Select Committee on Work and Pensions Written Evidence

Memorandum submitted by the Institute for Employment Studies after the publication of the Welfare Reform Green Paper

  The welfare reform green paper contains welcome proposals for collaboration between Jobcentre Plus and the NHS to get incapacity benefit claimants back to work, building on the early evidence of success from the Pathways to Work pilots. For too long medical gatekeepers have seen work as something from which people with health problems should be protected, rather than something which might genuinely improve their lives.

  Other proposals leave more to be desired, however. Few could disagree that those who can work should be treated differently from those whose conditions prevent them working, but deciding who goes where is not straightforward. This is particularly true for the growing numbers of IB claimants with mental health problems; experienced practitioners are justifiably sceptical that the staff, skills and funding exist to make these judgements accurately and fairly for hundreds of thousands of people.

  The hole at the green paper's heart, however, and the one on which this note will concentrate, is its neglect of the demand side of the labour market: the employers who are expected to provide jobs for up to a million IB claimants. Despite low unemployment, many businesses are wary of hiring the long-term workless, particularly those whose distance from the labour market is compounded, in employers' eyes, by health problems or a disability.[221] Employers' fears about extra cost, lower productivity or higher absence rates may not all be justified, but they certainly have them. Particularly in those parts of the country where employers still have a choice about who they recruit, disabled people with long histories of worklessness are likely to be some way down the hiring queue. In the tighter labour markets of the South East, their chances are better, as employers face labour shortages, and are forced to be more inclusive in their hiring practices.

  The green paper argues, in support of its focus on the supply side (the carrots and sticks applying to the IB claimants themselves), that the problem is not one of lack of jobs, and that IB claimants exist in large numbers in both booming and depressed local economies. This is true, but there is plenty of evidence that the demand side also matters. Census data at local authority level (Figure 1) shows how the relative employment disadvantage of disabled people (the difference between their employment rate and that of non-disabled people) varies with the overall employment rate in the local area. There is a strong, statistically significant relationship; the better the local labour market performs, the smaller the disadvantage of disabled people. If all localities enjoyed the level of economic buoyancy found in parts of the south east, many economically inactive disabled people would find work with no need for special schemes. In the absence of such buoyancy, employers may require rather more in the way of incentives and support than the green paper implies.

  By contrast (Figure 2) in the case of lone parents (the other main target of the green paper), the relationship between their employment disadvantage and the state of the local labour market is much weaker. This does not imply that labour demand is not relevant for them, but suggests that other factors are equally important, which partly explains the greater success in tackling inactivity among lone parents than among disabled people. For lone parents, the key constraints to labour market participation are indeed supply-side ones, particularly those related to "benefit traps", the cost and availability of childcare, and lack of confidence/skills following long periods not working. If these constraints can be addressed with support offered through the New Deal, then they are unlikely to face the same kind of employer resistance which is evident in the case of disabled people.

  In this light, it is unsurprising (Figure 3) that the lone parent employment rate has grown from 42 to 56 per cent since 1995, while the employment rate of people with a "work-limiting" disability[222] has only edged up from 37 to 40% since 1998 (earlier figures are not available on a comparable basis). For lone parents, it is clear that the package of supply side measures introduced since 1998 (particularly the New Deal for Lone Parents, and the tax credit regime with childcare subsidies) have made a real difference to the employment rate, and the research evidence (Gregg and Harkness 2003) confirms this (although it should also be noticed that the trend was also due to a labour market environment increasingly favourable to women working part-time, and that the increase in lone parents' employment started well before the current government's policies in this area).

  None of this suggests that the green paper's focus on getting the balance of incentives, obligations and support on the supply side of the labour market is not necessary. It is necessary; rather it suggests that the supply-side emphasis alone may not suffice to overcome employer resistance to recruiting IB claimants.

