Work for the Dole was the flagship employment program of the Abbott Government (Abbott reprised his role as the program’s founder as a Minister in the Howard Government). From July 2015, working for benefits for at least 15 hours a week became the ‘default activity’ for 6 months of every year for unemployed people. One fifth of employment services spending is devoted to the program – almost $300 million a year. Aboriginal and Torres Strait Islander peoples in remote communities face continuous Work for the Dole for 25 hours a week.

The Turnbull Government seems less enthusiastic: it has cut the program back: instead of Work for the Dole after 6 month’s unemployment, from April 2017 unemployed young people will be enrolled in the ‘Youth Jobs Path’ program which combines work-readiness training with private sector internships.

Work for the Dole has always been controversial, but does it work? This blog looks at recent evidence of the impact of ‘work for benefits’ schemes on transitions to paid employment in the UK and a 2014 evaluation of Work for the Dole in Australia.

The birth, decline and re-birth of Work for the Dole

Prime Minister Tony Abbott’s first Ministerial gig in the Howard Coalition Government was in employment services. One of his first programs was ‘Work for the Dole’. Abbott made it clear that one purpose of the program was to increase incentives for people to leave benefits.

‘If they’re not working for wages they’ll be working for the Dole’ (Tony Abbott, Minister for Employment Services)

Work for the Dole – in which long term unemployed people were compelled to work for their benefits for community organisations for 15 hours a week for 6 months –  was the Howard Government’s flagship employment program. By the mid 2000s, it was the default compulsory activity for long term unemployed people for 6 months of every year. ‘Job avoiders’ had to work for their benefits for 25 hours a week for 11 months a year.

The Rudd Labor Government kept Work for the Dole as one of a series of compulsory program options organised by Job Services Australia (JSA) providers for long term unemployed people, but it was no longer the ‘preferred’ option. This meant it was no longer the ‘default’ activity for people who failed to choose another program, and was no longer separately funded (instead JSA providers had budgets to draw upon to finance a range of options). Providers mainly chose to refer long term unemployed people to vocational training programs instead and participation in Work for the Dole plummeted.

Now it’s back with a vengeance! The program was expanded across the country from July 2015. People on Newstart Allowance for 12 months must undertake 15 hours a week’s unpaid work for 6 months, unless they’ve already enrolled in an alternative employment or training program approved by their ‘Jobactive’ (the new JSA) provider. People under 30 years will work unpaid for 25 hours a week after 6 months’ unemployment.

In remote Indigenous communities, people on unemployment payments face 11 months a year of working for the dole for 25 hours a week – the same as the ‘job avoiders’ of yore. Unlike the previous Community Development Employment Program in which they worked in community-controlled services and received ‘top up’ payments (so that it was more like waged employment), the new ‘Community Development Program’ (CDP) offer unpaid work and other unspecified ‘activities’ that are mainly coordinated by for-profit employment services companies. The upshot has been a steep rise in financial penalties for Aboriginal and Torres Strait Islander people for breaching their 25 hour a week requirement.

Controversy

From its beginning in 1997 Work for the Dole attracted controversy.

Some argued that unemployed workers were being exploited in work for which they were paid less than the hourly minimum wage. Former Opposition leader Kim Beazley called the program a “chain gang”.

In anticipation of these claims, the original scheme was limited to 15 hours a week – roughly equivalent to an hourly ‘training wage’. Later, a $10 a week allowance was paid for travelling expenses. In 2006, a ‘full time’ variant of Work for the Dole requiring 25 hour’s work each week (about $10 per hour in current values) was introduced as a punishment for people identified by Job Network providers as ‘job avoiders’. Interestingly, it was rarely used because providers preferred to keep unemployed people under their own close supervision while they searched for jobs.

