Workfare and the precariat

Workfare is the wrong policy response to the insecurities and inequalities of a flexible market economy.






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Publication: Soundings
Author: Standing, Guy
Date published: April 1, 2011

It has become an article of the creed of modern morality that all labour is good in itself - a convenient belief to those who live on the labour of others.

William Morris

The essence of workfare is that the unemployed (as well as some others) are obliged to undertake designated labour if they wish to continue to receive state benefits, and will lose them if they refuse. They are paid less than the market wage and must accept other terms that are inferior to those for comparable jobs in the open labour market. While this policy is currently being pursued by the coalition government, the groundwork was laid by New Labour. It is a cul de sac from which progressives must escape.

The historical precedents for workfare are the English Poor Law of 1536, which required labour from 'sturdy vagabonds', and the French Ordonnance de Moulins of 1556. It reached its most tragic form with the Poor Law Amendment Act of 1834, a venal 'localism' whereby parishes ran workhouses that, according to the Poor Law Commissioners, were to be 'the hardest taskmaster and the worst paymaster'. In 1905, the Unemployed Workmen Act provided labour for the 'deserving' unemployed of 'good character', while denying assistance to those deemed not 'honestly desirous of obtaining work'. As with previous schemes, the outcome was pauperisation. Winston Churchill made the objective of the 1905 Act crystal clear when saying of the unemployed: 'If they are not earning their living, they ought to be put under control'.

In some ways, modern workfare advocates are more ambitious. They are driven by a desire to change people, to break them out of bad 'habits', to induce them to be functional happy people contributing to 'social order'. As I have argued elsewhere, it is no coincidence that the drivers of workfare have often been religious or influenced by utilitarianism.1

In 1990 I wrote an article arguing that the labour market and social protection reforms being pursued at that time on both sides of the Atlantic would inevitably lead along the road to workfare.2 The widespread acceptance of the need for labour market flexibility in a global market system would lead to systemic economic insecurity and declining incomes at the lower end of labour markets. At the same time, the reforms in social protection that accompanied the flexibility agenda were bringing about a shift towards means-tested social assistance 'targeted' on 'the poor'. In the absence of any corrective distributional strategy, inequality was bound to worsen.

In Britain, as elsewhere, labour market flexibility led to a fall in 'unskilled' wages and a proliferation of temporary and part-time labour. This expanded the ranks of the precariat - the emerging class of people who experience multiple forms of insecurity and see little prospect of escape.3 Potential earnings from jobs declined relative to benefit levels, raising the income replacement rate (income received when out of a job as a proportion of income received when in a job) and worsening the poverty and unemployment traps, whereby taking a job would provide little or no extra income. This allowed conservative commentators to claim that benefits were over-generous, which in turn led governments to introduce 'in-work benefits' and cut 'out-of-work' benefits so as to 'make work pay'. But that failed to arrest the vicious circle. Lower benefits pushed down further the wages of the precariat, intensifying pressure for more cuts in benefits. Once down this road, workfare loomed.

The situation is such that growing numbers of people cannot afford to take low-paid casual or part-time jobs and have little motivation to look for them. Giving this group denigrating epithets such as 'scroungers', 'workshy' or 'benefit dependent' has contributed to altering the image of unemployment from a misfortune to a 'lifestyle choice', and has distorted policy-making. Universalism and values of social solidarity are among the casualties.

Inside New Labour, utilitarianism triumphed. Being 'tough' on 'scroungers' was seen as a way to placate middle-class voters and the remnants of the working class. And so the road to workfare was taken: in the interest of the happiness of the majority, a minority could be hounded. There were numerous signs of this. One stuck in my mind: a government advertisement on a London double-decker bus in 1999 urging people to report their neighbours if they thought they were 'benefit cheats'. Encouraging people to sneak on neighbours was part of the 'panopticon' state under construction.

Throughout the period of New Labour government, ever more stringent conditions were attached to benefits, with more and more directions, as, for example, under the Flexible New Deal. After the crash of 2008, the morality play reached its final act. Enter Iain Duncan Smith in 2010, with his Mandatory Work Activity for the long-term unemployed. The era of workfare had begun.

