How can jobcentres improve?

Friday saw the clearest signals yet that the real economy is heading for a slowdown. The Purchasing Managers Index, viewed as one of the leading indicators of economic health, found that output and new orders contracted for the first time since 2012. Sentiment in the service sector slumped to a seven-and-a-half year low.

For policymakers trying to make sense of the post-referendum environment, a key question will be the effect of any economic deterioration on the labour market. Unofficial statistics paint a mixed picture. Adzuna, a job-search website, found new vacancies crashed in the immediate aftermath of the referendum, but firms have since restarted their recruitment drives.

The labour market’s performance over the financial crisis also offers reassurance to those fearing the worst. Despite the deepest recession since the Second World War, the Claimant Count, a measure of unemployment, peaked at 4.7 per cent. By comparison, periods of the 1980s saw worklessness top ten per cent.

This resilience partly explains why Jobcentre Plus (JCP), the UK’s public employment service, has received so many plaudits of late. In 2013, the National Audit Office commended the organisation’s value for money—quite the complement from an auditor. An evaluation commissioned by the Department for Work and Pensions was arguably even more glowing, concluding that JCP has contributed to an expansion of the labour supply and reduced the welfare bill.

So if the UK experiences another bout of economic decline, will jobcentres be able to repeat their strong performance of late? Two new policy challenges suggest not.

First, the introduction of in-work conditionality for Universal Credit—which will require recipients to take steps to increase their working hours if they fall below a certain earnings threshold—could see footfall increase in jobcentres by 325,000 claimants a week. What is more, in-work support is a radical—albeit welcome—departure from the historic approach to welfare policy, whereby jobcentres wait for people to fall into unemployment before taking action. The novelty of these interventions will likely result in teething problems.

Second, jobcentres will be significantly squeezed by the government’s ambitious target of halving the disability employment gap. The new Work and Health programme, which will deliver employment services for disabled people, has been allocated just 24 per cent of the funding its predecessor was given. The recently departed Work and Pensions Secretary Stephen Crabb saw jobcentres as a way of bridging this shortfall, and pledged to double the number of employment advisers in jobcentres. But given the DWP needs to cut its day-to-day spending by 41 per cent between 2010 and 2020, scraping together the resources needed to fund this expansion will be difficult.

In light of these financial constraints, jobcentres must boost their productivity. Fortunately, as a Reform report published today notes, there are opportunities to make efficiency gains.

The roll-out of real-time tax data from HM Revenue and Customs will give analysts a detailed view of how former claimants are performing in the labour market. If matched with the tactics used to get these claimants back into work, jobcentres will be able develop a much richer picture of what works in employment policy—a question that policymakers know surprisingly little about. Such insights could help job coaches not only target resources on those that need most support; back-to-work programme could also be tailored to reflect what has worked for comparable claimants in the past.

In the current climate of economic uncertainty, improving jobcentre performance would be a good place for the new government to focus ministerial attention. But boosting the productivity of employment services will amount to far more than a reduction in the welfare bill. Smarter jobcentres will help individuals achieve a crucial driver of personal wellbeing: a secure job.

"The future of public services: digital jobcentres" is available at www.reform.uk