PRIME Initiative

The House of Commons Work and Pensions Committee has been looking at contracted employment programmes - the sort of thing people are sent on by Jobcentre Plus after they have been out of work for a while.

Jobcentre itself does not actually run these programmes, but instead contracts them out to mainly private providers. The bulk of the work is carried out by a mixture of private companies and some “third sector” non-profits. PRIME itself has sometimes been a provider in such schemes, so we know what they are like.

Most of the organisations involved, whether private or charitable, are actually looking to make a profit or surplus on providing such services. Payment to the providers is usually by results in some way. They receive a portion of the money up-front when they start training or helping a person, but the majority later - when the trainee achieves some target outcome, like ceasing to claim benefit or staying in a job for three months.

This all sounds pretty efficient, but there are some potential problems with this model. The Committee has drawn attention to them in its report - and found some evidence that bad things are happening.

Basically providers have a financial incentive to concentrate their efforts on the candidates most likely to succeed - in the words of the report to “cream off” the people most likely to help them attain their targets. Meanwhile those the provider thinks are not likely to end up giving them good or profitable outcomes are at risk of being simply “parked” - i.e. minimal effort is expended on them.

This is indeed a real risk, and it is likely that future back-to-work schemes, whichever flavour of government is in power, are likely now to follow some payment by results model. The Committee is to be congratulated on drawing attention to the problems that can result. The solution, if there is one, is to police the contracts more effectively, and perhaps to broaden the range of rewarded outcomes, so that all who go on these programmes get a fair crack of the whip.

Extract from report below.
Full report at the Parliament web site - HTML version (browsable) or PDF version.

Creaming and Parking

100. Providers are increasingly being paid by results, on the basis of the number of customers moving into work, rather than a flat fee. There are two particular risks associated with this approach. The first is that of ‘creaming’, where contractors who are paid by results are likely to concentrate their efforts on those participants who are closest to the labour market and more easily placed in a job. The second is that of “parking” where participants who are deemed furthest from the labour market will receive a bare minimum of services and are unlikely to make any progress whilst participating in a programme. In this way providers seek to maximise their profit, focusing on customers who will earn them outcome payments, while spending as little as possible on customers who will not.

101. There is evidence that creaming and parking is taking place in the Pathways to Work programme. Research by the Department found that provider staff felt that the focus on performance targets influenced their behaviour with clients, to the extent that they spent less time than required with people with multiple barriers to work (and perceived as harder to help). They also felt that they needed to encourage job ready clients to take jobs that would enable a swift return to work, rather than take lengthier routes towards jobs that they wanted.

102. In addition, most providers who took part in the research perceived that clients were, on the whole, harder to help than they had anticipated and some staff expressed concerns that this had also led to job outcome targets being prioritised ahead of clients’ well being and ability to sustain employment.

from p28, section 4, Vulnerable Groups in The House of Commons Work and Pensions Committee - Fourth Report Management and Administration of Contracted Employment Programmes

Click to download PRIME briefing paper as PDF 295K

ABSTRACT This paper summarises the ways in which the recession has impacted on the older (50+) workforce, comparing ONS data for different age cohorts since August 2008 – the point where the UK was entering recession and marked differences in the impact on these age cohorts started to appear. The data is drawn from ONS Labour Market Statistical Bulletins from October 2008 to February 2010, which provides figures from August 2008 to January 2010.

Here we go again. George Osborne has announced plans at the Conservative Party conference to make us all keep working longer before we can draw our State Pensions. While this might a seem logical way to save public money it misses the same key point as most similar proposals to raise pension age. It assumes there are going to be jobs there for these older workers to do. In reality it is probable that almost half will be out of work.

So for many people it will simply mean moving from drawing their pension to drawing an out-of-work benefit. Where’s the saving in that?

Let’s be clear. I have no problem with the idea of working for a bit longer. In fact there’s a lot of positive things to be said for it. It would probably lead to a generally better standard of health, and many people would a welcome a chance to stay ‘connected’ and contribute to society for longer. And of course, there’s the financial benefits.

