It is a muggy morning in Long Island City, an up-and-coming dormitory suburb
of New York. Manhattan is less than a mile away across the East River, its
skyline blurred by the misty summer air. Once this was a notorious red-light
district with prowling drug dealers and hookers.
Now organic food stores and art galleries replace the run-down grocery stores
and repair garages.
Long Island City is typical of many areas of New York, the scene of an urban
resurrection that has changed the city’s fortunes in the past decade. It is
also the scene of another remarkable American revival and one that carries a
vital lesson for Britain.
Here, as in scores of places across America, an extraordinary partnership
between private sector and government has taken thousands of long-term
unemployed off welfare. The number of New Yorkers on welfare is down by more
than 60%.
Much of the credit belongs to an enterprising private and voluntary sector and
perhaps most of all to America Works, a pioneering business that finds jobs
for the long-term unemployed in New York and across the country. I have come
to Long Island City to meet some of the people who have prospered because
Bill Clinton seized the moment and created a lasting legacy of his
presidency – at about the same time as Tony Blair blinked and retreated in
the face of the same momentous opportunity.
This tale of two leaders matters today because Gordon Brown has the
opportunity, after what some argue was a wasted decade, to put things right.
Welfare reform is one of the rawest nerves of politics. New Labour talked
big and bold at the start but never quite summoned the courage to confront
the unavoidable pain of radical action. Until now – perhaps.
Last week James Purnell, the work and pensions secretary, unveiled a host of
proposals described as the greatest revolution since the Beveridge report of
1942. Under the plans, those unemployed for two years will be forced to work
in return for benefits; single mothers will have to look for work when their
child reaches seven; new laws will make the unskilled take up training; drug
users will have to seek treatment if they want benefits; and those on
incapacity benefit will have to undergo rigorous medical assessments.
Perhaps most importantly of all, the reforms will give private companies the
right to bid for any back-to-work service they think they can run.
Welcomed by the Conservative leadership, who claim that most of the ideas were
theirs, the proposals have horrified some Labour backbenchers who say they
are a betrayal of the poorest in society. But even if they are implemented
as proposed – and personal experience of the mechanics of Whitehall suggests
this is unlikely – many of the changes will not take place until 2013.
Perhaps that is the real issue with last week’s announcements: how long it’s
all taken. In America, as in Britain, welfare reform has for generations
been a controversial topic. The tipping point came for both countries in the
early 1990s. Welfare rolls had been increasing for years and taxpayers were
running out of patience. The view that benefit cheats and layabout single
mothers were milking the system had become endemic.
In 1996, despite opposition from his own party, Clinton put into action a
promise to “change welfare as we know it” and signed a federal bill putting
time limits on benefits and giving states the right to spend money on reform
in any way they chose. This opened the door to private companies such as
America Works and other pioneers who believed that getting the jobless back
to work should not be left to the public sector – and was worth paying for.
Set up in the late 1980s, New York-based America Works is an unusual
combination: an altruistic company that – for a fee – finds jobs for some of
the nation’s toughest cases. The model is a simple one. Each state sends the
company its toughest cases. Often these are lone parents with no skills and
no one to help with childcare, or young men with a criminal past or drug
addiction. America Works assesses them, giving them advice on childcare or
the chance to brush up on skills such as interview techniques. The aim is to
get people into work as soon as possible. No one tends to stay at America
Works for more than two weeks.
It is a strategy that appears to be paying off. According to government
figures, 88% of the people placed by America Works are still in jobs three
years down the line.
IN a noisy workshop on Long Island City’s Vernon Boulevard, Wally Wise is
assembling an aluminium chimney shaped like a huge turban. This is Empire
Ventilation, a small family business run by a father and son team, George
and Brian Taylor. For the past five years they have been recruiting staff
exclusively through America Works.
“They’re our human resources department,” says Brian Taylor. “The hardest
thing for us, any business, is getting good people. This is noisy,
repetitive work and we can’t pay that much. Lots of people prefer cleaning
or cooking jobs.
“Given the choice between someone off the street or someone from America
Works, I’d always choose the latter. They’re usually motivated and hard
working. And they stay longer.”
Dressed in a sleeveless grey T-shirt, Wally is a big man in his late thirties
with a slow smile and near perfect teeth. He nods when I explain why I’m
here, then pulls off his huge protective gloves to shake my hand. Wally is
one of America Works’s success stories. A former building maintenance
worker, he was about to start at the World Trade Center when 9/11 happened.
He had been unemployed for almost three years and was doing voluntary work in
a care centre when he first heard of America Works through a friend. “I was
desperate,” he says. “I hated being out of work. I was used to having a job
and when I got laid off I got pretty frustrated and pretty angry. You stop
trusting.” Does he like his work? He gives me an old-fash-ioned look: “It’s
a good job; it pays fine. I have a family to care for. Yeah, I like it.”
