Do people really 'get used to a life on benefits'?

The cornerstone of the Coalitions' welfare reform agenda is the idea of 'welfare dependency'.  That people, as they remain reliant on the social security system, acclimatise to being unemployed: they no longer want to work, they adapt to a life without work and they get used to a life on benefits.

If people get used to a life on benefits, then the rationale follows that they need stronger incentives to move into work.  This logic is the justification for most of the Coalition's welfare reforms: the Universal Credit, the benefit cap, stronger sanctioning and welfare-to-work programmes.

But how valid this is this assumption?  Do people get used to a life on benefits?

One way to find out is by tracking individuals who remain unemployed over a prolonged period of time.  If people get used to benefits, then we would expect these individuals - the longer unemployment goes on - to become happier and more content.  In the subjective well-being literature, this phenomenon is called adaptation.  

In short, when people suffer a shock to their normal life (divorce, widowhood, childbirth), they tend to experience a quick change in their life satisfaction.  But over time, their life satisfaction 'resets' itself to its pre-shock level.  People adapt to their new life circumstance.  This is essentially the argument of the Coalition in relation to the unemployed.  After so long, people adapt to unemployment: it becomes their normal way of life.

Data from the BHPS however suggest this is not the case.  In the course of some other work I'm doing on the long-term effects of welfare-to-work programmes, I took a look at the effects of long-term unemployment on well-being.  The main question I wanted to check was whether people do adapt to unemployment the longer it goes on.  To do this, I split unemployed people into five groups: those who had been unemployed for 1 year, for 2 years and so on, up to 5 years of continuous unemployment.

If people adapt to unemployment - or 'get used to a life on benefits' - we would expect the long-term unemployed to have significantly higher subjective well-being than those who have recently experienced the 'shock' of becoming unemployed.  But this is not the case.  Once we control for a whole range of background factors, we find that there is no significant difference between the long-term unemployed and the recently unemployed.  They are, to put it crudely, as miserable as each other.

Unemployment then is not a condition that people ever get used to.  Whilst people tend to adapt to other life events - even widowhood - they do not get used to permanent exclusion from the labour market. This gives us an idea of the true extent of the social and psychological damage inflicted by unemployment.  And should give politicians food for thought in the way they talk about its victims.


The long-term effects of unemployment on well-being

Welfare-to-work, in perspective

The image above illustrates the large network of what policy academics call ‘active labour market policies’ (ALMPs); or what politicians refer to, in the increasingly Americanised language of social security, ‘welfare-to-work’.

ALMPs are big business.  They are in large part carried out by huge private sector providers, such as A4E and G4S, as well as a ‘supply chain’ that consists of hundreds, if not thousands, of smaller organisations and companies. According to the BBC, the Work Programme alone is expected to cost up to £5bn.

But as well as being big business, ALMPs are an integral component of the social security ‘contract’ that exists between the state, the public and benefit claimants.  The contract, so it goes, is that unemployed people agree to a wide range of – often stringent – work-related conditions: this in return for (a) benefits and (b) the provision of back-to-work ALMPs.

The state then, like the unemployed, has rights and responsibilities: the right to expect benefit claimants to take certain steps to get back into the labour market, but also the responsibility to provide good services that enable a transition back to work.  So this raises an important question: how well do we actually provide for the unemployed in terms of labour market programmes?

A simple but effective way to answer this is to look at what other countries do.  The OECD is a useful resource here, as they collect statistics on how much countries spend on ALMPs.  The graph below shows how much other European countries spent in the most recent year of data collection, as a percentage of GDP.

Spending on ALMPs in the OECD (% GDP)

As is obvious, we don’t do very well: spending on ALMPs is just 0.38% of our national income.  In fact, the only countries that spend less than us on ALMPs are the former communist states of Slovakia, the Czech Republic and Estonia.  What’s far more normal for countries like us, in terms of GDP, is for over 1 per cent on all spending to go on welfare-to-work, such as in the Netherlands (1.2%), France (1.1%) and Belgium (1.5%).  Denmark, meanwhile, spends a whopping five timesmore than the UK does on back-to-work schemes.

