Effectiveness of welfare to work schemes 'must be urgently reviewed'

A study examining 42 existing programmes highlights a worrying lack of evaluation and calls for an urgent review of their effectiveness as part of the Government's 'New Deal'. An analysis of nine schemes for which data was available pointed to wide differences in costs and success rates:

• The gross unit costs of getting people into jobs generally varied between £1,000 to £10,000 for every extra person in work.
• These were offset by savings in the form of higher tax revenues and lower social security spending averaging around £3,700 a year for each individual remaining employed.
• More detailed calculations suggested that the financial impact of different schemes after one year could range between a net saving of £7,000 to a net cost to taxpayers of £8,000 per head.

The report, by Karen Gardiner, a Research Fellow at the London School of Economics, stresses that welfare-to-work schemes with the lowest initial costs are not necessarily the most effective. In addition to costs, the effectiveness of programmes depends on their success in getting people into work and whether participants remain in those jobs for long.

A particular concern raised by the study was the low level of take-up among employers for schemes that offer them incentives to provide jobs for the long-term unemployed. This could have serious implications for the Government's attempts to create more job opportunities under its 'New Deal' for the young and long-term unemployed.

An available 'holiday' from paying employer's National Insurance contributions had attracted only a tiny fraction of the expected number of employers. Figures for the pilot Workstart project - which provides employers with a direct wage subsidy for hiring workers unemployed for more than two years - had a take-up rate only a quarter of the expected level among employers.

The two schemes that appeared most effective, on the limited information available, were Jobmatch - paying a weekly allowance for six months to young, long-term unemployed people taking part-time work - and the Jobfinders' Grant - paying a lump sum to people unemployed for more than two years who find full-time work. The gross costs of Jobmatch were between £3,000 and £6,000 per year for each extra person in work, but an unusually high 28 per cent of participants found work who would otherwise have stayed on Income Support.

Karen Gardiner said: "This study provides support for the view that welfare-to -work schemes can benefit unemployed people and taxpayers alike. However, there is a danger of public money being wasted unless policy decisions are based on better information about costs and benefits than is currently available. Given the Government's commitment to investing substantial resources in its 'New Deal' there needs to be a full and urgent review of all the evidence that can be assembled on effectiveness."