But the tricky bit is finding the jobs. So, at the moment, George Osborne has only half a policy. The difficult bit is missing.

The fundamental point that George Osborne seems to have missed is that alongside the proposed changes to State Pension Age, interventions are required to help older workers to stay in, or get back into, work – and these interventions come at a cost.

According to the last census, economic activity rates for workers during the five years immediately before retirement were only 58% for women, and 52% for men – and these figures are likely to have been worsened by the recession.

So what we really need from the Conservatives are some really innovative proposals that give older workers real support in finding sustainable work opportunities. Given the poor track record most companies have in hiring older workers, these proposals will have to include self-employment. This is how currently how over a third (35%) of 65 year-olds choose to work (source: ONS 2001 Census).

Full text of George Osborne’s speech

Over the next 20 years the UK’s population will age faster than ever before in its history. There will be 5.4 million more people of pension age - an increase of 45 per cent. At the same time, our working-age ratio is declining. This combination has serious implications for the economy, with proportionally fewer workers supporting the growing number of older retired people.

One measure being implemented by Government from next year to tackle this issue is the introduction of later retirement ages. Through gradual changes in State Pension age (SPA), three million people who would otherwise be able to claim a state pension are being nudged rather hopefully back into the workforce.

This presentation given by PRIME recently (Powerpoint format) highlights the economic impact of these changes - and projects even higher levels of worklessness and poverty among older people if practical measures are not adopted now.

Of the three million workers eventually being removed from pension entitlement by the changes, most are women - in fact in the initial batch all are. We reckon that no more than 40 per cent of the total are likely to be economically active. This means that 60 per cent of the three million will be without a pension - and without a job. And that’s without taking into consideration the impact of the recession, since it’s impossible to say how long that will last.

But it does seem the consequences of changing the pension age haven’t really been thought through. In attempting to solve the problem of financing pension provision the state may only have succeeded in creating different problems elsewhere.

On the plus side, today around one fifth of the over-50 working population are self-employed, and many continuing to work beyond the current state pension age. So there is considerable benefit to the economy to be gained through assisting higher numbers of over 50s into self-employment.

But self-employment isn’t an option for everyone, so there would also need to be other measures to support older workers to remain in or re-enter conventional employment.

Without such action raising the state pension age won’t accomplish much - indeed it may do more harm than good. It’s not enough to put a whole lot of older women and men back into the workforce by administrative fiat. They also need some practical way of making a living.

See also What are the alternatives to a personal pension? on our other site.

It’s widely recognised that our population is ageing, the main cause being the post-war baby-boom.

According to figures released by the Office for National Statistics last year (see ref 1), between 2006 and 2031, the overall population of England is set to rise from 50.76 million to 60.43m, a rise of 19.1 per cent.

However, the number of people of pension age is projected to increase by a much higher rate than this; over this same period, the number of women aged over 60, and men aged over 65 (ie current retirement age) is set to rise from 9.46m to 14.96m - a rise of 58 per cent.

Naturally, authorities are extremely concerned by the increasing costs of supporting older people, particularly pensions, healthcare, social services and housing.

Government is taking measures to tackle this challenge, including a gradual increase in pension age, which starts next year, the biggest impact being for women’s retirement ages.

For a man or woman aged 30 on 1st March this year, they will both work for longer, and will be aged 68 when they reach State Pension Age; however, for a woman who reaches her 50th birthday on 1st March this year, she would be aged 65 before she can draw her State Pension, whereas for a man of the same age, there is no change.

You can get your own projection here. 

These changes in State Pension Age will have a big impact on our working age population; this is currently women aged 16 to 59, and men aged 16 to 64. Pension Age changes across England will bring 2.53 million people into the working age population, who, without these changes, would be retired.

So what support is needed to help older people remain in work? We know that currently, 28 per cent of those aged 50 to State Pension Age are out of work, compared with just 20 per cent of those aged under 50 (see ref 2 below). We also know that employment rates drop off sharply the closer people get to retirement age (see ref 3).

