“Never again will work be the wrong financial choice. Never again will we waste opportunity. We're finally going to make work pay – especially for the poorest people in society.”
With these words David Cameron unveiled his new welfare reform bill, seen as the most radical shake-up of Britain's welfare system in decades. The bill's highlights certainly seem to justify this portrayal. It's the slickest-sounding part of the bill that's caught most commentators' eyes: the current wide-ranging collection of benefits are to be replaced with a single Universal Credit, the idea ostensibly being to simplify the welfare system by having someone's benefits guaranteed to a particular level of earnings before being reduced at a fixed rate once that person is in work.
While the universal credit proposal has caught the most attention, there are countless other aspects of this bill whose impact will be keenly felt by those currently receiving welfare. One of the most significant changes is the proposal to cut the contribution-based Employment and Support Allowance after just a year. This clashes sharply with the long-standing notion that paying into national insurance guarantees you benefits if you become sick or disabled before pension age. Citizens Advice argues this proposal “will betray people who have worked hard and paid national insurance contributions, only to find that they do not get the support they need”. Citizens Advice also note that the new replacement for Disability Living Allowance will only be available to people six months after they become ill or disabled.
In addition, the bill promises a 'three-strike' rule whereby people who refuse three job offers in a row could lose their benefits for up to three years. At the same time stay-at-home mothers of children over seven claiming the new universal credit will also be required to make themselves available for work or lose their state support. And one clause in the bill “provides for a crude benefit cap to be imposed irrespective of circumstances”.
The most far-reaching aspects of this bill that emerge once buzzwords and spin are pushed aside are the cuts. Cameron's aim is to save £18 billion over four years with this bill. The argument for universal credit is that it ensures those coming off welfare can keep 35p of benefits for every extra £1 they take home, a move estimated to benefit one and a half million households. Problem is, for most of these people that 35p will only be 5p more than what it is now. Meanwhile, 425,000 households will lose more than £25 a week or £1,300 a year, while 100,000 will lose more than £75/£4000.
The introduction of a cap on welfare payments, limiting total household welfare payments to £500 per week for couples/lone parents and £350 per week for single person households, will see 50,000 lose £93 a week. As Randeep Ramesh notes, it has been acknowledged and accepted this will lead to a rise in homelessness. Housing charity Shelter also recently highlighted the plan to switch indexation of Local Housing Allowance to the Consumer Price Index inflation rate rather than the cost of living: “[a]lthough rental costs are included in the CPI, the full impact of rent increases tends not to be reflected. This means the CPI may not increase at the same rate as average rents”. In other words, if the CPI increases at a slower rate than rents, the LHA will be insufficient for renting the average property.
Miracles and traps
Quite apart from the monotonous cries of 'cutting the deficit' and 'getting to grips with the cost of welfare' (both equally fallacious arguments), there are two justifications being provided for these reforms, implicit in the Cameron quote above, that have been tagged with the 'progressive' label. The first is the poverty angle. After saying last year that welfare was “trapping” people in poverty, the architect of the reforms, Work & Pensions Secretary Iain Duncan Smith has argued that these reforms will lift almost one million people out of poverty.
The discourse supporting this poverty angle has its roots in the long-developed idea that Work Is The Best Social Policy. As the impact assessment for Universal Credit argues, the current system “has the perverse effect of preventing many in our society from seeing work as the best route out of poverty”. In this regard these reforms aren't particularly radical at all, at least not in conceptual terms. From Europe to the United States, a doctrine has gained intellectual ground over the last twenty-odd years whose central thesis is that poverty reduction is best achieved through increased levels of participation in the labour market. It is by no means a new idea in Britain to shape welfare around coercion into employment.
The country often held up as proof of the success of work as social policy is the Netherlands. In the late 1980s, the Netherlands shifted social policy towards boosting labour market participation in the face of record unemployment. This shift had three main elements: general wage moderation, the passive erosion of minimum wages and benefits (by refusing to adjust them for inflation), and some targeted cuts in benefits. The result: a reduction of the unemployment rate from 14% in the mid-'80s to just over 2% in 2000 and a reduction of absolute poverty by 6% from 1985 to 1997.
Since the Netherlands is considered to have remained within the bracket of countries that enjoy low relative poverty as well, this policy is now seen as creating the 'Dutch Miracle'. Commenting on Britain's welfare reform bill, Helen Disney, CEO of the Stockholm Network think-tank, claims that the Netherlands “has had great success” in getting those on disability benefits back into work, leading many cities such as Rotterdam to employ “a 'full engagement' work-first strategy”.
But who exactly got into work thanks to this Miracle, and how was poverty affected? Ive Marx of the University of Antwerp has some discouraging research results on those fronts which have relevance for reforms in Britain.
Firstly, benefit dependency itself continued to rise throughout the period of this policy shift until the mid-1990s. While this perhaps can be explained by other factors, what's significant is that the Netherlands' massive job growth had only very limited success in moving people out of 'benefit dependency', particularly long-term dependency. “In fact,” Marx writes, “virtually all of these new jobs were taken by newcomers to the labour market: by school-leavers and women (re-)entering the labour market”.
The poverty results, based on OECD figures, are even more discouraging. Not only did absolute poverty in the Netherlands decline less than elsewhere, but relative poverty among the working-age population actually increased – in fact, it increased more than at least eighteen other OECD countries, by +3.2% between the mid-'80s and mid-'90s compared to +0.6% over the previous decade. Households with a working-age head but without a single adult in work in 1995 faced a poverty risk of 27%, compared to 12% ten years earlier, while working-age households with a single earner saw their poverty risk double to 8%.