  A more balanced policy portfolio aimed at moving inactive disabled people into the labour market requires greater emphasis on the demand side. The continued reliance, in addressing employers, on two initiatives inherited from the previous Conservative regime seems inadequate. The existing demand side instruments for disabled people in the UK are very limited: the Access to Work scheme (in place since 1994) allows employers to recover (all or part) of the costs of making workplace adjustments for disabled employees. However, the evidence suggests that, although well-regarded where used, the scheme is not-well known among employers and participation is low and budget-constrained. The other main UK instrument which addresses employer behaviour with regard to disabled people is anti-discrimination legislation, which came into effect in 1996 (the Disability Discrimination Act 1995—DDA). The econometric evidence shows, however (Bell and Heitmueller 2005), that the DDA has had no positive impact on the employment rate of disabled people at an aggregate level, and that it may even have had a slight negative impact. Qualitative evidence of the operation of the Act in practice (Meager and Hurstfield 2005) suggests that it may have set up perverse incentives for employers. It seems that, in practice, the Act is asymmetrically enforced: successful legal cases are much more likely to be taken by disabled people already in work, than by disabled people who have been discriminated against at the point of recruitment. The Act seems to be more effective at protecting disabled people in employment, than it is at protecting disabled people outside the labour market and trying to get in (the response of risk-averse employers wishing to minimise the chances of litigation might even, therefore, be to avoid the recruitment of disabled people altogether).

  A fuller, and more effective range of demand side instruments would seem to be required. One option would be to consider the development of targeted wage subsidies for employers who recruit inactive disabled people. Such measures score quite highly in terms of impact, in a recent Dutch review of the international evaluation literature (de Koning et al 2005), but have been rarely used in the UK for this target group.[223] A further direction in which policy innovation could be considered is in developing an effective job-broking service which would work not only with disabled job-seekers, but also with potential employers, before, during and after the recruitment process to facilitate the integration of disabled people in the workplace and provide support to employers in overcoming difficulties encountered and removing barriers to productivity. Such a service was envisaged in the original set-up of the New Deal for Disabled People National Extension, which almost uniquely among recent UK initiatives targeted at this group was designed to include activities on the demand-side of the labour market. In practice, however, the early results from the NDDP evaluation raise doubts about the extent to which the employer-focused element of the NDDP Job Broker role has been realised. Indeed, the evidence gathered from employers by my IES colleagues as part of the evaluation suggests that, for the most part, Job Brokers have concentrated on the traditional supply-side role of providing support and job-search assistance to disabled clients, rather than proactively engaging with employers to stimulate them to recruit disabled people, to influence their attitudes towards recruiting disabled people, and assisting them in the process of doing so (Aston et al 2003; Aston et al 2005; Dewson et al 2005). The evaluation suggested, moreover, that there was considerable demand among employers for support of this kind.

  Finally, it is worth noting that there is an issue not here not simply of how employers should be engaged, but of which employers are being engaged. The NDDP evaluation suggested that there has been a tendency for the Job Brokers to target the "usual suspects" and aim to place their disabled clients with employers (particularly large employers, and employers in the public and voluntary sectors) who already have disabled employees and are known to be well-disposed to recruiting disabled people. Such a pattern is common among intermediary agencies involved in delivering government programmes, and can be seen as rational behaviour where there is a performance-related funding regime: if agencies are paid for job placements, it makes sense to devote their energies to targeting employers with whom they have already had some success. Whether such an approach is likely to have the biggest long-term impact on the overall employment rate of disabled people is, however, questionable. Research with employers also suggests a "learning effect", ie employers, once they have real experience of recruiting disabled people, tend to moderate their views about the difficulties and costs involved, and become more willing to recruit disabled people in the future. When looking at how best to direct the resources of government programmes, therefore, this suggests that a bigger "bang for the buck" might be achieved from placing one disabled person with an employer who has none (and who is then likely to go on to recruit more in the future), than from placing one more disabled person with an employer who already has some. In conclusion, I would stress that effectively tackling the waste of human potential embodied in the IB rolls must surely rely not simply on carrots and sticks for the IB claimants themselves, but must also involve some fuller consideration of the incentives, support and obligations which need to apply to employers, if they are to play their necessary part.


