needs of ‘ordinary working-class people’ in the post-industrial era. Some would argue it says more about the depersonalised, contracted-out and digitised nature of today’s benefit and employment services – director Ken Loach, for example. His latest offering I, Daniel Blake, for which he won the 2016 Cannes Film Festival’s Palme d’Or, sits uncomfortably alongside Green’s resolutely upbeat account of the changing landscape of government employment support. The protagonist of Loach’s drama, a skilled man in his 50s whose working career is curtailed after he suffers a heart attack, finds himself cut adrift amidst the faceless, ‘digital by design’ bureaucracy of Jobcentre Plus call centres, online benefit processing and the impersonal, one-size-fits-all responses of government-funded advisers. So who is right?

In their own way, both are. Today’s Jobcentre Plus may have upholstered seats, carpets and jaunty, modern graphics – but just try getting past one of those burly security guards if you want help to get a job, or secure better-paid work. Austerity-driven civil service staffing cuts mean that, unless you are an existing benefit claimant required to attend a mandatory appointment with an adviser as a part of your ‘Claimant Commitment’[1], you will likely be turned away – told instead to search for jobs online, or to contact a call centre (using your own mobile and, until recent lobbying persuaded the DWP to change its stance, at a premium call rate). If the security guard allows you entry, you will be directed to a Jobpoint, a touchscreen monitor for online job-hunting – that’s if they haven’t already been removed, along with the free-to-use telephones, as Jobcentre Plus moves inexorably towards full digitisation. In fact, you may be hard-pressed to find a Jobcentre in your local area; in the last five years, scores of them have been closed – including many in rural areas where the nearest alternative may be over an hour’s travel away.

Reduced Jobcentre footfall is of course an undeniable product of the changed nature of work, and online recruitment methods now used by most employers and applicants. However, research is beginning to show that another important factor in the decline of Jobcentre use is the increasingly punitive way in which ‘jobseekers’ and other benefit claimants are dealt with, and a corresponding rise in the incidence of benefit disentitlement and sanctioning.[2] Arrive late for a mandatory appointment, or apply for fewer jobs than is stipulated in your ‘Claimant Commitment’, and you risk being sanctioned. Too many sanctions and you risk losing your benefits altogether, potentially for up to three years.[3] The government claims that sanctions are used infrequently and only as a last resort, but the evidence tells a different story. Research by David Webster from the University of Glasgow found that between 2007 and 2012, one fifth (19%) of all JSA claimants – equivalent to almost a million and a half people – had been subject to sanctions or disallowances.[4] In the context of an increasingly stringent, parsimonious and punitive welfare system, some eligible groups are simply not bothering to claim, further reducing the claimant count.

This brings us to another reason that Jobcentres may seem less desperate places these days: increasing localisation and discretion in the delivery and payment of welfare. In what Frank Field describes as “the most radical departure in welfare since the Atlee government"[5], emergency financial help and other discretionary support intended to prevent the poorest and most vulnerable people in society from falling through the safety net has been devolved from central government to local authorities. This has occurred, it should be noted, with limited public debate about the issues and implications localisation raises. So the queues, over-crowded waiting rooms and sense of despair have not gone away, they have simply relocated – into the burgeoning network of council ‘one-stop shops’ and food banks, where cash-strapped local authorities and volunteer workers struggle to help the growing numbers of claimants and families whose benefits or tax credits have been reduced, stopped or failed to reach their bank accounts for whatever reason.

Even if Green’s rosy vision of the contemporary Jobcentre is right, changes are afoot which may yet see a return to Jobcentre queues and sense of frustration.  Under the most radical and contentious welfare reform measure proposed to date, working people and families claiming Universal Credit means-tested financial help with housing, childcare and living costs will be drawn into a system of conditionality and sanctioning similar to that which currently applies to unemployed and economically inactive claimants. Untried anywhere in the world, a large-scale randomised control trial involving 15,000 low-paid Universal Credit claimants is piloting a new Jobcentre Plus-delivered ‘in-work progression’ service[6] targeted at an entirely new category of customer: low-paid workers and their partners. If rolled out nationally, an additional one million UC claimants will become subject to work conditionality. But here’s the most controversial part: these people will already have jobs. What is more, unless the family contains children under the age of 13, work conditionality requiring regular face-to-face meetings with a Jobcentre adviser will continue until household earnings reach a minimum threshold equivalent to both adults in a couple working 35 hours per week at the national minimum wage. Only parents with authorised caring responsibilities for younger children and other officially exempted groups, such as those with a serious health condition, will have the option to work part-time.

Encouraging low-paid workers to increase their earnings is a laudable policy goal, but when earning more means working longer hours, even in families with young children – and when working for longer is the only way of meeting mandatory conditions for UC receipt – the role of Jobcentre Plus advisers in supporting individuals to progress in work becomes somewhat compromised. Tailored, one-to-one, personalised support from a work coach which underpins the in-work progression service is similarly to be applauded, but progression implies improvement – not just in earnings, which could be achieved simply by getting another low-paid job - but in rates of pay and job prospects. Will customers be helped to access training to improve their earnings potential and jobs offering better terms and conditions, or will they simply be obliged to find more low-paid work? This raises another important question: in whose interests will this employment advice be offered? These already ‘hard working’ customers, employers proffering zero hour contracts, or a government intent on reducing social security expenditure?

Empathetic, individualised support to encourage employment progression runs counter to the work-first culture and general direction of travel that Jobcentre Plus has been moving in for more than a decade. What seems to be missing too is any acknowledgement that, although low earners eligible for means-tested help may represent a new category of customer for Jobcentre Plus, they are not necessarily a different group of people; it is well known that people in poverty and at the bottom end of the earnings distribution often cycle between work and benefits. How realistic is it to think that low-paid workers will be willing to trust the very same advisers who may have imposed a sanction on them during a previous spell of unemployment?

