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Universal Credit, Distinct Drawbacks

February 28, 2011

The prime minister’s exhortation last week for change towards a “culture of responsibility” around welfare bares a striking similarity to New Labour’s ambition to create a “change of culture among benefit claimants”[1]. There is also a distinct resonance between Tony Blair’s objective to bring “the new workless class back into society and into useful work”[2] and Teresa May’s pre-election statement that emphasised the benefits of work to “health, self-esteem and social inclusion”[3].  Finally, as Mike Brewer of the Institute for Fiscal Studies noted prior to the election, the corresponding Work Programme which constitutes the Conservatives’ sole welfare-to-work scheme, merely goes “a little further” in the direction of New Labour policy.

It appears that the UK escaped steep unemployment rises following the first shocks of recession in 2008-9, but this means little for “serious jobless concentrations among more marginal groups that 15 years of sustained growth did little to remedy”[4]. This is despite the fact that under Labour, benefit provision and corresponding sanctions were tailored closely to the needs of specific target groups, as suggested by the diversity of New Deal programmes. Will the Universal Credit effectively reach these groups?

Problems emerge when looking at underlying links between welfare and work: particularly the proliferation of ‘revolving door’ employment.  There is a one-way drive behind the combination of sanctions and job search assistance that is intended to encourage entry into the labour market. Research suggests that this often fails to “take account of people’s differing labour market attachment”[5]. If the Labour policy of classifying benefit claimants in the main Employment Support and Jobseekers’ programmes according to disability and claim length effectively “hides from the system” those caught in revolving door employment, the Universal Credit ought to reach them.  However, the Joseph Rowntree Foundation reports that the informal economy becomes much more attractive when sanctions regimes are tightened.  This impacts two important groups who are self-employed or more likely to work for less than the minimum wage: unskilled workers and young people[6]. The withdrawal of the Education Maintenance Allowance may also have knock-on effects here, discouraging young people from gaining higher-level skills, while increasing financial pressures on working members of the family. In addition, concerns that pressing claimants to find work will only work in areas with a healthy job market also remain unaddressed.  In areas where jobs are scarce, and as a result of a ‘work first’ approach to benefits, this may in fact mean increased competition for entry-level jobs between claimants and other jobseekers[7].

Evidence for the white paper on the universal credit also suggests that it is not enough to counteract in-work poverty, which actually grew in the growth years due to falling rates of pay for unskilled labour and increasing pay differentials. It is also difficult to see how reducing support to those working over 16 hours per week under current plans will encourage progression to more stable full time employment for those in low-wage jobs. There is a gap in policy that separates being supported in seizing job opportunities with few hours and being “stranded in low-paid work on the fringes of the job market”, as the Social Market Foundation has argued.


[1] Department for Social Security (1998), ‘A new contract for welfare: principles into practice’, London: HMSO.

[2] Blair, T. (1997), Speech by the Rt Hon Tony Blair MP at the Aylesbury Estate, Southwark, on 2nd  June, London.

[3] May, T. (2010), Tackling unemployment and worklessness, Speech by the Rt Hon Theresa May at the Conservative Jobs Summit, on 15th March, London.

[4] Gregg, P. and Wadsworth, J, (2010), ‘The UK Labour Market and the 2008–2009 Recession’, London: Centre for Economic Performance, London School of Economics.

[5] Mulheirn, I., Foley, B., Menne, V., and Prendergrast, J. (2009), ‘Vicious cycles: Sustained employment and welfare reform for the next decade’, London: Social Market Foundation.

[6] Griggs, J. and Evans, M., (2010), ‘Sanctions within conditional benefit systems: a review of evidence’, York: Joseph Rowntree Foundation.

[7]Kenway, P., MacInnes, T., Fothergill S. and Horgan, G. (2010), ‘Working-age ‘welfare’: who gets it, why, and what it costs’, York: Joseph Rowntree Foundation.

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