Social security in a changing labour market (II): big challenges, big opportunities

17 November 2016

We are now more than half way through the major rebuild of the welfare state that began in 2010 (welfare 2.0). The New State Pension has been delivered; Personal Independence Payment is replacing the old Disability Living Allowance; and the new child maintenance system is in place. Automatic enrolment has brought six million people into workplace pension saving already. Meanwhile, Universal Credit is now in every jobcentre in the country and we preparing for the major roll out of the full service next year.

But we are also at the start of a new period of reform. The focus will be on those ‘just managing’, social justice for the million most disadvantaged and strengthening protection for pensioners. Issues like intergenerational fairness are also coming to the fore in public debate. This new period of reform will be less about building than about fitting out – making what we have built work for these new challenges (welfare 2.1, 2.2 etc). For example, Universal Credit offers new opportunities to help people not just get a job but also progress in work. Automatic enrolment ‘phasing’ will move us from proof of concept to creating adequate pensions savings – if contributions go up and opt outs continue to stay low.

That’s not to say that there aren’t areas where we do need to carry on the building process. Last month’s green paper produced by the cross-departmental Health Work and Health Unit signalled the start of an ambitious long-term strategy. It needs to involve employers and health professionals as well as the welfare system. To give one example, at some point we will need to look at the way pensioner means-tested benefits work in a world of Universal Credit, and the role of contributory working-age benefits.

And we are clearly entering a period of huge uncertainty both in terms of the economy, with ultra-low interest rates, and in terms of changes to the labour market. If there is no consensus between experts on the overall pace and impact of technological change there will undoubtedly be sectoral change. Workers’ bargaining power vis-à-vis employers is already changing and the welfare system will need to keep up – for example with the rise in poorly remunerated self-employment. To these changes we need to add the reality of an ageing workforce and a rising State Pension age. All this suggests we shall need to think hard about labour market risk insurance; knowledge acquisition and utilisation over a longer working life; and how we increase connectivity, mobility and participation – especially as and when patterns of migration change.

A welfare state that works for all will need to provide not just a safety net but a sure hand when people are confronted by some of the biggest changes in their lives: the arrival of children; relationship stress and separation; deciding on savings and pensions; getting ill or acquiring an impairment; losing a job or looking for a better one. But we now have strong foundations in place – the right policies and structures to deliver a social security system that is fair, supportive and easy to navigate for everyone in society.

Jeremy Moore, Director General, Strategy, Policy and Analysis, Department for Work and Pensions

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