Many clients of America Works have not worked for years; some have never had a
job. Most will spend two weeks learning how to talk to prospective employers
and how to write a CV, as well as receiving advice on what to wear for
interviews and how to open a bank account.
In the corner of a bright red-painted room in a concrete tower in mid-town
Manhattan, a smartly dressed black man sleeps, a stack of papers balanced
precariously on his knee. The other six jobseekers in the room, crouched in
red and black armchairs and filling in complicated looking forms, ignore
him. Sixteen floors above the city bustle, there is only anxious silence.
For many, this is their last chance.
I am here to see Peter Cove, an antipoverty campaigner who founded America
Works with Lee Bowes, his sociologist wife. A Bostonian, Cove has adopted
the look of an English eccentric, complete with handlebar moustache. Today
he wears brown and white saddle shoes and a pink bow tie to match his socks.
When we first met in the mid1990s, Cove was in London to do a deal with Peter
Lilley, the then Tory secretary of state for social security. In the last
desperate days of the Conservative government, Lilley was looking to find a
way of reducing the UK’s escalating welfare bill. America Works had been
signed up to help to get Britain’s single mothers into work.
Cove also met Blair, who seemed keen to adopt the programme.
When Blair became prime minister two years later, however, the whole deal was
scrapped. Cove shrugs off my queries but there is no question now that Blair
simply got cold feet. Anxious to keep the public service unions and the left
wing of the Labour party onside – and fearful that his education reforms
would stretch his relationship with them to the limit – Blair decided that
private welfare provision was a step too far.
Bluntly, he blew one of the biggest opportunities of his premiership. He
settled on the New Deal that gave the private sector a much smaller role
while continuing to rely on a public sector that many believed had proved
woefully unfit for the task.
Originally aimed at Britain’s jobless 18 to 24-year-olds, the New Deal is now
a m a n d a t o r y p r o -gramme for everyone claiming unemployment
benefit. If participants have failed to find work after four months they are
told either to take up a government-subsidised job – employers earn up to
£60 a week for taking on a New Dealer – or are put into training, education
or voluntary work.
By contrast, America Works sends its clients out into what Cove calls “real
jobs in the real world”. Participants are paid directly by the employer,
usually about $8.50 (£4.25) an hour, and no employer subsidies are involved.
Critics of the New Deal claim that it has proved to be an expensive waste of
time and fails to keep people in jobs, even assuming that they find them in
the first place. The House of Commons public accounts committee reported in
February that many people continue to “cycle between work and benefits”.
Of the 2.4m claims every year for the jobseeker’s allowance (JSA), more than
two-thirds are repeat claims. More than 20% of people who leave benefits and
enter work return to JSA within 13 weeks and 40% are back on benefits within
six months. Despite a dramatic fall in unemployment since 1997, 3.5m people
are still claiming benefits, costing taxpayers more than £5 billion a year.
The National Audit Office estimates that if the government could reduce the
time that repeat claimants spend on benefit by just half, the Treasury would
save £520m every year.
In a recent think tank report, Frank Field, the former welfare reform minister
charged by Blair to “think the unthinkable” – until he got the sack for
doing so, says that when Labour began its programme of welfare reform in
1997, conditions could not have been more favourable. Massive public support
and record sums of £3.5 billion set aside for the New Deal should have
assured its unqualified success.
Field believes the results have been modest: “Some young people have found
work but the vast majority would have done so without the New Deal.” He also
points out that the percentage of young people finding work as a result of
the New Deal has collapsed from 51% in 1998 to 34% in 2005. I BELIEVE Blair
came to regret his decision to back away from radical reform. After the
election of 2005, with his key ally David Blunkett as work and pensions
secretary, Blair was keen to cut the large number of people on incapacity
benefit and open the market to the private sector.
As a special adviser to Blunkett, a long-term proponent of the intense testing
of claimants, I was shocked by the bad will that our attempts to reform the
system engendered. Caught between a frankly disillusioned civil service, a
well briefed and wily public sector union and an increasingly frustrated and
handicapped No 10, we found ourselves going round in circles.
When Blunkett resigned in November 2005, Blair’s advisers attempted a typical
coup d’etat, insisting that a senior adviser was moved from the Cabinet
Office into the department to “help” to finalise proposals. The department
refused point blank. It served No 10 right.
The decision to water down possible reforms in 1997 has wasted a lot of years,
a lot of money and has failed thousands of jobseekers. Now, with a revived
opposition breathing down its neck and a spiralling welfare bill, the
government is finally opening up the market to the private sector.
