Welfare to Work in Practice

Social Security and Participation in Economic and Social Life

Peter Saunders

• Publisher: Routledge
• Year: 2017
• Print ISBN:
  9781138266735
• eBook ISBN:
  9781351873345
• Topic: Business
• Subtopic: Business General
• Index: Business

Welfare to Work in Practice brings together some of the leading international social security experts to discuss the rationale for welfare to work policies, their limitations and problems encountered in practice. Contributors include Jane Millar, Neil Gilbert, Martin Werding, Jonathan Bradshaw and Einar Overbye, who address topics ranging from the linkages between social security and the labour market to how the welfare to work agenda is responding to the needs of special groups such as lone parents, the long-term unemployed and those with a disability. The book puts the arguments and ideas that underlie the new welfare reform agenda under the microscope and explains how it is being implemented in an international context. Several new data sets are analyzed in a collection that covers developments in Australia, Belgium, Denmark, Estonia, Germany, Norway, the UK and the US, as well as several comparative studies. In doing so, this volume helps to bridge the gap between research and policy and demonstrates how policy can respond to the challenges it faces.

Chapter 1
Welfare to Work in Practice: Introduction and Overview

Peter Saunders

Participation has become a rallying call in social policy, although its formulation and objectives varies greatly. In some countries, the primary goal has been to implement measures that encourage - or require - those who receive or are applying for social security benefits to take steps to find employment. In others, greater emphasis has been placed on developing social security strategies and programs that acknowledge the employment barriers those on welfare face, or allow them to perform important social roles such as parenting young children or looking after frail older relatives.

Underlying both approaches is the idea that participation is necessary for all citizens to contribute to, and benefit from economic and social progress. Social exclusion and joblessness are failings that deny people the opportunities to participate in ways that are essential components of modern citizenship. As these ideas have permeated research and policy, they have had profound implications for social security systems that must build better pathways to participation as well as to provide income support in ways that can trap people into dependency and serve as a barrier to participation.

But as social security systems have responded to these new imperatives, it has become apparent that too little is known about the factors that affect the decision to apply for social security, the motivations of those who receive welfare benefits, and what kinds of policy interventions are needed to increase employment and participation generally. It is undeniable that the shift in focus has resulted in a closer examination of how the worlds of welfare and work interact, in both a financial sense (the role and impact of poverty traps and work tests), as well as in terms of the procedures and administrative structures that shape the lives and aspirations of those who receive social security benefits.

This has opened up new issues surrounding what motivates the unemployed, people with a disability and sole parents, and what programs can assist them to become more engaged. These are topics about which relatively little is known, and the demands of those driving the policy agenda have at times outstripped the reliability - at times even the existence - of research evidence that can support specific initiatives. As policy makers have become increasingly concerned about growing pockets of welfare persistence in a context of booming economies and declining unemployment, researchers have begun to address the underlying issues using new conceptual frameworks, new combinations of understanding and new data sets.

But it has also become clear that many countries face similar problems. One group that has been of particular interest is those who are defined as being eligible to receive social benefits on account of a disability. The rapidly growing numbers receiving disability benefits has raised questions about the gateways used to establish disability for social security purposes and the effectiveness of measures that assist those deemed disabled to reintegrate with the labour market and other social institutions. Similar issues arise in regard to those who are sick or unemployed for long periods, with these situations often serving as a steppingstone onto disability benefits and further isolation from the workforce.

As many countries have struggled with these problems, the potential to learn from the experiences of others - successful and otherwise - has increased as the range of new policies and programs has expanded. International agencies like the Organisation for Economic Cooperation and Development (OECD) and the International Social Security Association (ISSA) have played an important role in this process of sharing knowledge, and representatives from both organisations presented papers at the 2003 FISS Seminar reporting on recent work on the impact and reform of disability benefit systems.

One theme that has emerged in many countries has been the increasing use of administrative data to investigate the policy impact of new initiatives on beneficiary populations. This has often been accompanied by increased effort directed at evaluating the implementation and impact of new 'welfare to work' initiatives in order to better understand one of the key current challenges facing social security policy: what works? But issues aside from estimating policy impact and effectiveness also need further examination from researchers, including whether the new emphasis on work offers a practical solution to all existing problems, and how the needs of those who are unable to participate can best be addressed. Questions of benefit adequacy - though rarely mentioned in current policy debates - are also important, particularly where what is expected of beneficiaries is changing in ways that affect their living conditions and costs.