Our poor record on ALMPs is reflected even more intensely in what the EU calls ‘the activation rate’.  This is the number of unemployed people, per 100, who are enrolled onto welfare-to-work programmes.  The image below shows the pitiful coverage of UK provision: for every hundred unemployed people, just over one person is participating in activating schemes.  This compares to rates of over a fifth in other major West European economies, such as Italy, Sweden, Spain and Belgium.

The ‘activation rate’ in EU countries

In fact, the UK is bottom of this league table across the entire EU.  This means there are a higher proportion of unemployed people on ALMPs in countries like Bulgaria, Romania and Lithuania.  Even tiny Malta has a higher activation rate than the UK.

So, whilst the state asks a lot from the unemployed, it simultaneously fails to provide them with a relatively high standard of labour market programmes.  The key point here is not that it’s unfair to ask – or even compel – unemployed people to take steps back to work.  Rather, it’s unfair that we ask so much of the unemployed yet do so little, compared to other countries, to help them.

David Cameron and George Osborne like to talk about the ‘Global Race’ that the UK is in: a race where we must compete more effectively and efficiently against our economic competitors.  Yet if we really are in a ‘Global Race’, then surely a test of how where we stand is by how much our government invests in reskilling the unemployed.  And on this test, we are miserably failing.

This article originally appeared on the site RealFare

Have universal benefits had their day?

This week, Labour has made some (potentially) significant shifts in its welfare policy.  On Monday, Ed Balls announced that a future Labour government would seek to means-test the universal Winter Fuel Allowance.  And today, the BBC report that Ed Miliband will state that Labour wouldn't reinstate the universal principle to Child Benefit.  These are significant shifts: suggesting that Labour is coming into line with centre-right (and perhaps public) views on universality.

The Right have never liked universal benefits: seeing them as a waste of money and unaligned with the proper purpose of social security, which is need.  The Left have never really been able to argue against this point: many people receive benefits who don't, in the strict sense of the word, need them.  Instead, the Left has supported universality as a mechanism for maintaining support for the redistributive welfare state as a whole.

I've argued this point myself - and certainly think that universal benefits do help public support for welfare from dropping even further.  But this New Statesman piece makes a valid point: universality doesn't just come in the form of benefits, but also services: the NHS, schools, Sure Start centres and public transport (at least for pensioners).  And often, it's universal services - as opposed to universal benefits - that seem to command the most solid levels of public support.

So, whilst the death knell might be sounding for universal benefits, this doesn't mean it has to sound for the universal principle as a whole.  More free childcare instead of universal Child Benefit; well invested active labour market programmes for all unemployed people instead of widening eligibility for JSA; means-tested winter fuel payments but more social care for the elderly. Universal services, but not benefits, could kill two birds with one stone for the centre-left: economic credibility and a stronger welfare state.

So what do UKIP have to say about welfare?

Max Wind-Cowie writes for Prospect magazine that UKIP's recent electoral and polling successes can be put down to it's 'accidental post-liberalism'.  By 'post-liberalism', Wind-Cowie means the idea that there are serious fallouts, losses and consequences from the hegemony of liberalism: both economic and social.  By 'accidental', he means that UKIP has come to espouse this position almost by fluke; that it has found strong public support for both its policies and arguments because they speak to a post-liberal mindset.

Whisper it quietly, but I suspect that Farage and co now know that this is where their future lies.  No longer will they keep up the frankly bizarre pretence of being a libertarian party, nor a simply more-right-wing-than-the-Tories party.  Their recent success has been built on adopting policies and arguments that counter the dominant liberal narrative of the main three parties; and this means that policies that must appeal to both middle- and working-class voters.  Hence why, quite importantly, their commitment to a flat tax was recently dropped.

For those of us interested in social security, this raises the interesting question of what UKIP will eventually say about the welfare state.  If Wind-Cowie's thesis is correct (and I suspect it is) it means that UKIP will look to build a conservatively-inclined, but still post-liberal, welfare strategy.  This will involve a far more complex approach than simply cutting back on social security, as the Conservatives tend to favour.