Although the private and voluntary sectors have been involved in
welfare-to-work schemes for some years, the government will now offer
long-term contracts worth millions to successful bidders and pay them
according to how many people they get into work and keep there.
At the beginning of the year, Chris Grayling, the shadow secretary for
welfare, set out the Conservatives’ ideas, based on a US-style “forced
labour” strategy that includes stripping benefits from anyone who won’t work
in return for them. Labour does not go quite so far, but its proposals are
unquestionably similar. At first glance both sound robustly straightforward:
those still on unemployment benefit after two years will be forced to earn
it through community work, including cleaning graffiti off walls and
scraping chewing gum off pavements.
This is all good headline-grabbing stuff, but the real test will not be the
lazy but the majority: single parents and those on incapacity benefit who
lack the confidence and know-how to find a job and keep it. These are people
who are less likely to respond to the sticks of sanctions but instead need
support and help.
Furthermore, Purnell’s assurance that he will free the private sector “from
central control and allow them to innovate” has a hollow ring to it. Beneath
the dry jargon of the government’s blueprint for reform is a clear message:
the centre knows best. Innovation and experimentation are fine, but within
limits.
If the government is to have a prayer of success it must give complete freedom
to private companies – and to the third sector – to innovate and make
mistakes. It should stop subsidising incompetent providers and employers
through the New Deal and allow failure to become an endemic part of the
system. Less emphasis should be put on formal training and much more on the
job itself as “teacher”, as the founders of America Works insist.
Cove is politely scathing about the UK’s “obsession” with training. “What
counts are jobs,” he says. “Education and training are not enough. The
biggest turn-off for the people who come to us is thinking they have to go
back into a classroom. Education is not an incentive, but the chance of a
job that helps them gain self-esteem and pay the bills is.
“We are not against training, but we don’t believe it plays a big role in the
long-term. Putting people who have been failed by education into a classroom
is not something that particularly works for us.”
Bowes agrees. “No one ever learnt a job in a classroom,” she says simply.
Brown has to seize the nettle
Low self-esteem, little motivation and poor basic skills, including the
inability to read or write properly, are typical of those who are drawing
state benefits in America and Britain.
In the UK, one in six adults has a reading ability below that set for
11-year-olds and there are about 5m adults without qualifications of any
sort. Half of these are unemployed or inactive, in other words doing nothing.
Despite recent improvements – by the end of 2006, 1.76m adults had improved
their basic skills and more than 1m had achieved further qualifications –
employers remain deeply concerned about the number of children who leave
school with no qualifications.
In America and Britain, poor educational attainment is still the cornerstone
of the welfare state. Recent figures show that about 60% of pupils in the UK
– 3.9m over 10 years – have left school without gaining five grade C GCSEs.
One million have not even achieved five GCSEs. Worse, 100,000 children are
missing from school; 15,000 15 and 16-year-olds are not on school registers;
about 70,000 due to take exams each summer simply will not turn up; and
despite £1 billion spent on antitruancy initiatives, about 220,000 children
miss school on at least one day a week.
Put simply, we have failed over decades to educate Britain’s poorest
adequately or to raise expectations to a level where teenagers feel they can
achieve something, or even want to bother.
The real problem is that we keep topping up our welfare system with the
refugees of our education system. As one former government adviser says
despairingly: “How can we hope to reduce the number of single workless
mothers when their number is being topped up every year by teenage girls who
drop out of school with no education and no work experience?” What neither
Labour nor the Conservative party has properly acknowledged is that the
problem starts on the housing estates of our poorest communities and within
families where worklessness is as natural a state as breathing.
Our schools have churned out thousands of ill-educated, feckless and hopeless
teenagers, many of whom, sooner or later, end up on benefits.
If we don’t radically sort out the problems in our schools, the “dependency
culture”, already endemic in thousands of families, will become even more
entrenched.
This summer the government will force local authorities to produce plans to
turn around England’s worse schools. Once these proposals have been agreed,
schools will have a couple of years to transform themselves or face closure.
But what these schools really need is the radical action of local and central
government that allows, as the norm, children to be assessed at 11 and
removed from schools where they are failing and put instead into special
units and schools where they can concentrate purely on basic education –
reading, writing, mathematics, some social skills – for at least two years.
In other words, the government should advocate a massive expansion in its
existing pupil referral units. These take on excluded children, including
younger pregnant girls, and at present are run by local authorities, with
some input from local schools.
If the private sector has the expertise to overhaul welfare reform – and,
given the freedom to innovate, it both can and will – running units designed
to prevent problems before a cure is necessary will be simple stuff.
If Gordon Brown’s government is brave enough to do that, there is a chance of
finally stemming the flow of benefit recipients – Britain's only real hope
of long-term welfare reform.