Others criticised the nature of the work on offer (usually ‘make work’ activity in low-productivity jobs) and the lack of training. Supporters argued the program improved work motivation and ‘soft skills’ like punctuality and communication and improved self esteem. However, in an early official evaluation of its impact on self esteem. Dr Winefield found that it had no impact and that participants were already strongly motivated to work:

“Although, WFD had no impact on participants’ self-esteem, it had clear ongoing benefits on other measures of psychological well-being, although whether these benefits were lasting or short-lived remains to be seen. Research has shown that self-esteem is sensitive to changes in employment status. The current finding implies that participants did not perceive WFD as a change in their employment status.  Similarly, although WDF had no impact on work involvement, the level of work involvement was so high that there was little room for improvement.” (Winefield, A 1999, “Measuring the impact of the Work for the Dole pilot projects on work ethic and self esteem.”)

The views of participants varied: many objected to being forced to undertake work they felt wasn’t helping them find paid work while others enjoyed the work or companionship with fellow unemployed workers.

Crucially, Work for the Dole is not a labour market program. It does not have an explicit goal of helping people secure paid employment. Its official goals are mixed. They range from fulfilling a ‘moral’ requirement that unemployed people should ‘give something back’ for their benefits, to discouraging people from staying on benefits, to building soft skills and raising self esteem, and undertaking work of benefit to local communities. Depending on the audience and political mood, it has been portrayed either as punishment for ‘bludgers’ or a balm for the psychological harms of prolonged unemployment.

The program’s chameleon-like character makes it hard to evaluate objectively. To my way of thinking, the litmus test for any employment program is whether it improves people’s job prospects. If not, then there’s no good reason to force people to undertake it. Whether this is the case has been debated among experts from the outset.

Evaluating employment programs

The best way to assess this is a ‘net impact evaluation’, in which employment and ‘off-benefit’ outcomes are compared over time with outcomes achieved by a similar ‘control group’ of unemployed people not referred to Work for the Dole. Employment programs have three different effects:

1. Referral or ‘threat’ effects: Some people leave benefits rather than participate in the program
2. Attachment or ‘lock-in’ effects: Participation in some programs reduces job search activity
3. Program effects: Ideally, participation in a program improves employment prospects, for example by improving skills, putting people in contact with employers who might take them on, or by improving the efficiency of job search.

The overall impact of an employment program equals the referral effect + the program effect – attachment effects. Quantitative studies should be supplemented by qualitative research that examines what actually happens to unemployed people and prospective employers when they participate in a program. Here I focus on net impact studies of work for benefits programs.

Previous studies of employment impacts

Economist Jeff Borland  conducted the first and only independent net impact study of Work for the Dole. He found that participation in the original pilot scheme for young unemployed people in the late 1990s actually reduced the probability that unemployed people had left income support 12 months after referral to the program. He suggested this was due to attachment effects (they were too busy with Work for the Dole to search for jobs effectively). There appeared to be no significant program effects.

Subsequent official net impact studies by the Employment Department found reductions in reliance on unemployment payments after referral to Work for the Dole. A study in the mid 2000s found that referral to the program reduced reliance on income support 12 months later by 6.1 percentage points. (Dept of Education Employment and Workplace Relations 2010, ‘Labour market assistance, a net impact study.’)

That’s not a bad outcome for a labour market program but I’d be more confident of the results if they were backed by independent studies. International studies of the effects of work for benefits schemes give little cause for optimism. An early literature review by MDRC Research, a prominent independent employment program evaluator in the US, found that work for benefits schemes did not improve people’s job prospects. A later report by the New Zealand Department of Labour concluded that neither New Zealand’s ‘community program’ nor similar programs in other countries improved job prospects.

Evaluating Work for benefits schemes in the UK

The most thorough recent evaluations of work for benefit schemes were undertaken in the UK: a country with a rare record of careful independent evaluation of its labour market programs. Here we examine recent evaluations of two UK work for benefit programs: the Mandatory Work Activity (MWA) program introduced in 2011 and the Community Activity Program (CAP) introduced in 2013.

Mandatory Work Activity

Mandatory Work Activity comprised 4 weeks of compulsory work for benefits for 30 hours a week. It was targeted towards people at risk of long term unemployment. It attracted much controversy and a successful British High Court challenge by an unemployed woman required to work for her benefit for a private employer.