The precarity trap

Workfare is intended to override the standard poverty and unemployment traps, whereby people lose benefits as they gain wage income: in some cases the combination of lost benefits and income tax can result in marginal 'tax' rates exceeding 100 per cent. Governments have sought to reduce these traps through 'in-work benefits' and tax credits - which are distortionary subsidies. But these have only cut the effective tax rate modestly, meaning that those on low incomes and the unemployed still face much higher marginal tax rates than the rich.

Poverty and unemployment traps will remain as long as means testing and flexible labour remain, even if the tapering of benefit loss is made less steep. The more wages fall at the lower end of the labour market, the higher the income replacement rate will be if benefits are maintained at adequate levels. Duncan Smith deserves credit for trying to reduce the poverty trap. But he will fail. He claims that, under his plans, the marginal tax rate of going from benefits into jobs will be 65 per cent; others estimate it will be 75 per cent. In either case, it will still mean that the marginal tax rate faced by the precariat will be much higher than for more privileged groups. Unfortunately, the progressive voice is muted, since under New Labour the situation was even worse.

Meanwhile, what we might call the 'precarity trap' is growing - a trap in which poverty and insecurity are compounded by the precarious nature of available jobs. The trap takes several forms. If, say, jobs are generated in one place while the unemployed are living in a deprived area elsewhere, and if jobs are low-paying and temporary or part-time, job-seekers take high risks in going for them. They have to travel, which is costly; they may have to move away from a network of family and friends; they must reckon on losing benefits that took months to obtain; and they are expected to do all this when there is only a low probability that the job will last.

Being trapped in a cycle of coming off benefits only to be forced back onto them again is debilitating. Each time people become unemployed, they must apply again for benefits, during which time they may once more exhaust any savings they have accumulated, further erode family support, become prone to loan sharks, or lose creditworthiness. Once in this cycle of deprivation, only a long period of income security can enable people to climb out of it. (That is not to say that all in the precariat are victims; some want short-term jobs and look back on old-style employment security with disdain. But the precarity trap is real for many. And understanding how it operates is crucial in assessing workfare.)

A further disincentive to taking a low-paid job, whether casual or otherwise, is that working in itself raises the cost of living; in addition to travel, child-care and other costs associated with working, there is less time to spend looking for bargains or other money-saving but time-consuming activities. All these raise the effective tax rate.

The precarity trap compounds the poverty trap. For many, there is no incentive to take the sort of job they could anticipate being offered. In the end, sanctions become the only way of forcing people into the jobs that are available - though the Welfare White Paper mischievously calls them 'incentives'. If the government continues down the workfare road (and it will), one can predict that the system will become ever more coercive and impoverishing.

The moral underpinning of workfare

Workfare advocates claim that 'the poor' have a duty to labour because there are no rights without obligations. Adding sophistry, this is called the 'reciprocity principle'. It is the position of the Roman Catholic Church of Duncan Smith. Of course, one could just as easily assert that the rich have a duty to labour, in return for having had the luck to be born with wealth, or to gain it. Both positions are moralising, but only the former is much heard in government and press circles.

All the emphasis is placed on what the benefit recipients owe society. Thus the government will introduce a 'claimant commitment', setting out what people must do in return for benefits. Lawrence Mead, American adviser to the Conservatives, argues that social policy must enable people 'to discharge social obligations' . Furthermore, not only must claimants be pushed into labour, no matter of what kind, but 'governments must persuade them to blame themselves .4 In general, however, commentators refrain from openly stating their belief that people living on the margins respond to coercion rather than incentives (though Mead has done so). This is convenient, since there are no incentives for the precariat to respond to.

A related assertion is that claimants suffer from 'benefit dependency', which is likened to an addiction. Once more the problem is seen as residing in a deficiency of the unemployed, rather than in the fact that the lower end of the labour market is not paying wages that remove people from income insecurity and poverty The Welfare White Paper of November 2010 was premised on an assertion that there was a 'national crisis' of benefit dependency, with 4.5 million people receiving 'out-ofwork' benefits. Instead of working on measures to tackle the poverty, unemployment and precarity traps faced by millions, the minister was attempting to establish a causal link between receipt of benefits and 'addiction'.