Not simply a cultural and logistical challenge for resource-strapped Jobcentres, through eroding the distinction between being in work and out of work and potentially extending negative representations of benefit claimants to those who already have a job, in-work conditionality also risks obscuring the hitherto strictly demarcated political dividing line between Theresa May’s ‘just managing’ families and welfare-dependent ‘scroungers.’ Hampered by the incremental and chronically delayed rollout of Universal Credit, and a paucity of up-to-date government-commissioned and academic research, only time will tell whether this new vision for Jobcentre Plus will ever be realised.

Notes

[1] Originally designed as part of Universal Credit, with a rollout that has been much slower than anticipated, the ‘Claimant Commitment’ – with its requirement for 35 hours of evidenced job search as a mandatory condition of benefit receipt – also now applies to claimants of jobseekers allowance (JSA) and employment support allowance.
[2] See ESRC-funded research entitled ‘Welfare conditionality: sanctioning, support and behaviour change’ led by the University of York.
[3] A third failure to comply with the most important jobseeking requirements will result in a sanction of 156 weeks.
[4] See D Webster, University of Glasgow
[5] http://www.publications.parliament.uk/pa/cm201516/cmselect/cmworpen/373/37302.htm
[6] http://www.publications.parliament.uk/pa/cm201516/cmselect/cmworpen/549/549.pdf

The rise of Bristol, success but not yet shared growth — notes for a new mayor

📥  cities, Economy, education, employment, labour market, Welfare, young people

Gavin Kelly is Chief Executive of the Resolution Trust, and former Deputy Chief of Staff at 10 Downing Street.

Any outsider asked to comment on Bristol’s prospects should, of course, tread fairly carefully. I love coming to the city but claim no special knowledge of it. I like to think I’ve been here enough to see past the standard cliché that it’s a city made of hipsters and hills, balloons and bridges. But I have no granular understanding of the different communities within the city, the twists and turns of its economy, and how its politics have ebbed and flowed.

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So I’m going to rely instead on some arid statistics to form a dispassionate external impression. Statistics are, of course, always partial and quite often misleading. They never tell the whole story  – they’re just dots on a chart. But if you join the dots you form a picture, even if it’s a sketchy one. And pictures can be very revealing. As I’ll explain, the image that emerges for me is a city that has rare strengths as well as major challenges.

What’s happened in Bristol should, I think, be of interest across the country. That’s because to some degree Bristol’s story reflects the received wisdom about the correct recipe for urban economic success. Mix physical regeneration of a city-centre with a successful and growing university, a large pool of high-skilled labour and strong transport links. Sprinkle in some cultural-cool and a high quality of life. And then sit back and watch a place thrive. On this basis, Bristol has the lot.

Given these ingredients, how does the city perform? Like most things, it’s a mixed story. Its strengths are very real: simply put, it has high employment levels, above-average pay for those working in the city, and a remarkably high share of graduates in the workforce. These are big assets. Some cities have lots of jobs but weak pay; others have decent pay but fewer jobs. To do well on both fronts is impressive. And being a magnet for graduates is more vital than ever. Every city that wants to succeed in high-knowledge, high-value sectors will always require a critical mass of highly-educated workers. Outside of London, Bristol outperforms every other city in the UK on this front with 4 in 10 of those in Bristol’s workforce holding a degree.

So far so good. Why, then, do I say the city faces deep problems? For me, three challenges stand out.

First, it is something of an understatement to say that the benefits of the city’s success have not been evenly shared. It is a city of deep inequalities. If we look at child poverty across the city we find a gigantic poverty gap with 5% of children in poverty in some wards and just under half in others. That’s a far more pronounced difference between affluent and deprived communities within a city than we see in places like Glasgow or Nottingham.

But to really get a sense of the challenge facing Bristol look at educational inequality. GCSE attainment for state schools in the city is slightly below the national average and this is mostly due to the low attainment of the poorest children. 25% of pupils on free school meals in Bristol reach the usual benchmark of 5 good GCSEs including English and Maths, compared to 62% of non-poor pupils. That’s a big, ugly, 37% gap between the poor and the rest: only nine local authorities in the country have a larger one. Put simply, non-poor pupils in Bristol do better than the national average, whereas the poor do worse.

This inequality at age 16 is maintained as young people progress. Just 13% of those on free-school meals in Bristol at GCSE progress onto higher education (and the gap between the poor and the rest in this regard has been getting larger in Bristol over time while it shrinks nationally). To put this in context, compare it to the London story. In Inner London half of the poorest kids achieved five good GCSEs including English and Maths. That’s not much lower than the overall score for all pupils in Bristol. And 42% of the poorest pupils in inner London go on to university. That’s three times as many as in Bristol. Let me repeat that: a poor child in London is three times more likely to progress to higher education than their counterpart in Bristol. And, no, it’s not just London: the 13% of poor children progressing to university compares to 30% in Birmingham and 25% in Manchester. Until this is turned around then any talk of improving social mobility in the city will be a pipe dream.

Even on wages  –  where Bristol performs better than average –  there is still a lot of poverty-pay: one in five workers earn less than the (real) Living Wage. Moreover, like everywhere else in the UK, it has been a lost decade for workers. After the financial crisis average pay in Bristol collapsed all the way back to the level it was at in 2001. As of today it has climbed back to 2005 levels. It would be very surprising if pay returns to its 2009 peak before 2020.

If the first big challenge facing the city concerns inequality then I’d argue that a second issue concerns productivity. Bristol has its very own productivity puzzle  –  and it’s a worrying one. Now, in some ways that’s an odd thing to say. Bristol  – and the South West region  – performs better than large parts of the UK on this score and, historically at least, the city looked like a strong performer outside London. The puzzle is that since the financial crash Bristol’s productivity has been sliding backwards. It now stands at just 93% of the UK average (and bear in mind that this has occurred while national productivity has itself flat-lined).