This is why PRIME, a national charity founded by Prince Charles in 1999, helps people look at self-employment as a way of continuing to earn, and remain economically active. Self-employment rates are much higher for the over 50s than their younger counterparts, with around one in five (18 per cent ) working in this way, compared with 11 per cent for the under 50s.

The over 50s also appear to have much better business survival rates than younger people (ref 4), so with careful research and planning, this could be an option that gives people more control over their working lives, and the choice of retiring when they want.

We know from the people we talk to daily that many are looking for more flexible solutions than they can find on offer through traditional employment, and that’s assuming they can even find job opportunities. A lot of people over 50 have care responsibilities for both elderly parents and grandchildren; many have health conditions that require a change in working patterns, and some only want to work part-time.

In today’s economic climate, with rising unemployment, redundancies continually in the headlines, and less jobs on offer, people do need to consider different options, and that’s where organisations like PRIME come in. We are very aware of the challenges self-employment presents, particularly to someone who has spent all their life as an employee, and often in the same organisation.

There’s a lot of help and information on this website , but if you can’t find what you’re looking for call us on 0800 783 1904.

References 

1 ONS, 2006-based subnational population projections by broad age-groups and old age dependency ratios.

2 Annual Population Survey, ONS, Jul 2007-Jun 2008

3 Nigel Campbell, “Decline of Employment Among Older People in Britain”,
Centre for Analysis of Social Exclusion, 1999

4 Cressy and Storey (1995) show survival rates after six years amounted to 70% for businesses with owner/managers over 55, while the average rate for all start-ups was only 19%.

5. Findings from: The Economic Impact of Ageing on Entrepreneurship and SMEs by M. Peters, R. Cressy, D. Storey May 1999. Warwick Business School. Study initiated and financed by the Forward Studies Unit of the European Commission.

Today’s unemployment figures released by the Office for National Statistics paint a worrying picture for those aged over 50.

In the last year (Dec 2007 to Dec 2008), as highlighted by the national media, unemployment in the UK has risen from 1.6m to 1.97m - an increase of 370,000 people.

This increase is made up of 296,000 under 50s and 74,000 over 50s. What’s particularly worrying for the over 50s is that the increase is 31.5 per cent, against just 21.6 per cent for younger working-age people.

This now means that of all unemployed people, the number aged over 50 now represents 15.5 per cent of the total, as against 14.5 per cent a year ago. What’s more, once on Jobseekers Allowance, younger people tend to get back into work quicker than the over 50s, resulting in a higher proportion of older people becoming long-term unemployed.

It’s interesting to note that employment figures have seen an increase of 86,000 from those who are of pension age, 50,000 of whom are women. Is this an indication that more older people want to, and are capable of, work beyond our current State Pensions ages? Or is it through necessity, with devalued pension funds, badly performing savings, and inadequate State Pensions?

Nationally, around 20 per cent of working over 50s are self-employed, and benefit from better business survival rates than younger people, mainly through life experience and better planning & research.

So this can sometimes be a solution to continuing to work in today’s economic climate, and achieving the flexibility to fit around other commitments.

This video on the BBC web site is about people over 50 in the South West setting up their own businesses. It was shown on Spotlight, the BBC’s regional news programme for the South West of England, on the 23rd of October 2008.

The clip shows interviews with Jean Singleton and Carol Glover who set up Jeneca Beads, and also an interview with me, Peter Bennie of PRIME. We were filmed as part of the coverage of the well-attended HMRC business advice day held in Torquay the same day  Jean and Carol were filmed back at their base, after having earlier spoken at a PRIME seminar at the same event.

PRIME regularly attends the HMRC events with a stand, as they are a cost effective way of making contact with people around the UK. We have another one coming up soon in Belfast, where we’ll also be running our own programme of workshops late into the evening, after the HMRC exhibition has finished.