Duncan Smith has also adduced as evidence of benefit addiction the existence of 450,000 vacancies, which must mean that people are refusing to take jobs. This is to misrepresent a market economy. There is always a stock of vacancies. Every day vacancies emerge. It would be mad to fill them immediately. Procedures for filling them take weeks. Some are left unfilled for months (even years), being announced just in case an outstanding talent comes forward. An unfilled vacancy may have more to do with the employer than with applicants. A certain level of vacancies is needed for a normal market economy, and this says nothing about the unemployed. One can hypothesise what ratio of unemployed to vacancies is a measure of frictional unemployment, or what share of vacancies reflects lack of skills among the unemployed. But to say that there is a link between vacancies and benefit addiction is simply bad economics.

A further claim is that workfare will 'restore the work ethic'. This is risible. That many people do not want poorly paid and precarious jobs says nothing about any 'work ethic'. It is unlikely that workfare advocates would want such jobs for themselves or for their children. Lawrence Mead gave the game away when he wrote that workfare must be 'directive', since otherwise the unemployed might opt for training for jobs they would like, preparing them for work 'beyond their reach', rather than for 'menial jobs actually available to them'. The poor must be kept in their place. It is hard to parody this posture. What a shame there is no progressive voice to oppose it with the withering scorn it merits.

All this moralising seeks to justify the looming imposition of benefit deductions and forced periods of stigmatising labour. The latter sets out to humiliate the long-term unemployed, who will be required to undertake thirty hours a week, for four weeks, of litter clearing or cleaning graffiti from walls, while being paid less than the minimum wage. This is hardly an educational strategy for the 'workshy'. Rather than accustoming people to labour discipline, one could foresee it eroding job commitment and leading to more need for benefits in the longer term. The Welfare White Paper states that 'advisers' will be allowed to impose more or fewer conditions on job seekers at their discretion, and with sensitivity. But a policy that is discretionary is ultimately unfair. Of course, the aim is not help those on benefits. Workfare addicts want to punish and threaten, so that fewer apply for benefits.

Privatisation

Workfare is also intimately connected with the privatisation of social policy, which was pursued by New Labour as well as the present government. In a number of countries, including the UK, governments have contracted out welfare-towork policies to commercial providers. In so doing, governments have provided commercial firms with huge subsidies, in effect paying them to make a profit - and they include many companies with no track record in delivering social services, including armament companies.

The National Audit Office concluded that subsidised welfare-to-work companies had routinely delivered only a third of their contracted targets, while Ofsted found that most inspected contractors had failed to provide adequate outcomes. The Department for Work and Pensions noted that private firms were 'cherry-picking' - discriminating in favour of easy-to-place 'clients' while pushing others towards workfare; public jobcentres performed better in placing more disadvantaged jobseekers.

In one case that came to light in late 2010, it was revealed that the company A4E had received millions of pounds from the European Union social fund to deliver welfare-to-work schemes across the UK. Although the public was denied access to information on how the money had been spent, a Einancial Times investigation found that one of its multimillion-pound subsidised schemes had placed just fourteen people in jobs in nearly a year.5 (It is perhaps worth noting that David Blunkett, a former Secretary of State for Work and Pensions, is a highly-paid adviser to A4E.)

Given the evidence, it is a triumph of faith over experience to pursue the privatised route. But the workfare programme starting in 201 1 will be run by commercial and voluntary contractors, who will be paid by results. This will continue the trend of privatising while denying a voice in the process for the targeted population, who have no capacity to appeal or to hold the private firms to account. The Edinburgh and London Coalitions Against Poverty have exposed a number of abuses that have flowed from a privatised workfare regime. But such local coalitions are in a weak position, and are staffed by volunteers and poorly-equipped activists; they are unable to do more than bring the occasional case to light, costing them time and money they can ill afford.

