Is 'workfare' better than welfare?

With five milion people on out-of-work benefits, welfare is costing Britain £190bn a year. Now the government is proposing to force the unemployed to carry out manual work in return for state benefits. Similar 'workfare' schemes have been tried in the US. But are they effective? Simon Wilson reports.

A key plank in the Coalition's plan to reduce the £190bn welfare bill is Iain Duncan Smith's controversial proposal to introduce American-style 'workfare' programmes. Simon Wilson reports.

Britain has five million people of working age on out-of-work benefits. Of those, 2.5 million claim incapacity benefit, and 1.4 million claim jobseekers' allowance. It all adds up to a £190bn annual welfare bill. In recent press briefings foreshadowing his White Paper, Iain Duncan Smith favours bringing a US-style workfare scheme to Britain. This obliges the long-term unemployed to carry out manual work in order to keep their benefits. Those who have been out of work for a certain length of time would have to take up four-week placements at 30 hours a week to get them used to having a full-time job. The scheme would also be intended to act as a deterrent where benefits staff suspect claimants of doing undeclared paid work.

What has the response been?

Mixed. The most angry outburst came from the Archbishop of Canterbury. He argued this week that people struggling to find work and worried about their future will be "driven further into a downwards spiral of uncertainty, even despair, when the pressure is on in that way". At the other end of the scale, rightwing newspapers hailed the Coalition's assault on the "feckless" and "workshy". What has been most significant, however, is the response from the Labour party.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Ken Livingstone, the former mayor of London who is Labour's candidate again in 2012, agreed that "it doesn't do poor and unemployed people any favours to leave them out of work. If you get people into the habit of getting out of bed, doing something, having a sense of worth, and if that involves getting people who are currently unemployed helping out with the elderly or clearing up an area or things like that, I think it's worth doing."

And the rest of the Labour party?

While scornful of Iain Duncan Smith's get-on-a-bus-and-look-for-work rhetoric, many also recognise that the Coalition is building on reforms already started by Labour (Smith's new 'Work Programme' is strikingly similar to Labour's 'Flexible New Deal'). James Purnell, the former secretary of state at the Department of Work and Pensions (DWP), wrote in The Times this week of a "covert consensus" in Britain on welfare and revealed that he had finally quit the government when Gordon Brown refused to give him an answer on a package of welfare reforms very similar to Iain Duncan Smith's universal benefit plan.

So it's a political no-brainer then?

A DWP survey of schemes worldwide found that workfare is least effective in getting people into jobs where labour markets are weak. It doesn't increase the likelihood of finding work, and can end up reducing employment opportunities by cutting the time available for the job search. It also does not play a big part in cutting overall welfare case loads. The most effective examples of workfare involve paying claimants a real wage. In other words, if international comparisons are any guide, the workfare aspect of Iain Duncan Smith's plans is unlikely to prove the crucial factor in getting Britain's long-term unemployed back into work. What will matter will be renewed economic growth, together with a remodelled benefit system that always makes it pay more to work than to claim.

Has workfare been effective in America?

Yes, if you believe Lawrence Mead, the American professor who inspired much of the Clinton/Gingrich workfare reform programme in the 1990s. That's the most famous and widespread example of workfare in practice. He came to give a briefing to David Cameron and senior ministers in June. In the 1990s, Clinton boasted of lifting a generation out of poverty through a variety of tough-love-style programmes. But as Mary Riddell put it in The Daily Telegraph this week, there is a big risk that "what looked good in boom time Wisconsin will seem cruel in slump-hit Walsall".

Does workfare work?


1. In America in the 1990s, welfare claims were slashed by a massive two-thirds following a series of welfare reforms, which included workfare.

2. A big part of workfare's success is its deterrent effect. That is hard to measure and quantify, but that doesn't mean it isn't important in slashing the welfare bill and forcing people to work.

3. The Iain Duncan Smith work programme does not involve 'time-limited' benefits or indefinite workfare. It is not cruel or heartless, but one part of an effective and humane combination of both carrot and stick.


1. Workfare can only help nudge people off the dole and into jobs if there are jobs available; in times of high unemployment, like now, it will just make people angry and resentful and end up costing more money to run than it saves.

2. Evidence from a DWP survey of American, Canadian and Australian experiences suggest that workfare doesn't always work, that its efficacy is unproven, or that it is impossible to separate out its effects from welfare in general.

3. Hardened benefit cheats are few in number, but tend to be determined and clever; they may not have much to fear from workfare.

Simon Wilson’s first career was in book publishing, as an economics editor at Routledge, and as a publisher of non-fiction at Random House, specialising in popular business and management books. While there, he published, a bestselling classic of the early days of e-commerce, and The Money or Your Life: Reuniting Work and Joy, an inspirational book that helped inspire its publisher towards a post-corporate, portfolio life.   

Since 2001, he has been a writer for MoneyWeek, a financial copywriter, and a long-time contributing editor at The Week. Simon also works as an actor and corporate trainer; current and past clients include investment banks, the Bank of England, the UK government, several Magic Circle law firms and all of the Big Four accountancy firms. He has a degree in languages (German and Spanish) and social and political sciences from the University of Cambridge.