Many of the chapters that follow provide examples of how new data have been collected and used to examine these issues, often from within social security institutions themselves. The range of countries included, while not complete, is sufficiently wide to provide a broad perspective of recent policy developments in Scandinavian, Continental and Eastern Europe, as well as the United States and Australia. Many of them use data sets that have not previously been reported, shedding important new light on the issues examined. Several other papers reflect on the lessons that have been learnt from past experience and how this can be put to better future use. Together, the collection provides an important stock-take of existing knowledge in an area that is set to remain at the leading edge of social security research and at forefront of social security policy.

In Chapter 2, Neil Gilbert raises a series of challenging questions about many of the often-unstated assumptions that underlie the recent emphasis on reconfiguring social protection schemes. He draws on experiences in a broad range of countries to show that work-oriented measures have been aimed at four key objectives: to increase the availability of work; to increase individuals' readiness to work; to improve work incentives; and to increase the costs of non-participation. But, he argues, too little attention has been paid in the tide of reform that has swept many OECD countries to basic issues, including who wants to work, what counts as work and who is actually able to work. Until these issues are brought into the policy discourse, social security policies will fail to deliver on the key objective of providing people with the freedom to live fuller lives.

In Chapter 3, Jane Millar describes recent attempts by the UK Government to increase employment among lone parent families, which had remained well below that of married mothers in the UK throughout the 1980s and 1990s. She describes the measures introduced in the UK to address this difference, before focusing specifically on three recent measures - the New Deal for Lone Parents (NDLP), the Working Families Tax Credit and the National Childcare Strategy. She shows that, although participation is voluntary, the NDLP has been successful in raising employment rates among lone parents, with a matched comparison showing that income support exit rates were twice as high among those who participated in the program. However, the other two programs have been important in achieving this outcome and the results illustrate that a coordinated policy response is needed to achieve results. Reinforcing a point made by Neil Gilbert, she concludes by emphasising the need for greater policy attention on the nature and quality of the jobs generated by welfare to work schemes.

The Australian experience described by Peter Saunders in Chapter 4 shows how participation has been shaping the reform agenda in a country where income-tested benefits have always been accompanied by part-time work among many recipients. This is borne out by the evidence he presents on participation patterns among the income support population, even before this issue became a focus of policy. He goes on to show that changing these patterns must address the barriers that prevent many from increasing their participation (or from participating at all), including poor health and caring responsibilities. Although the rhetoric of the Australian reforms recognises caring as an important form of social participation, the policy emphasis has been on economic participation through employment. He uses administrative data to show how complex the dynamics of work-to-welfare transitions are, even over short periods, but identifies some of the factors that are associated with exits from the benefit system, arguing that more work is needed to gain a complete understanding of the factors at play.

In the first of two studies of the Swedish experience, Lisbeth Pedersen and J0rgen S0ndergaard in Chapter 5 provide a refreshing contrast to much of the focus on the aggregate employment effects of workfare programs. They examine the effect of recent Swedish workfare programs on the level and distribution of social welfare, giving new meaning to what welfare to work means in practical terms. Drawing on the experience of Denmark as well as Sweden, they present evidence on the differing effects of Scandinavian workfare initiatives, in theory as well as in practice. They argue that while the available evidence does not yet allow final conclusions to be reached, there are clear distributional effects, with taxpayers and some of the unemployed gaining, while others who are unemployed suffering a loss in welfare. These differential effects among the Swedish unemployed lead the authors to argue that more effort is needed to target workfare to those among the unemployed who will gain most from it, although the Danish experience shows that complex issues remain about whether or not programs should be made compulsory.