  Aston J, Atkinson J, Evans C, Davis S and O'Regan S (2003), Employers and the New Deal for Disabled People: Qualitative Research—First Wave Department for Work and Pensions, Jobseeker Analysis Division, Report WAE 145, Sheffield: Department for Work and Pensions.

  Aston J, Willison R, Davis S and Barkworth R (2005), Employers and the New Deal for Disabled People: Qualitative Research—Wave 2, Department for Work and Pensions, DWP Research Report No 231, Leeds: Corporate Document Services.

  Atkinson J and Kodz J (1998), Evaluation of the Job Introduction Scheme, Brighton: Institute for Employment Studies.

  Bajekal M, Harries T, Brennan R, and Woodfield K (2004), Review of Disability Estimates and Definitions, Department for Work and Pensions, In-house Report no 128, London: Department for Work and Pensions.

  Dewson S, Ritchie H and Meager N (2005), New Deal for Disabled People: Survey of Employers, Department for Work and Pensions, DWP Research Report No 301, Leeds: Corporate Document Services.

  Gregg P and Harkness S (2003a), Welfare Reform and the Employment of Lone Parents, in Dickens R, Gregg P and Wadsworth J (eds), The Labour Market under New Labour: The State of Working Britain, Basingstoke/New York: Palgrave Macmillan.

  Kelly G, Lam P, Thomas A and Turley C (2005). Disability in the Workplace: Small employers awareness and responses to the Disability Discrimination Act (1995) and the October 2004 duties, Department for Work and Pensions, Research Report no. 277, Leeds: Corporate Document Services.

  Koning, J de, A Gelderblom, K Zandvliet and L van den Boom (2005), Effectiviteit van Rentegratie de stand van zaken, literatuuronderzoek (Effectiveness of reintegration activities. State of the art. A literature review), Erasmus University, Rotterdam: SEOR BV.

  Roberts S, Heaver C, Hill K, Rennison J, Stafford B, Howat N, Kelly G, Krishnan S, Tapp P and Thomas A (2004), Disability in the workplace: Employers' and service providers' responses to the Disability Discrimination Act in 2003 and preparation for 2004 changes, Department for Work and Pensions, Research Report no 202, Leeds: Corporate Document Services.

221   There is plenty of evidence from surveys of employers in the UK, that significant proportions of employers see disabled people as likely to have lower productivity levels, or to be subject to higher rates of absence from work. See, for example, Dewson et al 2005, Kelly et al 2005, Roberts et al 2004. Back

222   Note: in Figure 3 we have defined "disabled people" as people who, in the Labour Force Survey, say they have a long-term health problem or disability, which affects the kind or amount of work they can do. The official definition of "disabled people" used by DWP in monitoring its PSA target includes, in addition to this group, all people who meet the broader definition of disability of the Disability Discrimination Act (DDA). The employment rate of disabled people according to this official definition is higher than that recorded here, and shows a stronger upward trend; however, this is because it includes a significant group of people (around 1.5 million) who meet the DDA definition, but whose health problem does not affect them in the labour market, and who actually have a higher employment rate than non-disabled people. There is considerable debate regarding the appropriate definition of disability to use for policy-monitoring purposes (see Bajekal et al 2004), but our view is that the work-limiting definition used here comes closer to identifying the group of inactive disabled people disadvantaged in labour market terms who are the key target of policy. Back

223   The main exception is a very small, long-standing programme (the Job Introduction Scheme) which, unusually in the UK policy context, has been in place since 1977, and which provides a small subsidy to an employer for six weeks on recruiting a disabled person. The scheme is not well-known and take up is low (2,000 participants in the financial year 2003-04). Despite its longevity, however, no quantitative evaluation of the impact of the subsidy has been conducted, although qualitative research (Atkinson and Kodz 1998) provided some evidence of positive benefits. Back

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