The conundrum grows when we consider that Bristol very nearly matches London in terms of the high share of graduates in the workforce. Yet it resembles places like Darlington or North Lincolnshire in terms of productivity. That’s an odd combination. It should cause pause for thought within the city’s business community and invite questions about the utilisation of skills, along with the quality of infrastructure in the city.

Finally, there is  –  of course –  the housing challenge. Again, Bristol is hardly alone in facing acute affordability issues. But the problem is particularly severe and getting worse. The average house price in Bristol has now passed £250,000. According to the ONS it has jumped 15% in the past year alone, 50% since 2010 and 255% since 2000. You don’t need me to tell you that this isn’t sustainable. To see why look at the ratio of house prices to average earnings. It leapt from around 5:1 in the early 2000s to over 9:1 today. Or to put it another way, house prices have grown more than 3 times faster than earnings in Bristol since 2002. And things are just as bad for renters. A household on a modest income in the private sector will typically spend at least a third of their total income on rent. That is what housing experts call ‘unaffordable’. And it puts Bristol in the top quarter of the most expensive places to rent in England.

Let me finish by saying that being a mayor of an incredible city like Bristol must be a remarkable privilege. But being a new mayor has to be both a luxury and a burden. It’s the former because you have the joy of being able to speak freely about the city’s challenges. And it’s the latter because you know that moment is a fleeting one and that soon all the city’s shortcomings will be hung around your neck if they aren’t addressed.

I hope and expect the new mayor will prioritise an agenda of ‘shared growth’. Doubtless he’ll already be familiar with the received views on the right recipe for a successful city. My argument is that some extra ingredients are required. I hope he won’t hold back in being candid about the scale of the challenge if the ‘shared’ part of the equation is to be made real. And he’ll need to be ambitious and innovative in his agenda for putting it right.

This piece was the basis of remarks made in response to the Inaugural Address of the Mayor of Bristol, Marvin Rees. It first appeared on Gavin Kelly's personal blog.

Policymaking, Citizenship and Democracy in a Complex World

📥  employment, future, migration, New Labour, policymaking

Professor Graham Room is Director of Research and Professor of Social Policy in the Department of Social & Policy Sciences at the University of Bath

Complexity Science

Recent decades have seen a dramatic growth in the literature on complex systems. Much of this has developed in mathematics and in the natural and computational sciences. Increasingly however it is also infusing the social sciences.

This has in many ways been a breath of fresh air. It has got social scientists drawing upon dynamic models from the natural sciences that can be extremely fertile in suggesting new insights – in terms for example of tipping points, bifurcations and co-evolving systems. It has created much greater interest in the non-linear dynamics of the social world – and in the macro-patterns that emerge unanticipated from the micro-interactions in which we are all involved.

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Nevertheless, in applying these perspectives to the social world, we need to take care. How human beings interact depends on the subjective meanings which they construct and negotiate with each other. These interactions involve them in exercising and contesting power. All this also involves uncertainty – and efforts by the powerful to offload that uncertainty onto others. Yet these have been rather neglected by much of the complexity writing within the social sciences.

Policymaking

Evidence-based policymaking brings together robust evidence as to the outcome or impact of a particular intervention. Evidence is collected, evaluated and aggregated – ‘systematically reviewed’ – across as wide a range of contexts as possible. The gold standard remains the randomised controlled trial.

The prominence given to this gold standard can be explained in part by its high status within medical science and clinical practice. What may also be relevant is the ascendancy of the 'contract culture' for the commissioning of public services from multiple providers – contracts that need to specify the impacts against which the service providers will be judged, and which depend therefore on a well-established evidence base for such impact (and a policy research community that endorses such an approach). This may also explain why impacts which can be couched in terms of ‘behaviour change’ are especially attractive, if they seem readily identifiable and measurable.

This tends to assume that any particular intervention can be assessed in isolation from others. The complexity literature however tells us that we live in a connected world – and that these connections require us to pay attention to the dynamic interactions among policy interventions. Any new intervention is an intrusion into a dynamic policy ‘ecosystem’ and must be evaluated as such.

Government leaders warn that conventional methods of policy intervention no longer seem to work. New models of a dynamically interconnected world are needed, if they are to anticipate, steer and control its turbulent behaviour. It is just such models that the literature on complex systems affords. One of the simplest and most elegant is Schelling’s model of residential segregation in cities.[1] His agents have different addresses on a grid or lattice. Schelling posits a ‘tolerance schedule’, a preference not to have within one’s immediately adjacent neighbourhood more than a certain proportion of another race: the general racial composition of the city at large is however of no concern. Starting with an initially random distribution of households across the city, Schelling conducts repeated simulations, as households walk step-wise to an adjacent address, whenever their immediate neighbours exceed this racial threshold. He shows that even a rather mild level of racial antipathy – and concerned only with immediate neighbours – will quickly generate zones of racial segregation across the city.

Schelling’s actors react to the racial composition of their immediate neighbourhood. As they do so, their actions affect the composition of adjacent neighbourhoods, and the society as a whole moves progressively to a more segregated state. Any particular individual may find that, whatever the level of their own tolerance, the ethnic composition of their neighbourhood is increasingly likely to exceed that threshold, obliging them to move. Even the most tolerant finds that their neighbourhood steadily loses all diversity. In this way the rate of segregation accelerates, through processes of positive feedback.  What this means is that the level of social segregation that results is quite other than the individuals in question themselves anticipated or sought.

This is a simple model, but one which illustrates well how ‘macro’ emerges from ‘micro’ in non-linear ways and with counter-intuitive results. Policy interventions launched with insufficient thought, as to their interactions with the wider policy ecosystem, are unlikely to be sufficient to the task. No policy is launched onto a greenfield site: it is an intervention in a tangled web of institutions that have developed incrementally over extended periods of time and through a succession of political struggles. Complexity analysis can play a central role in the analysis of such policy dynamics.