Out of all the main parties, Labour has flirted the most with post-liberalism: with a small group of academics and MPs, such as Maurice Glasman and John Cruddas, attracted to it ideas.  In terms of welfare, post-liberalism has often been expressed in terms of reestablishing the contributory principle and prioritising certain groups for things like social housing.  This is 'post-liberal welfare' because it couches the receipt of social security in a language devoid of the individualist rhetoric of 'social rights' or 'need'.  It speaks to a wholly different line of reasoning: one based upon contribution, reciprocity, desert and the good of the community.

But Labour has yet to decide where it lies on welfare; the kind of ideas Glasman et al put forward will cost big money and involve a substantial reorientation of the welfare state.  But what they do is give us some ideas of what UKIP might offer on welfare, with a conservative edge of course.  This could involve emphasising contribution, and so favouring benefits for pensioners and NI contributors over (semi-) universal payments with more abstract objectives, such as Child Benefit.  It could also, inevitably, mean the right to social security is removed from newly arrived immigrants.

In light of the debate last week about winter fuel payments and bus passes, these kind of dividing lines could come to be crucial.  The support given my most people in defence of universal benefits for pensioners is not based on the abstract language of liberalism, but the more basic response of contribution: of paying your dues.  At the moment, the Conservatives, Labour and the Liberal Democrats are all flirting with the idea of means-testing pensioner benefits.  To support this would be to swim against the 'post-liberal' tide; and to play in the hands of the only party who is genuinely picking up its mantle.

On social security, universality and public support for the welfare state

As the Government moots the idea of means-testing certain benefits for pensioners, Owen Jones writes for The Independent that universality is an integral component of a good welfare state.  In response, Sunny Hundal writes that universality does not automatically generate support for social security.

In defence of his view, Sunny argues (quite rightly) that overall support for extra spending on benefits has dwindled since the 1990s.  But to what extent does this prove his idea that universality does not increase support for social security?  What Sunny's graph shows is that there is little evidence linking very specific introductions of universality (winter fuel payments for example) with broad support for the welfare state as a whole.

The picture is quite different if we break down support for specific parts of the social security system.  The graph below shows the percentage of respondents from the British Social Attitudes survey by aspects of the welfare state they prioritise for extra spending.

Percentage that prioritise specific area of social security for extra spending (British Social Attitudes)

Over the New Labour years, large amounts of extra spending was targeted at two different groups: a) pensioners and b) families with children.  And as the graph above shows, over the late 1990s and 2000s increasing proportions of the public would prioritise extra spending on these 'growth' areas of the welfare state.

Alternatively, during the same years unemployment benefits became a) worth less and b) available to a decreasing pool of people.  As it happens, the number of people prioritising extra spending on the unemployed dwindled to, at one point, just 2 per cent.

The UK welfare state can be thought of as a hybrid system: there are pockets of universality and pockets of means-testing.  What I think the graph above shows is that where universality is dominant (for pensioners and families with children) there is strong public support.  Of course, the same can be said for the NHS: the universal principle leads to widespread public backing.

But where means-testing and highly selective coverage dominates - such as for the unemployed - public support is very low.  So whilst Sunny is right on one point - winter fuel payments alone won't boost support for the entire welfare state  - he is wrong to misjudge the effect universality can have on specific parts of the social security system.  It's difficult to imagine how the welfare state could sustain the levels of solidarity it requires without universal benefits; the left, at its peril, supports their demise.

Evidence shows 0% of long-term unemployed people are failing to look for work

There is a lot of debate, particularly fuelled by the political right and the tabloid press, about the extent to which unemployed people are genuinely looking for work.  People on the right argue that there needs to be a tighter sanctions regime so those who are failing to look for work are encouraged to do so.  People on the left claim that the problem is not lack of effort, but lack of vacancies.

To clear this debate up a bit, I thought I would share some interesting data from the Annual Population Survey (APS).  The APS is an exceptionally large dataset of over 300,000 people.  This means that anything found in the data is quite likely to be true of the wider population.

The APS asks a simple question to all its respondents: 'Have you looked for paid work in the past 4 weeks?'.  If the right are correct, we might expect a decent proportion of unemployed respondents to answer 'no'.  If the left are correct, we'd be expect a very low figure to answer 'no'.

The number of unemployed not looking for work is tiny - 2%

In total, 11480 unemployed people answered this question.  Of this group, 98% (11,428) said they had looked for work and just 2% (232) said they hadn't.  This suggests 'idleness' amongst the unemployed is a relatively small problem: just 1 in 50 of the total out of work.