So what's the relevance of this to Britain's welfare reforms? The Con-Dem government have stated many times that the aim of these reforms is to stop people being 'trapped in welfare'. Why would this entrapment be occurring? Under the current system, for any additional income you end up acquiring, your income position may be altered such that you incur greater tax and reduced entitlement to tax credits and benefits. Thus your disposable income hardly rises at all. The welfare trap is a result of people with low incomes being unable to substantially increase their income through job earnings due to the steep withdrawal of benefits. Donald Hirsch & Jacqueline Beckhelling at the Resolution Foundation give a striking example of this in their report on the impact of Universal Credit:
“It means, for example, that to get from one-quarter to one-third of the the way up the [income] distribution, someone supporting a partner and two children would need to raise their earnings by 50 per cent, from £18,700 to £28,100 a year. Yet it would produce a rise in net income of just 13 per cent, from £21,500 to £24,400.”
The key point about these welfare reforms, as Hirsch & Beckhelling make clear, is that they do not fundamentally change this situation. Although the very steepest withdrawal rates of 90% and above are abolished, the much more common rate of 70% rises to 76% and continues to affect people on a wide range of incomes, including those on low incomes. Just as in the Netherlands, then, it's questionable how successful these reforms will be at moving people out of long-term dependence on benefits to maintain a decent income. As Ive Marx notes, in the Netherlands the simultaneous decline of benefits and minimum wages “did little to alter the relative pay-off to (minimum-wage) work versus benefit dependency: that is, to eradicate unemployment traps”.
In fact Marx goes on to say that among single parents, welfare entrapment is not the fundamental reason why poverty hasn't been tackled. The main problem is that those single parents are disadvantaged in an economy where relative living standards and poverty lines are set by the proliferation of double-earners. As a result, “even jobs that pay considerably above the minimum wage can be insufficient to lift single-earner households with children above the poverty line”.
Now look at Britain's reforms. Universal Credit will reduce incomes for lone parents working 16 hours or more, as Hirsch & Beckhelling demonstrate: “a lone parent with one child working 16 hours and earning £5,000 a year would take home £318 a week under Universal Credit, rather than £351 a week under the current system: a loss of £33 a week”. Add to this the reduction of eligible childcare support from 80% of childcare costs to 70% due to happen in April, and you have quite a disadvantaged position for single parents. Then add on what's happening in Britain that Marx also noted as relevant in the Netherlands – wage stagnation/erosion and rising earnings inequality.
How on earth, then, does the government hope to lift lone parent households out of poverty? The Dutch Miracle is more of a warning than a beacon of public policy hope.
Work = citizenship?
There's a deeper point about the Work Is The Best Social Policy doctrine that needs to be made loud and clear. This relates to the second 'progressive' justification for these reforms, that a work-focused welfare system will ultimately foster more autonomous individuals able to realise their full potential. This justification is implicit in political discourse: from David Cameron's notion of an “ethos of self-betterment” and his assertion that welfare should be about “provid[ing] support and boost[ing] individual pride and autonomy”; to Ken Livingstone's argument in favour of workfare on the grounds that work provides people with “a sense of worth”.
At the heart of this discourse is a distinction between self-reliance and dependency, the former associated with employment and the latter with the welfare state. The workfare discourse is able to embrace both the Camerons of the Right and the Livinstones of the Left by painting self-reliance as an enabler of social integration; welfare dependency, by contrast, erodes individual autonomy and separates recipients from society.
While people are right to point out the contradictions in the government's workfare policy – particularly the current lack of jobs in Britain – progressives should also confront head-on this discourse of work as a route to self-worth and social inclusion. For one thing, work is not our only or even primary route to self-respect; it depends on what kind of work you're getting. Nor is work necessarily a route to social inclusion, for the same reason. Labour market marginalisation is not equal to social or political marginalisation; in fact, labour market inclusion can cause social & political marginalisation, due to the nature of the work, the hours worked, the stress placed on familial & friend relations and so on.
The self-reliance/dependence distinction made by this discourse is not fixed or natural. Knut Halvorsen does a good job of undermining its presumed naturalness by politicising one's relations to both the labour market and family: “why is being economically dependent on the state less desirable than being dependent on employment (market) or family? The choice is not whether a person will be dependent or not, but upon whom he or she will depend, and to what extent”. So-called welfare dependency, then, can be understood as actually providing a defence against dependency on an exploitative and commodifying labour market or on family structures, dependencies that can erode the kind of 'social integration' political elites ostensibly desire.
If progressives don't contest this workfare discourse, there's a danger that this discourse will promote and legitimise a very particular understanding of citizenship, of the relationship between individuals, society & government and the obligations inherent in those relationships. The mantra of 'the need for responsibility in welfare' places citizenship as conditional on individual labour market participation. As Martha McCluskey outlines, neoliberalism, by distinguishing individual freedom and government-led redistribution, implies that welfare recipiency is a sign of an erosion of citizenship, that those who receive welfare are “non-citizens or subordinate citizens: those who are deemed inadequate to assume the responsibilities of freedom because of their incapacity or incivility”. Welfare recipiency is thus a sign of inefficiency, efficiency of course being associated with autonomous individual decision-making in the free market. In this narrative, economic security is no longer a right, an obligation on the part of society through its government.
Progressives need to argue that welfare recipients are not subordinate citizens whose self-worth and social inclusion can only be established through the jobs market. The notion of self-reliance is a sham; we are all dependent on institutions and other people to some degree. Importantly, our economy is dependent on precisely the sort of low-paid temporary work that welfare recipients will likely be encouraged to take up under these reforms.
Self-worth can only come about once basic needs are met. Until this happens, we should use David Cameron's rhetoric against him, and demand that he takes the notion of 'responsibility' seriously.