If the government delegates a public service to a private profit-making firm, that firm will do what is necessary to make a profit. Its legitimate first concern is not the needs of 'clients' but its own objectives. The responsibility lies with government, in choosing an inappropriate instrument for delivering what it claims is a social service. As an immediate short-term measure, there is a need for publicly funded bodies in every part of the country to represent welfare claimants and prevent them being denied benefits, or forced into actions that are against their interests.

Labour's 'job guarantee'

All workfare advocates are disingenuous when discussing unemployment: they must know that a market economy requires unemployment, for various reasons including the restraint of inflationary pressures. And macro-economists generally agree that the 'natural rate' of unemployment has risen in recent years. So it is dishonest to pretend, as Labour appears to do, that in a market economy a government can guarantee everybody a job. Labour has been led into a cul de sac by a social democratic variant of the reciprocity principle, given gravitas by being described as 'fair workfare'. The argument is that reciprocity is only fair if there are job opportunities, and so the state must guarantee jobs.

When the Welfare White Paper was announced, shadow Work and Pensions Secretary Douglas Alexander said that Labour would guarantee 'real jobs and real sanctions', thereby sounding as if Labour wanted to be even nastier to the unemployed. While the sanctions are clear, the jobs are not. What sort of jobs would they be? At what wage? For how long? Who is to provide them? In fact, though the job guarantee lobby does not stress that the jobs to be guaranteed will be unattractive, it is implicit in all the discussion. So Labour is simply advocating workfare under another name.

Progressives must oppose workfare. And they will not succeed in this if they offer only opportunistic opposition, going along with a 'benign' version of workfare on the grounds that the public favours targeting 'scroungers'. The challenge is to fight for economic security for the precariat, and to develop an emancipatory agenda that redistributes the key assets of an inegalitarian market society. In meeting that challenge, Ed Miliband - or whoever takes up the mantle of leading a progressive revival - should begin by marching away from workfare.

Eventually, a progressive agenda is likely to crystallise around a strategy of delinking basic economic security from the performance of labour, through a basic income for all individuals (with supplements for special needs).6 This would allow the wage mechanism to function, properly commodifymg labour (jobs) but decommodifying people, who would be allowed to make decisions on jobs for themselves. Elsewhere I have proposed unconditional economic stabilisation grants, which would facilitate job search and provide an automatic macro-economic stabiliser (which unemployment benefits used to provide).7 Labour should be debating such ideas, not tacitly accepting workfare.

One good outcome of current reforms is that the proposed consolidation of benefits will make a basic income easier to introduce. Unfortunately, in the meantime, coercion and intrusive meddling in the lives of the economically insecure will intensify. Those wishing to forge a progressive strategy should be courageous in proposing alternatives, accepting possible short-term unpopularity in return for longer-term integrity and respectability - and the prospect of a better, more equal and more solidaristic society.

Notes

1. G. Standing, Workfare: Ed Miliband's defining challenge?' New Left Project, 26 January 2011.

2. G. Standing, 'The road to workfare: Alternative to welfare or threat to occupation?', International Labour Review, 129(6), 1990.

3. G. Standing, Work after Globalization: Building Occupational Citizenship, Edward Elgar 2009; G. Standing, The Precariat: The New Dangerous Class, Bloomsbury Academic 2011.

4. L. Mead, Beyond Entitlement: The Social Obligations of Citizenship, Free Press 1986, plO (emphasis in the original).

5. 'Spotlight turned on big UK corporate beneficiary', Financial Times, 2.12.10.

6. See G. Standing, Work after Globalization, op cit, Chapter 10; and G. Standing, The Precariat, op cit, Chapter 7.

7. G. Standing, 'Responding to the crisis: economic stabilisation grants', Policy & Politics, 39(1), 2011.

Author affiliation:

Guy Standing is Professor of Economic Security at the University of Bath, and Co-President, Basic Income Earth Network (BIEN). He is author of Work after Globalization: Building Occupational Citizenship (2009); and The Precariat: The New Dangerous Class (201 f, forthcoming).

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