Real time earnings data can unlock jobcentre productivity

28 July 2016

Friday’s PMI data was the clearest sign yet that the UK is heading for an economic slowdown. A key question policymakers will now be asking is the impact that business uncertainty will have on unemployment, but for those fearing the worst, the UK’s record over the financial crisis offers some reassurance. Despite the deepest peacetime recession since the Great Depression, the Claimant Count at the turn of the last decade peaked at 4.7 per cent. By comparison, periods of the 1980s saw unemployment surpass 10 per cent.

The labour market’s strong performance partly explains why a number of organisations have recently praised Jobcentre Plus (JCP), the UK’s public employment service. In 2013, the National Audit Office judged the organisation to offer value for money; Accenture has concluded UK jobcentres are some of the most digitally advanced in the world; while an independent impact evaluation suggested JCP has increased the UK’s labour supply and curbed welfare expenditure.

Despite winning plaudits, a Reform report published today argues the scope for improving JCP performance is considerable. Jobcentres are currently evaluated against ‘benefit off-flow’, the rate at which individuals stop their claim. Yet this measure is no guarantee of employment, since a claimant could simply be initiating another out-of-work benefit claim. What is more, the current performance framework does not reward jobcentres based on the pay progression or employment duration of former claimants. Not only, as the OECD points out, are these metrics essential to understanding the value for money that public employment services represent. Ultimately, these are the outcomes – rather than simply shifting claimants off benefit – that policymakers want to achieve.

Practical difficulties partly explain this shortcoming. At present, the only way to assess the performance of former claimants is through survey data – a process that entails a great deal of administration.

However, HM Revenue and Customs’ introduction of real time earnings data, a reform initiated under the Coalition, will soon change this. This capability will soon give jobcentres a continuous understanding of the employment status of former claimants. If merged with data on the types of interventions used by job coaches, this information could be used to gauge the value for money represented by retraining initiatives and other back-to-work interventions. More than this, analysts could segment jobseekers by the type of support that has proved most effective for comparable claimants.

In practice, this information presents jobcentres with the opportunity to allocate their resources more effectively. Job coaches will have a better idea of the claimants that need the most attention; back-to-work plans will be personalised to reflect what has proved effective in the past.

Perhaps more significantly, assessing JCP against employment outcomes – along with the introduction of in-work conditionality – will encourage jobcentres to take a more proactive approach to tackling unemployment. Jobcentres already have a good understanding of local labour market conditions, a perspective that will only be strengthened by earnings data. If shared with local businesses and educational establishments, this information could improve investment and training decisions.

JCP faces a number of challenges beyond the immediate prospect of an economic slowdown. Universal Credit is expected to see jobcentre footfall increase; the Government’s ambition to halve the disability employment gap will place further strain on JCP. There will, however, be little scope to meet these pressures through additional funding, with the current envelope requiring a 41 per cent reduction in DWP’s day-to-day spending between 2010 and 2020.

The intelligent use of data analytics has to be part of the solution to this productivity challenge. If jobcentres succeed in harnessing the potential of real-time earnings data, the working-age population will be even better insulated against the next period of economic turbulence.

William Mosseri-Marlio, Senior Researcher, Reform

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