Nevertheless, this is a slightly misleading - and exaggerating - number.  Much of the time, the right is generally focused on people who have been out of work for a decent period of time: those who have, in the jargon, been 'parked on benefits'.

So what about the long-term unemployed?

Thus a better way to assess whether we have a 'scrounger' problem is to look exclusively at the job-seeking efforts of the relatively long-term unemployed, say those who have been out of work for 6 months or more.  Reducing the sample in this way gives us 6148 long-term unemployed (54% of the total out of work).

Now, here is the interesting statistic.  Out of the 6148 people who have been out of work for 6 months or more, just 15 - yes, 15 - had failed to look for work over the past month.  This is 0.2%: or, if you like, a small enough group of people to make 'idleness' essentially non-existent amongst the unemployed.

Per cent of long-term unemployed who have a) looked for work in past month or b) not looked for work in past month

If we extrapolate this to the wider population, this means that out of an estimated 1,400,000 (54% of the total unemployed) people might be long-term unemployed, just 2,800 have not recently looked for work.   And it is this small minority - rather than the 1.4 million mass of long-term unemployed - that Coalition rhetoric is almost exclusively targeted towards.

A non-existent problem

There will be obvious retorts here from right-wingers.  They might say people aren't telling the truth; but they have no real incentive to lie as this is an anonymous survey.  They might also say that we don't know how much job-seeking long-term unemployed people are doing, which is true and which could be answered with the proper data.  However, what we do know from the APS is that nearly every long-term unemployed person is actively looking for a job.  A fact that makes the current furore over the benefits system even more difficult - and infuriating - to understand.

Would higher benefits increase the wellbeing of the unemployed? Perhaps not.

New research using the cross-national European Social Survey was released today, with a special emphasis on the relationship between the recession, the labour market and subjective wellbeing.  A key finding of the research is that in countries with welfare systems that generally provide high unemployment benefits (the Nordic countres), the unemployed tend to have higher levels of subjective wellbeing than their counterparts in countries with ungenerous benefits (like the UK).

This raises an important question.  Would increasing the value of benefits raise the wellbeing of the unemployed?  In theory, higher benefits could make unemployment more bearable by reducing poverty and alleviating anxieties about making ends meet.  The ESS findings come at a useful time policy-wise.  At the weekend, Labour announced new plans to back an increased level of unemployment benefit.

Looking first at the life satisfaction levels of the whole population, we can see the kind of relationship we might expect: those with the largest incomes have higher life satisfaction, those with the smallest incomes have the lowest life satisfaction.  For ease of interpretation, the results below are based upon a sample that excludes the richest 30 per cent or so of respondents; the vast majority of which are not unemployed, which makes any analysis (based upon tiny numbers) problematic.

Average life satisfaction by income group, Citizenship Survey (2009/10 and 2010/2011)

So what happens when we divide this up by employment status?  The results below are, in this instance, perhaps what we might not expect.  For those within the employed group, the higher earners have the highest life satisfaction, but only just.  This suggests that being in work is pretty good for life satisfaction even if you are on a relatively low income.

Average life satisfaction by income group and employment status

Yet the question we're really interested in here is whether a higher income protects unemployed people against a loss in life satisfaction.  And the answer seems to be no.  The average life satisfaction for unemployed people in the highest income group is 3.6; remarkably, for the lowest income group of unemployed people it is slightly (though perhaps not significantly) higher, at 3.7.

What this suggests is that unemployment corrodes wellbeing irrespective of how much money a person has whilst they're unemployed.  Yet this is not necessarily an argument against higher unemployment benefits.  The argument for higher benefits is based upon a much wider range of arguments than boosting life satisfaction: reducing poverty, giving dignity to people, easing income anxieties and allowing the children of unemployed people to be adequately provided for.

But what this does mean, I think, is that we have to consider the stigma attached to unemployment and the social costs that follow as much greater problems than purely economic ones.  So whilst higher benefits may solve some of the issues associated with unemployment - such as intense poverty and income insecurity - they cannot, at least alone, deal with some of the other problems of unemployment. Not least, why it makes people feel so bad.