Where much of the complexity literature is weak however is in recognising the exercise of power and interests in human societies and social interactions. What works for whom? By reference to which interests do we assess the significance of the effects of any intervention? In what ways do power inequalities ‘emerge’ from the complex social interactions to which complexity writers refer?

Of course, there is much that remains stable: otherwise we would hardly be able to live our everyday lives. Nevertheless, it is easy to take this stability for granted and not to notice the small changes that are continuously underway. It is also easy to focus on the stability that may be evident at home, while overlooking developments elsewhere. Stability and freedom of manoeuvre do not descend equally on all, as manna from heaven: they are the distributed through positional struggle.

Citizens

Policymakers – and their academic policy advisers – adopt a variety of assumptions about the citizens they serve and what motivates those citizens to behave as they do. These assumptions are not immune to successive intellectual fashions.

Rational action theories remain dominant across much of social science: here social actors assess the menu of choices available to them in terms of their costs, benefits and consequences. The rational citizen deserves to be provided with clear information about the public services that are available and those services should embody variety and choice.

There is however increasing recognition of the bounds to such rationality, because of the partial information that actors have at their disposal and their limited ability to assess risk. This is true not just of the person in the street: it was also only too evident in the 2008 financial crisis, when the ‘rationality’ of the financiers produced risky behaviours that almost led to systemic collapse. The complexity literature reinforces that recognition of the bounds to rational choice. The lesson of Schelling’s model, discussed above, is that aggregating individual choices can produce counter-intuitive results for the individuals in question, as well as being non-optimal socially. This fundamentally challenges the central place that has been given to individual choice in the rhetoric of policy reform over recent decades.

Meanwhile, recent years have seen growing interest – especially on the part of economists – in behaviourist perspectives. These in some degree abandon orthodox models of rational economic behaviour, especially as far as ‘ordinary’ people are concerned, instead pointing to the biases and blunders that they display in many of their decisions. These behaviourist perspectives – based on empirical studies of individual behaviour – have increased the attention given in policy debate not only to the contribution of psychologists, but also that of neuroscientists, claiming to measure wellbeing in a far more rigorous manner than social scientists could ever offer.

This is the realm of ‘nudge’, with policymakers seeking to structure the ‘choice architectures’ that face citizens, so that even with their innate biases and short-sightedness, they will make choices that align with their own best interests. Nudge has been well-described by Thaler and Sunstein as ‘libertarian paternalism’. [2] This might however seem a very modest form of paternalism, compared with that which traditional welfare states are often accused of embodying, where the citizen is said to be left with few if any options. Nudge leaves the citizen to make the final choice: government can structure the choice architecture, but if, despite this, citizens still make the wrong choices, that is their responsibility.

What if the citizen, however – far from being lazy or short-sighted – is simply but profoundly unsure what to do, given the insecurity and instability of the world around them? It is after all not with all citizens that Thaler and Sunstein are equally concerned: their particular focus is on ‘the least sophisticated’, who they reckon to be in greatest need of such guidance. These are precisely those who are most exposed to such insecurity and instability. The citizen may want not more choices, but a guarantee of wellbeing and security instead.

Consider instead therefore an account in terms of agile actors. This depicts social actors as probing the complex and turbulent landscapes on which they find themselves, but only if they can do so from the vantage point of some stable and settled ground. In contrast to rational action theories, it sees social actors not as menu-takers but as menu-shapers, re-working and contesting the social and economic world in which they find themselves. In contrast to behaviourist perspectives, it understands any biases and blunders by reference to the settled ground from which social actors draw their routines and practices: a ground which may be extensive or shrunken, and which must be understood in terms not of psychology but of sociology and political economy. The result is a perspective on social action that sharply distances itself from the abstract individualism of much contemporary writing.

This gives a central place to uncertainty and instability and to the efforts by agile actors to offload their costs onto others. The social distribution of uncertainty thus moves to centre-stage. But of course, this is a struggle played out on unequal terms. Those already at a positional disadvantage are likely to carry a disproportionate share. They may end up with hardly any stable and settled ground from which to shape their world, and with little option therefore but to hunker down and cling to a precarious existence.

A New Social Contract

It is from this analytical standpoint that we examine the social and political conditions under which agile citizenship may be possible for all.

Citizens need to be secure, resilient and adaptable, if they are to survive and thrive in a complex world. No less than the earlier leitmotifs of rational consumer choice and nudge, our notion of agile actors suggests an agenda of policy reform. This involves public policies to provide a stable and secure ground for all – and investment in the creative energies of everyone.

The recent direction of UK social policies has been to push as many as possible into the market place, narrowing public generosity towards those who remain. The burden of austerity has fallen on the most disadvantaged, multiplying the uncertainties to which they are exposed. This is the politics of fear and surrender to the global market, of insecurity and hunkering down.

In contrast, the post-war social contract between state and citizen, across the western world, involved a pooling of risks and uncertainties through systems of social security. It set the fraternity and mutual interdependence of citizenship against the divisions and inequalities of class and against the turbulence and insecurity of an urban-industrial society. The same period saw governments confronting the economic instability of capitalist society. This has sometimes been characterised as a consensual process, the benign fruit of economic progress. Nevertheless, as T H Marshall warned: ‘in the twentieth century, citizenship and the capitalist class system have been at war’. [3]

If the social changes of the 21st Century are to be managed successfully and with public consent, they need a new social contract to underpin them. We need to mobilise the energies and talents of all sections of society, and we are more likely to pull together if the distribution of rewards is less unequal. Such a contract would need to include several interrelated elements, going well beyond traditional welfare systems:

·         Individual security against risks of income interruption: the heartland of traditional welfare states, albeit in the last half century on the defensive, across much of the industrialised world, in face of neo-liberal hostility to state welfare;

·         Investment in everyone’s capabilities, not just in those with parental wealth: what many have referred to as the ‘social investment state’. There is good evidence that for a given financial outlay, it is investment in the lowest-skilled that can produce the greatest benefit for national productivity; [4]

·         The rebalancing of our economies to provide ‘decent jobs’ which make use of everyone’s capabilities;

·         Investment in vibrant local communities, as places of education, learning and creativity for all – in particular for disadvantaged communities, which are often poorly connected to the society at large;

·         Involvement of all in the governance of social, political and economic institutions, with active citizenship and scrutiny of public policies, and of the corporate interests which might otherwise detract from such a contract.