The official evaluation of MWA found significant referral or ‘threat’ effects on the likelihood of benefit receipt:

“in the first 3 months MWA decreased the likelihood of claiming benefit by up to 5 percentage points: the proportion of referrals in receipt of benefit was 77% at week 10 compared to 82% for non-referrals at week 10. This strongly suggests that MWA had caused a deterrent effect of claiming benefit – a very high proportion (64%) of those who did not start signed off their JSA claim.

But, as shown in the graph below, these effects were reversed within another three months, as many of those who left benefits returned:

“However, in the subsequent period the impact decreased, returning to zero by 21 weeks following the referral (benefit receipt for both referrals and nonreferrals was 74%). This means that in this period a higher proportion of individuals returned to benefit amongst referrals than non-referrals. Overall, the benefit impact during the first 21 weeks equated to referrals being off benefit for an average of about 4 days more than had they not been referred.” p39.                      

                      Effects of Mandatory Work Activity on benefit reliance

Note: green line represents MWA participants

Crucially, the program had no impact on people’s employment prospects (so those who left benefits weren’t for the most part getting jobs and some were diverted to disability pensions). This is shown in the graph below:

“unlike for benefit, a MWA referral had no impact on the likelihood of being employed compared to non-referrals. This suggests that although the benefit impacts suggested a deterrent effect from claiming benefit for the first 10 weeks, individuals were not going into employment.” p40                            

                        Effects of Mandatory Work Activity on employment

Note: green line represents MWA participants

These data suggest that this short work for benefits program had significant ‘threat’ effects that were later reversed, but no impact on the future job prospects of unemployed people. What did the Government do when it received this evaluation? It expanded the program! As labour market researcher Jonathan Portes pointed out in a blog:

“Briefly, what the analysis shows is that the programme as currently structured is not working. It has no impact on employment; it leads to a small and transitory reduction in benefit receipt; and worst of all, it may even lead to those on the programme moving from Jobseekers’ Allowance to Employment and Support Allowance.  Sadly, the DWP’s press release doesn’t mention any of these key points. Nevertheless, one would naturally assume that as a consequence the programme would be redesigned to achieve better outcomes.

However, in a Written Statement, the Minister for Employment said:    ‘I am also pleased to announce the Government has decided to expand the Mandatory Work Activity scheme. The expansion will enable Jobcentre Plus to make between 60,000 and 70,000 referrals to Mandatory Work Activity each year, based on the current experience of the scheme, at a cost of an additional £5 million per annum. This decision has been taken as the result of careful consideration of the positive impacts demonstrated within the Impact Assessment.’ Unfortunately (says Portes) it is very difficult indeed to reconcile this statement with the impact assessment itself.”

Community Action Program

In 2013 a new work for benefits program called Community Action Program (CAP) was trialled for very long term unemployed people (2 years out of work). This was carefully evaluated as part of a ‘very long term unemployed trailblazer’ scheme.

The scheme had these features:

• “A randomised controlled trial to give a high degree of confidence that any observed differences in outcomes are attributable to the support options,

• A 13 week pre treatment period to test deterrence, informing and maintaining awareness of forthcoming support throughout the period, and

• A 26 week period of treatment consisting of either:

–     Standard Jobcentre Plus support – this is the control group within the trailblazer and consists of flexible and personalised adviser based support.

• Community Action Programme (CAP) – delivered by contracted providers and comprising 26 weeks of full time work experience or provider-led job search support.

