THE IMPACTS OF JOBCENTRE PLUS ON EMPLOYMENT: EVIDENCE FROM LOCAL LABOUR MARKET FLOWS Rebecca Riley and Ana Rincon-Aznar National Institute of Economic and Social Research April 2011 Abstract Over the period 2002-8 the infrastructure for delivering public employment services and social security benefits in Britain underwent major change. Before 2002 the job- brokering activities and active labour market policies provided through the Employment Service were directed primarily at people claiming unemployment benefits. With the introduction of Jobcentre Plus (JCP), the Employment Service and those parts of the Benefits Agency dealing with people of working age were merged into one. The intention was to provide an integrated and work-focused service to all people of working age seeking to claim social security benefits. We exploit the staged roll-out of the programme across Britain to identify its impacts on the labour market. Following the initial disruption to the public employment service caused by the introduction of JCP, we find that the changes brought about by the programme are likely to have increased the rate of job-matching for benefit claimants of working age. Disclaimer: This work contains statistical data from ONS which is Crown Copyright and reproduced with the permission of the controller of HMSO and Queen's Printer for Scotland. The use of the ONS statistical data in this work does not imply the endorsement of the ONS in relation to the interpretation or analysis of the statistical data. This work uses research datasets which may not exactly reproduce National Statistics aggregates. Acknowledgements: This work was commissioned by the Department for Work and Pensions. The authors thank Stuart Prince, James Calverly, Gary Gifford, and Susan Gillie of the DWP for their help in facilitating the analysis, arranging data access and/or managing this project, to Jobcentre Plus staff for discussion of policy delivery in particular Jobcentre Plus Districts, and to Richard Dorsett for details regarding Pathways- to-Work. The authors thank Ray Barrell, Pam Meadows, James Mitchell and seminar participants at the DWP for comments and discussion. Correspondence: National Institute of Economic and Social Research, 2 Dean Trench Street, Smith Square, London SW1P 3HE; Tel.: +44-207-222-7665; fax: +44-207-654-1900 E-mail: [email protected]; [email protected] 1. Introduction Over the period 2002-8 the infrastructure for delivering public employment services and social security benefits in Britain underwent major change. Before 2002 public employment services were delivered through the Employment Service. The job- brokering activities and active labour market policies provided through the Employment Service were directed primarily at people claiming unemployment benefits (Jobseekers’ Allowance, JSA). Separately, a range of social security benefits were provided through the Benefits Agency, including Income Support (IS) and Incapacity Benefit (IB). With the introduction of Welfare-to-Work initiatives such as the New Deal for Lone Parents in 1998, the New Deal for Disabled People and mandatory Work-Focused Interviews for lone parents claiming IS in 2001, labour market policy in Britain was increasingly inclusive of people who were economically inactive and on low incomes. The economic background to this was one of strong and stable economic growth, which, although associated with continual falls in unemployment, was failing to engage individuals further away from the labour market. The change in policy emphasis called for a change in the infrastructure through which core elements of labour market policy were delivered. Jobcentre Plus (JCP) was first introduced in October 2001 in a set of Pathfinder Areas, and was subsequently rolled out nationally over the course of the following 6 years. It brought together the Employment Service and those parts of the Benefits Agency dealing with people of working age to provide an integrated and work-focused service to people seeking to claim social security benefits and to employers. One of the main innovations of JCP was the extension of the work-first ethic and the concept of rights and responsibilities to all people of working age wanting to claim social security benefits, regardless of their individual situation. Most prominent was the introduction of mandatory Work-Focused Interviews (WFIs) for all benefit claimants and increased efforts to channel people into the New Deals, known as caseloading. The merging into one of the job placement functions and active labour market interventions, previously performed by the Employment Service, and the payment of benefits, previously performed by the Benefits Agency, was also accompanied by the introduction of new IT systems and a rationalisation of the service network. These were intended to increase the efficiency with which benefits and the work-focused service are delivered, to reduce benefit fraud and to improve job vacancy management and job matching. 2 Quantitative evidence on the labour market impacts of these changes to the public employment service infrastructure is relatively scant. Delivery of the modernised and integrated service network was initially planned for a budget of £2.2 billion, but was delivered for £314 million less1. In a report by the House of Commons Committee of Public Accounts2 the roll-out of JCP was judged to have been a success, in terms of providing a more cost effective service network and improved customer and working environment. However, the same report goes on to say that “it is not able to demonstrate clearly whether the project has achieved the business case objective of increasing the number of clients finding work”. The analysis presented in this paper aims to fill some of the gaps in the evidence base. In particular, we exploit the differential timing of the roll-out of the policy across local areas in Britain to identify the impact of the introduction of JCP on the numbers of people moving off benefit and into work. This paper is structured as follows. The next section details the change in policy introduced with JCP and reviews existing evidence on the labour market impacts of JCP. Section 3 outlines the potential labour market implications of the introduction of JCP. Section 4 discusses identification issues, including policy measurement. Details of our methodology are discussed in section 5 and results are presented in section 6. A final section concludes. 2. The JCP policy change The roll-out of JCP represented a major overhaul of the infrastructure used to deliver public employment and benefit services. The main change was to bring the Employment Service and Benefits Agency under one roof, providing an integrated service for all people of working age seeking social security benefits. This organisational restructuring was accompanied by a significant modernisation of service delivery. As such JCP has brought a work focus to benefit delivery for people who previously would have been able to claim benefit without simultaneously considering the opportunities for work and the assistance to get people into work that might be available. It has also enabled the 1 Report by the Comptroller and Auditor General, HC 346 Session 2007-08. 2 The roll-out of the Jobcentre Plus office network, HC 532 Session 2007-08. 3 introduction of new policies directed at economically inactive benefit claimants, such as Pathways-to-Work for disabled people. The main aim of Jobcentre Plus is to provide work for those who can, and support for those who cannot, by:3 helping disadvantaged people into work, as a route out of poverty providing financial support for people of working age while they are out of work addressing inequalities of opportunity protecting the integrity of the benefit system working with employers and partners to address market failure in the labour market In order to achieve this aim JCP offers three distinct services (Riley et al., 2007). First, the work-focused claim process, which involves allocating individuals to the appropriate benefit and a two-way process of getting to know individuals’ circumstances and work potential, and of raising individuals’ awareness of the opportunities available. The second, programme delivery, follows on from the work-focused claim process and involves more active and targeted provision. The third function of Jobcentre Plus is its job-brokering service. This service supports both the work-focused claim process and programme delivery. But what actually changed with JCP? It is important to consider this, as it is essentially the labour market impact of these changes that we can evaluate. We do not evaluate the impacts of having the Jobcentre Plus agency and all the services that it performs in comparison to the case where JCP simply did not exist. Nor do we evaluate the impact of the various policies that have been introduced since the introduction of JCP, which may not have been possible without JCP. Rather, we evaluate the impact of the organisational changes and modernization of the public employment and benefit delivery service that were introduced with JCP against a case where these had not taken place. 3 Jobcentre Plus Story, presentation received from DWP. 4 Many of the services currently provided through JCP existed before the introduction of the JCP Agency, sometimes in a different form or under a different name. For example, there was no change in the type or range of Welfare-to-Work programmes available to JCP customers.4 As set out in Riley et al. (2007),