Such a contract would involve a broad range of policies of relevance to all citizens, rather than focussing just on society’s casualties. It would need to go far beyond the notion of a basic income, which in various guises has again reared its head across the political spectrum. It would limit the risks of poverty but also promote economic growth; promote individual security but also collective resilience and adaptability. It would also go far beyond the extension of choice in public services, with the citizen seen primarily as a consumer. It would involve rebuilding local and national communities, as points where these different policies can be connected up. It would leave the market where it belongs, as the servant of the community not its master.

This would also reshape the debate on immigration. First, by investing in the skills and creativity of our own population, we reduce the need for employers to look elsewhere – for nurses, for IT specialists and others – in ways that denude poorer countries of those in whom they have invested their slender national resources. Second, by taking collective responsibility for the infrastructures of those communities to which large numbers of immigrants come, rather than ‘devolving’ this burden to the local areas in question, we reduce the risk that those communities will see immigrants as a threat.

It is not however enough for government to provide stability and security and to invest in agile and creative citizens; those citizens must also be able to hold government to account. This means government being placed under critical scrutiny by citizens, rather than vice versa. This gives a fundamental role to citizens in policymaking as well as in policy implementation. Nudge, in contrast, makes little or no attempt to engage citizens as active, critical and responsible partners; they are deemed hardly up to that.

A Self-Organising Democracy?

By the start of the new century, New Labour had in some measure joined the Conservatives in their celebration of market capitalism, with philosophical underpinnings that owed much to Hayek. The economy was a decentralised system, best left to self-organise and self-steer. Government could not expect to second-guess the market and had therefore better stay out.

In the public services, both parties sought to expand individual choice: in many cases by expanding the role of the market and its self-organising virtues. Government would nevertheless maintain its overall grip, albeit at arm’s length – and even under conditions of austerity, big data and smart government would enhance its effectiveness. Public services would become leaner and fitter and more tightly managed, so as to be better-tuned to consumer choice.

Hayek’s vision likewise resonates with many of those who have been attracted by the literature on complex systems. He describes a complex and interconnected economy peopled by a myriad of micro-decision-makers – but one which has generated wealth on an unprecedented scale. This would seem an obvious example of the processes of ‘self-organisation’ with which the complexity literature deals, and one with socially benign consequences. In contrast, the complexity literature might well seem poorly aligned with the sort of social democratic vision that has been outlined above.

There are however several important caveats.

First, the complexity literature gives little attention to uncertainty (as distinct from risk) and its implications for social actors. As argued above, uncertainty makes people hunker down. On the economic and on the social front, government has a strong role to play in building stability and confidence – on the part of businesses, communities and individual citizens. This was of course a major tenet of Keynes’ analysis of economic recession, differentiating him from Hayek. In conditions of great uncertainty, businesses would not invest; strong government action was needed, to boost confidence in the future buoyancy of the economy. Otherwise the economy would ‘self-organise’ at sub-optimal levels of activity.

Second, Hayek pays insufficient attention to power differentials among social and economic decision-makers. The same goes for much of the complexity literature, including writers such as Schelling, concerned with a mass of micro-decision-makers, each following a simple algorithm as to whether to move house. The real world of contemporary capitalism gives scope for large corporations to shape the rules of those micro-interactions in their own interests. Not least, the more powerful are able to offload the costs of uncertainty onto others. Complexity analysis must be conjoined with political economy.

Third, there is little reason to confine the vision of a complex and interconnected society to the economy and market agents alone. The complexity literature can also inform our thinking about citizens and communities, their networks of interaction and the public services on which they draw. These too we can think of as decentralised systems with distributed intelligence, connecting a myriad of agile actors, with their varied projects and visions of change. Here too we might examine the counter-intuitive outcomes that can emerge and how these vary, depending on the institutional conditions.

Finally, while the complexity literature can help us to understand the non-linear emergence of macro-patterns from micro-interactions, it helps little in evaluating those macro-patterns in terms of how socially benign or otherwise they are.

Conclusion

Complex dynamics can produce a tangled knot of institutions and policy interventions, with path dependencies and lock-ins which are hard to escape, and trade-offs which allow of no easy resolution. ‘Wicked’ problems of this sort are unlikely to be solved by leaving them to the market, or by improving the technical skills of those in government. What is needed instead is the distributed intelligence and wisdom of all those involved and cooperative solutions that include citizens, their communities and the public services on which they depend.

The literature on complex systems demonstrates that quite small changes in initial conditions can result in dramatically different dynamics and directions of travel. It underlines that the future is open: there is always an alternative. This chimes well with longstanding critiques of ‘futurology’. [5]  Nevertheless, faced with an open future, the more powerful do not hesitate to intervene, to ensure as far as possible that their interests are protected, their position consolidated and the costs of uncertainty displaced onto others. To expose how these powerful groups narrow the range of possible futures is one of the tasks of the social scientist.

A second is to illuminate other possible paths of development, thereby enriching democratic debate. This is no merely technical matter. These alternative futures span the different values by which citizens live their lives and express their hopes and their fears.