Martin Werding, in Chapter 6, analyses the weak performance of the (West) German labour market focusing on unemployment among low-skilled workers. He argues that this partly reflects the existence of relatively low wage differentials that have proved resistant to market forces. This, he argues, reflects state intervention in the form of generous welfare benefits that have effectively 'suspended the market mechanism for low-skilled labour' by providing virtually no financial incentive to move from benefit into paid work. He presents a reform package developed with colleagues at the Ifo Institute for Economic Research built upon a new appreciation of the benefits of greater competition that combines reduced welfare benefits with wage subsidies and a government sanctioned job guarantee the classic hallmarks of the welfare to work approach. Using Ifo modeling, he estimates that the package could increase labour supply by over 2 million in the medium-term and more than pay for itself through reduced welfare spending and higher tax receipts. He ends with a review of recent welfare to work reforms in Germany, which he sees as helping to address its labour market problems.

The next two chapters cast a wider net, adopting a cross-national perspective on welfare state provisions and employment patterns. In Chapter 7, Jonathan Bradshaw, Naomi Finch and Emese Mayhew examine the relationships between the financial incentives produced by tax and benefit provisions and mothers' fulltime and part-time employment patterns in OECD countries. After exploring how different national systems affect marginal tax-benefit rewards for working, they show that a systematic inverse cross-country relationship exists between the average benefit replacement rate and the employment rate of mothers. They then examine how different systems impose work test requirements on lone mothers, showing that the stringency of such requirements appears to have an impact on the employment rate. Echoing the findings of earlier chapters, they conclude that although their findings suggest that making work pay provisions have important effects on employment, such provisions must be considered alongside other measures such as employment practices, labour market regulations and childcare provision.

In Chapter 8, Lieve De Lathouwer reviews recent welfare state reforms in Belgium against the background of the shifting policy priorities in other OECD countries. She begins by documenting the nature of Belgian labour market performance, which is characterized by low employment among some groups and high rates of benefit dependency - even though poverty is low in Belgium, reflecting its high commitment to social spending. However, generous benefits have resulted in high replacement rates that in turn have produced an unemployment trap for those on welfare, making long benefit durations a common feature in Belgium, as in many other European countries. Her policy analysis focuses on the development of a specific type of make work pay scheme, based on the provision of employment subsidies involving employment-promoting reductions in the cost of labour combined with incentives to increase labour supply. While she favours the further development of such schemes, she cautions against expecting too much of them unless they are complemented by measures that improve the 'work-life balance' that many European workers currently find difficult to achieve.

The remaining five chapters are all focused on a group that has presented particular challenges to welfare to work reforms - those who are either disabled or who experience a period of long-term sickness (often the precursor to disability).

Einar Overbye, whose analysis draws on Scandinavian experience but is of broader application, sets out the underlying policy dilemmas in Chapter 9. He starts by noting that because disability policy serves the contradictory goals of combating exclusion and supporting incomes, difficult choices must be made to balance these competing objectives. The disability benefit population can be kept low through a combination of low benefits, limited coverage and extensive gate-keeping, but the Scandinavian approach of providing high benefits and broad coverage has placed great emphasis on gate-keeping in order to control costs. But intense activation gate-keeping efforts have broken down in the face of new forms of illness that reduce the ability to work, posing problems for rehabilitation agencies. He argues that many disability beneficiaries are unaware of the rules encouraging re-entry to the labour market and shows how information campaigns can increase their practical effectiveness at little cost. He concludes that while the current trend towards a work-obsessed social policy is unambiguously desirable for the financial state of government budgets, it can give those who are unable to work a self-image as second-class citizens, contradicting a basic equality objective of the welfare state.

In Chapter 10, Patricia Thornton and Anne Corden draw on a wealth of experience researching disability policy to examine the role of cross-country comparisons in the analysis of personalised employment services. They report on a study that compared evaluations of six employment programs, three of which were specifically designed for disabled people and three of which involved a case management approach that served disability pensioners among others. In trying to compare the outcomes generated by different programs, the authors found it very difficult to standardise for the 'quality' of the service provided, or even to accurately determine the relationship between inputs and outcomes. The analysis also raises important issues about how access to such programs should be determined, contrasting a targeted approach that assists only those deemed to be most 'suitable', with universal access that may be more effective in the long-run. The authors also demonstrate the enormous complexities involved in applying the comparative approach at the level of detail required to examine important issues of process and delivery.

