What did they do in Wisconsin?
In the late 1980s, stumped with a huge underclass of unemployed workers drawing on the state, Governor Tommy Thompson introduced a set of measures to coax those on benefits into employment. Each potential worker was assigned to a Financial and Employment Planner, who was charged with finding that person something productive to do. A punishment system was introduced whereby $5.15 was docked from a claimant’s benefits for every hour they missed of the job they were handed. If they didn’t turn up for work, they got no benefits.
As a further incentive to stay in employment, a time limit for benefits was added in. Over your lifetime, you can only claim two year’s worth of government help. As Johann Hari notes in The Independent, “once those two years are up, you won’t get any help, ever again.”
How did it pan out?
On the face of it, Governor Thompson’s idea was a rollicking success. In twenty of the State’s 77 counties, the welfare roll dropped by 80% or more. By 2007, the number of those on welfare had halved in the State of Wisconsin. President Clinton was so impressed by the success of the plan that he used it as a template for his own welfare policy.
Under his administration, the welfare roll fell from 14 million to five million. In Wisconsin, even the school drop-out rate fell, to 2.4% (under the “Learn Fare” scheme, benefits were docked if children did not attend school), one of the lowest in the country.
But these statistics mask some of the grim realities behind the Wisconsin reforms. Professor Sharon Hays of the University of South California has conducted the most thorough study, says Hari. She found that of all the women who had been through the welfare system, half are sometimes without enough money to buy food, and almost half find themselves unable to pay rent or utility bills. “It has some flickers of a good programme to get people from welfare to work,” says Hari, “but is also packed with measures that are designed to punish people for their ‘dysfunction’.”
Does Britain need to bring in similar policies?
When Labour was elected in 1997, there were 5.7 million people on out-of work benefits. Now the figure is still 5.4 million, despite a decade of continuous economic growth and massive job creation. One in five children lives in a workless household in Britain, a level that is even worse in some cities. In Glasgow, Liverpool and Manchester, it’s one in four.
It’s especially hard to justify the fact that 167,000 under-25s are on incapacity benefit, says The Business. Currently, all unemployment benefits combined add up to less than 3% of public spending – so we can certainly afford to maintain the status quo, says Hari. But “to leave people in a workless rut for life isn’t compassion. It’s apathy”. And with ministers’ projections suggesting that the overall welfare bill will rise from £31bn now to £42bn by 2030, “the Brown Government is presiding over a blueprint for making poverty permanent”, warns The Business.
Could it work in Britain?
The success of the Wisconsin reforms had a lot to do with the fact that the initiative was popular with the American public. But Britain lacks this sense of urgency, says Fraser Nelson in The Business. And you also have to wonder how inclined businesses would be to employ those under-25s who have been claiming sick benefit, rather than the 1,500 or so altogether more driven migrant workers who arrive in Britain every day.
It’s also worth noting that the Wisconsin measures were introduced in the midst of an economic boom. Now that mortgage defaults are escalating as the poor in the US fall behind on the dodgy subprime home loans they took out, unemployment may well start to rise and job numbers fall.
That’s when the reforms are really going to sting the poor, and the success of the initiative will be seriously called into question. All the same, there are a few aspects of the Wisconsin deal that are worth importing.
What reforms should be taken on?
The basic goal of the Wisconsin reforms – removing the promise of a blank cheque for raising children in poverty, and replacing it with programmes aimed at getting people into jobs – is unquestionably sound. It also seems reasonable to cut someone’s benefits if they repeatedly turn down suitable work.
It’s just the way the US administration went about it that’s the problem. Forcing mothers with three-month-old babies to take jobs that involve two-hour commutes is far more “stick” than “carrot”. But a less extreme system that docks benefits and includes a time limit could well help the UK’s long-term unemployed. It would certainly beat the current “smother it in cash” approach to problem-solving.
Has Cameron shown his cards?
Johann Hari in The Independent accuses David Cameron of planning “a real assault on single parents” and of wanting to “set fire to the safety net that protects the British poor.”But it’s time for a change, says Fraser Nelson in The Business. “The idea that the solution to poverty is to give more resources to the needy has been tested to destruction.”
Cameron is much taken by the work of political theorist William Galson, who identified three steps to escaping poverty – finish school, marry before having children, avoid teenage pregnancy. Of those who did all three, Galson’s studies found that only 8% were poor. Of those who did none, 79% were in poverty. Cameron’s ethos is clear – “tough love”.