A third is to fix responsibility and enable powerful actors to be held to account. But is this even in principle possible, given the unexpected and unintended dynamics that can emerge from simple individual choices? Think for example of Schelling’s interconnected city residents who collectively produce a segregated city – and which in the real world may mean the dramatic narrowing of choices and life chances for some of those ethnic minorities. Complexity analysis can enrich our analytical toolkit and illuminate these tangled processes.

Nevertheless, in a complex social system it is never wholly possible to allocate clear responsibility for such effects; it is necessary for the State to take ultimate responsibility for solidarity and compensation across the society as a whole. Civility does not ‘self-organise’ – it must be politically constructed, and we cannot escape the social and political choices of our time.

This blog post draws on Graham Room’s recently published book Agile Actors on Complex Terrains: Transformative Realism and Public Policy (Routledge, 2016)

 
[1] T C Schelling (1978), Micromotives and Macrobehaviour, London: W.W.Norton
[2] R H Thaler and C.R. Sunstein (2009), Nudge: Improving Decisions about Health, Wealth, and Happiness (Revised edition), London: Penguin
[3] T H Marshall (1950), Citizenship and Social Class, Cambridge: Cambridge University Press
[4] S Coulombe, J-F Tremblay and S Marchand (2004), Literacy Score, Human Capital and Growth across Fourteen OECD Countries, Ottawa: Statistics Canada
[5] J H Goldthorpe, J.H. (1972), 'Theories of Industrial Society: Reflecrions on the Recrudescence of Historicism and the Future of Futurology'', European Journal of Sociology, 12: 263-88.

 

Young, Female and Forgotten?

📥  Economy, employment, labour market, Welfare

Professor Sue Maguire is Honorary Professor at the IPR, and is distinguished by her important work on the topics of education, employment and social policy.

Way back in 1988, the Thatcher government, through the Social Security Act, took most young people under the age of 18 out of the unemployment statistics by effectively removing their welfare entitlement. Then, in the 1990s, concerns over the numbers of 16-18 year olds who were not engaging in formal learning, training or employment led to the creation of the term ‘NEET’ (not in education, employment or training) – which sought to capture the size and scale of youth disengagement and social exclusion. In the UK, as in most countries across Europe and other advanced economies, the economic turmoil of the 2000s saw an alarming rise in the levels of young people who are detached from both the labour market and the education and training system. However, rather than the initial focus on a younger cage group, the term ‘NEET’ is now applied internationally to a much wider cohort, typically 16-24-year olds (and, in some countries, up to the age of 29 years), and includes young people in receipt of unemployment benefit as well as to those who claim other types of welfare support or none at all. Despite the official NEET figures in the UK falling over the last couple of years, the numbers remain persistently high. For example, in the period January to March 2016, 865,000 young people (aged 16 to 24 years) were NEET[1]. Of these, 485,000 (56%) were classified to be ‘economically inactive’, with the remainder being ‘unemployed and actively seeking work’.

ladyresized

 

A striking feature of these statistics is that young women accounted for nearly two thirds (62 per cent) of the economically inactive group, but only 40 per cent of the unemployed group. In the UK, trend data show that young women consistently outnumber young men within the economically inactive group, although the number of economically inactive young men is currently rising. While there have been a number of studies[2] which have segmented the NEET group in terms of young people’s propensity to re-engage with education, employment or training, the prevalence of high economic inactivity rates among young women is under-researched. This perhaps reflects a widespread belief that it is largely attributable to early motherhood or other caring responsibilities and that this group of young people requires little policy attention or intervention because of their domestic commitments. Such assumptions run counter to a body of research evidence which has demonstrated that periods of economic inactivity in early life leave a scar on the individual’s education and employment prospects that persists over time[3].

I am currently collaborating with the Young Women’s Trust (YWT) in undertaking a two-year study (2015-2017), with supported funding from the Barrow Cadbury Trust, to examine economic inactivity rates and why they disproportionately impact on the lives of young women. Early evidence from the research points to the picture being far more complex than the conventional explanations would suggest. It is apparent that there has been a distinct lack of investigation into why so many young women are economically inactive, and at a time when teenage pregnancy rates have reached their lowest levels across England and Wales[4]. While engaging in ‘caring responsibilities’ is undoubtedly a significant factor, evidence about the characteristics of young women who carry this label, where they live, who they are caring for and for how long, as well as data on what types of intervention they attract or require, is thin on the ground. What is clear is that economically inactive women (and men) are assigned to different welfare trajectories than the young unemployed, with those on Employment Support Allowance (ESA), Income Support (IS) and Carer’s Allowance (CA) receiving significantly less intensive support and intervention than those on Jobseeker’s Allowance (JSA). Crucially, young people on ESA/IS/CA are not included in the ‘official’ unemployment statistics.

High rates of economic inactivity within the NEET population are not peculiar to the UK. Young women are disproportionately more likely to be NEET and economically inactive in almost all OECD countries, with the exceptions of Luxembourg and Spain. Female NEET inactivity is overwhelmingly linked to child or elder care and/or other domestic/family responsibilities and in some countries, to cultural expectations. As an extreme case, 40 per cent of young girls in Turkey are NEET (compared to 18 per cent of boys), of which 93 per cent are economically inactive, possibly with family care responsibilities[5]. It is contended by Assaad and Levison that inadequate global labour market demand for young people invariably leads to young women being more likely to be found doing non-labour-force work and less likely to report themselves as actively seeking work. This results in many young women not being included in the unemployment rate, especially when the ‘seeking work’ criteria are applied[6].

While large groups of economically inactive females are a common feature among most NEET populations world-wide, there is a dearth of national and international evidence about effective interventions to reverse this trend, or, in fact, to accurately quantify or qualify their composition or existence. Some commentators highlight that the NEET economically inactive group is essentially an under-researched ‘black box’, which is categorised in terms of what young people are not doing, as opposed to understanding the likelihood of young people within the overall group or subgroups (re)engaging with education, employment or training (EET)[7]. The research by the YWT is exploring the reality of the lives of young women in the economically inactive group in England, including an analysis of their circumstances and aspirations. It is being carried out in a climate where impending welfare cuts are likely to remove even greater numbers of young people from independent welfare support, including housing benefit. However, early evidence suggests that the majority of economically inactive young women live with their families or relatives, with the impact of their ‘exclusion’ being borne by themselves and their household group.