In Chapter 11, Sisko Bergendorff, Marcela Cohen-Birman, Kristian Nyberg, Peter Skogman Thoursie, Annika Sundin and Ingemar Svensson examine the flows onto disability benefit in Sweden. After presenting an overview of the Swedish disability insurance system, the authors examine trends in the numbers of sickness and disability insurance beneficiaries, the in-flows onto benefit and the conditions affecting those granted new benefits. They then use a survey conducted in 2002 by the Swedish National Social Insurance Board that examined the circumstances of those who had been receiving sickness benefit for at least two weeks. Using a variety of statistical techniques, the authors show that while many sickness beneficiaries express a wish to transfer to disability benefit, there is evidence that many could return to work if working conditions were changed to better accommodate them. The analysis, valuable in its own right, also illustrates the importance of studying those who depend on both disability and sickness benefits together, as well as highlighting the role that job opportunities play in facilitating the welfare to work transition.

In Chapter 12, Jan Høgelund and Anders Holm present an insightful analysis of the determinants of the return to work by those affected by long-term sickness in Denmark. After reviewing previous studies and describing the Danish policy context, the authors analyse five-year panel data covering over 430 long-term sick-listed employees to identify the employment impact of education measures. Using a combination of theoretical reasoning and the application of sophisticated statistical techniques, the authors show that the processes that lead to returning to work with a previous employer or joining up with a new employer are different. While some factors exert a similar influence on both outcomes, others such as seniority, gender, health status and the stock of company specific human capital lead to differential outcomes. They also find that, on average, participation in educational measures has not helped the sick-listed back into work. However, the Danish policy of not obliging employers to either hire people with reduced work capacity, or to participate in vocational rehabilitation measures, while making it relatively easy to dismiss employees during sick leave all make it harder to achieve a successful transition from prolonged sickness back into work.

Finally, in Chapter 13 Orsolya Szirko provides a unique perspective on some of the issues facing those responsible for setting disability benefit policy in Estonia. Here again, there was a dramatic increase in the numbers receiving disability benefits after the early 1990s. Although policy was not well designed to reject claims from those who were capable of working, the poor state of the Estonian labour market and widespread unemployment made it difficult to police the systems that were in place. With the gate-keeping role left mainly to medical specialists, there was a tendency to re-define those who were actually unemployed as eligible to receive disability benefits, with the effect that the disability insurance scheme acted as a form of disguised unemployment. This is confirmed by the analysis of variations in the disability population ratio across counties and municipalities, which shows that these are unrelated to differences in disability policy but reflect differences in economic conditions. Implementing effective disability reform in these circumstances must thus involve addressing the causes of unemployment.

Together, the chapters in this volume cover a range of national and international perspectives on the welfare to work issue, including its underlying rationale, the challenges it faces, the kinds of policies adopted to achieve it, and the effects to which they ha...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• List of Figures
• List of Tables
• List of Contributors
• Preface
• Acknowledgements
• 1 Welfare to Work in Practice: Introduction and Overview
• 2 Protection to Activation: The Apotheosis of Work
• 3 Work as Welfare? Lone Mothers, Social Security and Employment
• 4 Bridging the Welfare to Work Divide: Economic and Social Participation among Income Support Recipients in Australia
• 5 The Role of Workfare in the Scandinavian Model of Social Security: Soft Work Incentives, Skill Upgrading or Quality of Life Improvement for the Disadvantaged?
• 6 In-work Benefits: Curing Unemployment among the Low-skilled in Germany
• 7 Financial Incentives and Mothers' Employment: A Comparative Perspective
• 8 Reforming the Passive Welfare State: Belgium's New Income Arrangements to Make Work Pay in International Perspective
• 9 Dilemmas in Disability Activation and How Scandinavians Try to Live with Them
• 10 Personalised Employment Services for Disability Benefits Recipients: Are Comparisons Useful?
• 11 Who Becomes a Disability Benefit Recipient in Sweden?
• 12 Returning the Long-term Sick-listed to Work: The Effects of Educational Measures and Employer Separations in Denmark
• 13 Disability Benefits and Unemployment Patterns in Estonia
• Index