• Ongoing Case Management (OCM) – an intensive offer of flexible and personalised adviser based support, delivered by Jobcentre Plus (JCP) through increased interventions over 26 weeks.” p6

A randomised trial is the ‘gold standard’ of net impact studies. Unemployed people were randomly assigned to a treatment group referred to the CAP,  an alternative scheme called ‘ongoing case management’ (an intensive form of job search assistance), or a control group who received ‘standard JobCentre Plus support’ (mainly job search assistance) as shown in this flow chart:

The likelihood that unemployed people involved in the trial were still receiving income support up to 91 weeks after referral to each of these three options was compared. The results are shown in the graph below: 68% of benefit recipients in  ‘standard JobCentre Plus support’ still received benefits 91 weeks later, compared with 66% of those referred to CAP and 64%  referred to ‘case management’. So referral to CAP reduced benefit reliance by 2%, which was 2% less than the impact of case management.

Effects of CAP, Case Management and standard job search assistance on benefit reliance The graph below compares employment outcomes for those referred to CAP and the other two options in the trailblazer. It turns out that CAP had no significantly greater impact on employment than the standard ‘Jobcentre Plus’ option. Ongoing case management did increase the likelihood of employment compared with the standard service, by just 1%.

So the recent British evaluations confirm what others have found: referral to work-for-benefits programs increases the likelihood that people will leave benefits, but many soon return. Participation these programs  has no significant impact on the likelihood of paid employment. A fair summary of the pros and cons of these programs was offered by Tony Wilson from CESI, the British employment services advocacy body. His conclusion: it’s reasonable for unemployed people to be required to join programs that help them secure a job and Governments should fund them, but work for benefit schemes generally aren’t worth the effort.

Evaluation of the 2014 Work for the Dole scheme

When the Abbott Government restored direct funding for Work for the Dole and also its previous ‘default program’ status in 2014, it authorised an evaluation of the impact of the new scheme in a number of ‘trial’ areas.

This found that in those areas, the new scheme increased participation in Work for the Dole by 28 percentage points for unemployed people with similar characteristics. So it was successful in reviving the program. However, 27% of participants did not complete the program and 60% of unemployed people responding to a survey agreed that the program’s aim was to ‘put people off claiming benefits’. Consistent with this, the report found that:

‘There is clearly stigma associated with the programme and those who participate in it.’

The new program was less successful in helping people secure jobs.

While the report estimated that the program:

increased the rate of part-time/casual paid employment reported to JSA providers by 7 percentage points more than in the comparison areas controlling for other characteristics (from a baseline of 13%).

it warned that this was due to an unknown extent to people declaring existing employment on referral  (i.e. a ‘threat effect’).

The report estimated the impact of the program on placement in new jobs as follows:

‘an additional 2 percentage point increase in the probability of job seekers having a job placement controlling for other characteristics (from a low baseline of 14%).’

It’s not clear from the report exactly how the net employment impact of the 2014 scheme was measured: the report refers to a ‘difference in differences’ method using administrative data, but warns that it was too early in the program’s development to properly measure its employment impact. Unlike the British evaluations, there was a lack of longer-term data to assess how many people returned to benefits after leaving them  (The report refers to ‘short term’ employment impacts but it’s not clear how soon after referral to the program these were measured).

A key finding of the 2014 evaluation  on the employment impact of Work for the Dole appears to be that participation in the scheme increased the probability of future employment by 2 percentage points (interestingly, the same as the British CAP program), which may well be within the net impact study’s margin of error. The evaluation suggests that ‘threat effects’ (such as declaration of existing employment) are significant but does not appear to measure them directly. Yet, similar ‘threat effects’ would probably be achieved by any program of compulsory, intensive ‘activation’ of unemployed people.

Participation in an employment program should make a difference to people’s job prospects and work-for-benefits schemes do not do this. To refer people to a scheme that has no impact merely to discourage them from staying on benefits is a cynical exercise.

Conclusion

To summarise: six months of compulsory work-for-benefits has none or very marginal impact on the future job prospects of long term unemployed people and the $300 million spent on the scheme would be better invested in other programs. Even the standard job search assistance offered by Jobactive providers (limited as this is for most people) probably yields better employment outcomes.

The Australian and British Governments are among the biggest investors in work for benefits schemes. Despite public commitments to ‘evidence based policy’ and ‘value for money’, these Governments are slow learners.