With regard to future policymaking, the research into the economically inactive NEET group also calls into question the continued rationale for assigning both the young unemployed (i.e. those ‘actively seeking work’) and the economically inactive group within the umbrella term ‘NEET’. Is such an approach an equitable or acceptable way of ensuring that significant numbers of young women (and men) are not simply ‘written off’? Given that the epithet ‘NEET’ was coined originally in the UK to define 16- and 17-year olds who were outside the unemployment count, but is now commonly applied to those over 18 who are eligible to claim unemployed status, it may be both opportune and productive to question whether ‘NEET’, as currently defined and applied, is appropriate. Certainly, if it is applied too casually, it may mask rising and unacceptable levels of inactivity among young people. Another issue is whether an age range of 16-24 is too wide, as it encompasses significantly different ‘sections’ of the life course. Pronounced differences are apparent between the under-18s NEET group and the 18-24s NEET group in the UK. Here, the percentage of under-18s who are NEET is higher for males, whereas among the 18-24s, the percentage of females who are NEET is higher than that of males. Overall, there is an urgent need to reappraise how we define the NEET group, and, as a consequence, to re-think our policy responses to the issues confronting the various sub-groups within the NEET category.

At present, policy intervention is primarily targeted at young people who are ‘available for work’ (i.e. the unemployed group within the NEET population), as opposed to those who are defined as economically inactive. In order to formulate appropriate policy measures, we first of all need to identify and locate those who are presently ‘unknown’, ‘missing’ or ‘forgotten’, as far as the statistics are concerned. Along with this process, we need to generate substantive evidence – especially relating to the legion of young women who are affected – about what support, if any, they require. Crucially, this will include understanding what works best in assisting them to engage with support services and what additional support mechanisms may be required to attain an education, employment or training (EET) outcome. As far as current policy direction in the UK is concerned, there is a need to assess the potential impact of any national roll-out of Universal Credit on the future trajectories of the economically inactive NEET group.

[1] Office for National Statistics (ONS) (2016), Statistical Bulletin ‘Young People Not in Education, Employment or Training (NEET), May 2016’, 26th May.
[2] Eurofound (2016) ‘Exploring the diversity of NEETs’, Publication Office of the European Union, Luxembourg.
[3] Britton J, Gregg P, MacMillan L, Mitchell S. (2011) The Early Bird... Preventing Young People from becoming a NEET statistic. Department of Economics and CMPO, University of Bristol.
[4] http://www.theguardian.com/society/2016/mar/09/halving-of-teenage-pregnancy-rate-hailed-as-extraordinary
[5] Bardak, U., Maseda, M. R. and Rosso, F. (2015) Young People Not in Employment Nor in Education or Training (NEET): An overview in ETF partner countries. Turin, European Training Foundation. July.
[6] Assaad, R. and Levison, D. (2013) Employment for Youth – A Growing Challenge for the Global Economy’. Background Research Paper. Submitted to the High Level Panel on the Post-2015 Development Agenda. University of Minnesota.
[7] Tamesberger, D. & Bacher, J. (2014) NEET youth in Austria: a typology including socio-demography, labour market behaviour and permanence. Journal of Youth Studies. 17:9, 1239-1259.

Giving back control? A contradiction at the heart of Universal Credit

📥  employment, policymaking, Welfare

Professor Jane Millar is a member of the Institute for Policy Research (IPR) Leadership Team, in addition to her role as Professor of Social Policy at the University of Bath. Fran Bennett is Senior Research and Teaching Fellow in the University of Oxford's Department of Social Policy and intervention.

As Damian Green arrives as Secretary of State in the Department for Work and Pensions (DWP), Universal Credit must be at the top of the long list of issues he faces. And the decisions he takes will have a major impact on the incomes and living standards of those ‘ordinary working class’ families that the new Prime Minister has promised will be the focus of her government.

Coinsmall

 

An estimated ten million people will be in the Universal Credit net when the new system is fully in operation in the next five years. The current system is very complex: people have to find their way through a maze of benefits, and they have to make new claims for some benefits every time they move in and out of work. Universal Credit will smooth that transition by replacing six existing means-tested benefits (Income Based Jobseeker’s Allowance, Housing Benefit, Working Tax Credit, Child Tax Credit, Income Related Employment and Support Allowance and Income Support) with a single benefit.

Having one single benefit will, it is asserted, encourage more people to work, improve take-up of benefits and tackle in-work poverty. The idea of Universal Credit – and in particular the simplification of the system – has itself received almost universal support. This has come from political parties, from think-tanks and NGOs, from the House of Commons Select Committees, and from the Social Security Advisory Committee. There have been some cold feet about the very slow and very costly implementation, with critical reports from the National Audit Office and the Public Accounts Committee among others, and the recent announcement of further delays until 2022 highlight the very real challenges of making this system work. But Iain Duncan Smith’s vision for Universal Credit remains, so far, largely intact.

The fact that there is support from a wide range of interests and groups might be taken as a good sign. But policy consensus can also mean lack of scrutiny and challenge. Perhaps we need to look more closely at the design and try to understand what it might mean for those millions of people as they try to access the system. If we walk through the system, as it is supposed to work, what happens?

First, you must make your claim online. This is the only way to claim and the only way to update your claim if your circumstances change, though Jobcentres or local advice services may help complete this for you. This is a big step into the modern IT world – but perhaps not a step that everyone is able to take yet. Many people with low incomes have no access to computers at home, and must rely on friends or public systems in libraries or Jobcentres, which are not always readily available. Others will lack the experience and skills to easily negotiate complicated online forms. DWP evaluation has already found some significant barriers to the use of IT, which suggests that this area might require significant and ongoing investment.

Second, you must sign a ‘claimant commitment’. This kind of arrangement will be familiar to people who have claimed Jobseeker’s Allowance, most of whom have always had full-time work requirements as part of their benefit conditions. Universal Credit extends these work requirements in various ways, depending on your circumstances. Lone parents will have to be actively looking for work once their youngest child is three, and be preparing for work before that. But so will partners with children, who have not previously had work requirements like this. And people already in part-time work may be required to try to increase their earnings or hours. A new role within DWP – the ‘work coach’ - is being introduced to support unemployed people into work and help those in work to increase their hours. The work coaches will have some discretion to vary work requirements (for example, for disability and caring obligations) but will also be responsible for sanctioning those who fail to meet their claimant requirement. Some early evidence suggests that people in work are bemused by these requirements, which they feel are very unfair.

Third, you must report changes in circumstances, apart from changes in earnings. Changes in earnings for employees will be picked up automatically by the ‘real-time information’ system that uses PAYE data – a big step forward and key to making work transitions smoother. But all other changes in circumstances must still be reported and there are many of these, in total (including earnings changes) when fully operational this could mean as many as 1.6 million per month.

Experience with tax credits shows that many people will struggle to understand what exactly they have to report and when. And when they do report, the changes will be applied on a single assessment date each month and treated as though they apply to whole of the previous month. This might be good or bad news, depending on the event and the timing. Universal Credit is paid for the month just gone, not the month to come. So if you have a baby just before the assessment date you will get almost a month’s extra benefit. But if your oldest child leaves home just before assessment you will lose almost a month. This creates a disjunction between income and circumstances, making it harder to meet current needs or to plan ahead.

Fourth, you will receive your benefit as a single monthly cash payment. This is intended to give people the opportunity to manage their money in the same way as they would in work. But the single payment will challenge budgeting practices that rely on the receipt of different sources of income at different times. There are systems to allow for alternative arrangements in certain circumstances, and support for budgeting and money management has been piloted alongside the digital support services. But again it is clear that not everyone will want, or be able, to access such support. Perhaps most tellingly, one of the conclusions reached so far is that the ‘most significant challenge in delivering personal budgeting support was that...trial participants simply did not have enough money each month...’.

Which takes us to the final point about the difference between the current situation and that under Universal Credit: there will be less money. The 2015 Budget proposed cuts to tax credits, some of which George Osborne was forced to postpone after challenge from the House of Lords. But these were not abandoned; they were instead pushed ahead to Universal Credit. Spending on Universal Credit will fall by £3.7 billion (leaving aside temporary protection for some new claimants) compared with the existing system. The impact on families may be mitigated in part for some by rises in the ‘National Living Wage’ and personal tax allowances, and much will depend on individual circumstances. But many working families will receive less from the Universal Credit system than they do now from tax credits. As a new Universal Credit claimant, you will also wait longer for your money; there are seven waiting days (for which you get no money), meaning a wait of about six weeks to the first payment.

So far, the evidence about the impact of Universal Credit is limited. The early evaluations do show some positive effects on moves into work, and increases in job search. The work coaches are generally upbeat about the personalised support they can offer, and some claimants respond well to this. But the main groups brought into the system so far are single people and childless couples. There is a long way to go before all families, with their more complex circumstances and needs, are covered. Simpler systems may work very well for straightforward cases, and this could be a huge gain for Universal Credit. But there are limits to simplification for means-tested benefits, especially when the aim is to target people whose circumstances are not secure.

Universal Credit is supposed to be ‘like work’ and thus make people feel more independent and – to use a Prime Ministerial phrase of the moment – give them back control. But there will be no escaping the state for these millions of people, subject to ongoing means tests, having to report changes in their lives, fulfilling tougher work requirements even if already working, getting less financial support, and for many also being advised how to budget. This is a contradiction at the heart of Universal Credit. It is intended as a simplification, but the intrusion and control embedded in the design are substantial and extend both to more people and to more aspects of their lives.

Note: the above draws on the authors' published research in Social Policy and Society.

 

The most influential text of late Victorian imperialism was J R Seeleys The Expansion of England

📥  Brexit, David Cameron, Economy, employment, EU membership, EU Referendum, EU renegotiation, policymaking

The most influential text of late Victorian imperialism was J. R. Seeley’s The Expansion of England.  In it, Seeley, a Cambridge historian, argued that underneath the surface of British political history - the stories of the rise and fall of Prime Ministers, great events and such like - was a deeper logic of logic of political evolution, that of the expansion of the English state. Through trade and war, England had acquired a mighty empire, within its own islands and across the oceans. Its key challenge was to hold it together: having lost its American colonies in the 18th century, how could it retain the rest of it settler dominions in the 20th century? Should it form an imperial federation to rival the rising states of Russia and America, and secure its unity?

hero-houseofpar

It was not to be. The 20th century was a story of the contraction of England and the end of Empire.  But only now is the reverse logic of Seeley’s master narrative being fully realised. England has voted to leave the European Union and in so doing has imperilled her own union. The wound of Irish partition has been reopened and Scotland now faces the prospect of another independence referendum. Only Wales has stood with England in choosing to leave the European Union.

Empire gave Britain command of the global economy, until hegemony passed to the US. Trade and finance flows kept Britain afloat as it ceded industrial leadership to the US and Germany. Foreign direct investment and the City played the same role after we de-industrialised. Today, our economic weaknesses stand brutally exposed: Brexit has caused mayhem in the markets and a run on the pound.  As we adjust to the shock, we will become poorer.

What is England now? What is her role in the world?  Alas, the referendum debate told us nothing of these things; it was sour, parochial and mendacious. It has destroyed a Prime Minister and there is rubble everywhere.