‘Liz Kendall’s DWP shakeup is bold – but should be even bolder’

This week Demos hosted Liz Kendall in her first major speech as Shadow Work and Pensions Secretary. Speaking as part of our Future Public Services Taskforce, she made the case for renewed focus on youth employment.

The lines on getting young people back to work made the headlines, but there was a much more interesting idea beneath the rhetoric. In a fascinating passage midway through the speech, she argues that “the overwhelming focus of the Department for Work and Pensions… has been on benefits and the creation of Universal Credit.” Isn’t that what the DWP should be focusing on? Kendall disagrees, arguing for a different interpretation of the department’s role:

“A relentless focus on helping more people get work”

“Under Labour, the Department of Work and Pensions, and Job Centres will do what they say on the tin. We will have a relentless focus on helping more people get work, and get on at work. And on making workplaces healthier and more productive places to be.”

This is a much broader scope for the DWP than today. Reflecting its origins in labour exchanges, established in the early twentieth century and the precursors to Jobcentres, the department primarily sees its role in the labour market as keeping unemployment low by helping or mandating people to take up work as quickly as possible.

In times of high unemployment, this approach makes sense. But what to do when unemployment is low but households are struggling for other reasons? Or when the number of economically inactive people – those not working but also not actively seeking work – is rising? This describes the UK’s labour market over the last decade or so, with low pay, low quality work and low participation all bigger problems than unemployment.

How to create “good work”?

In response, there is much political interest in how to create ‘good work’. Though it now seems like ancient history, Theresa May’s government was interested in this agenda, through Matthew Taylor’s gig economy review. This mantle has been picked up by Labour today, with its New Deal for Working People probably the most radical element of their policy programme.

While talking about ‘good work’ might sound fluffy, this agenda has been given new force by Dani Rodrik’s recent work on productivism; the best attempt to describe a new economic paradigm. Rodrik defines productivism as “an approach that prioritizes the dissemination of productive economic opportunities throughout all regions of the economy and segments of the labor force.” This is academic-speak for Kendall’s stated aim to “create more good jobs in every part of the country”, as she put it in her speech this week.

But does a “work first” approach create issues?

How does the DWP’s current approach undermine a productivist future? One major issue is the narrowly-defined ‘work first’ approach. This means that benefit claimants are given just four weeks to look for a job in their previous occupation or sector, and after this period are mandated to apply for any job which is available.

As a result, those that lose a ‘good job’ could be demanded by the state to take a ‘bad job’ in its place – with significant negative consequences for their wellbeing, but also the productive capacity of our economy. A number of research studies have shown that a slightly longer period spent looking for work can lead to a higher productivity, higher paying job. So if Labour is serious about ‘good jobs everywhere’, it needs a radically different DWP: a productivist department actively shaping labour markets. That would require several things beyond the content of Kendall’s speech.

New powers for the DWP, changes to the benefits system

First, it would probably require new powers for the DWP. Although it is responsible for reducing unemployment, the department lacks wider labour market functions – it is not responsible for skills policy, minimum wage policy or for encouraging businesses to create ‘good jobs’. Kendall talked about industrial strategy in her speech and that would likely be critical for delivering any alternative economic agenda.

But today industrial strategy would probably sit outside the DWP, likely in the Department for Business and Trade. This could suggest an argument for a beefed up economic department outside the Treasury, combining industrial strategy and labour market policies, with benefits administration potentially shifted to HMRC. This could be the home for Labour’s growth mission, which shadow ministers have repeatedly argued is the foundation of the party’s plans for government.

Second, it means making significant changes to the benefits system. It would require giving people longer to look for work in an appropriate industry; giving them more active support to find a ‘good job’; and integrating employment support and adult skills policy more effectively in order to boost productivity. It would also likely require more generous benefits, to support higher paid workers to not have to take whichever job becomes available first, which could come in the form of a new ‘unemployment insurance’ scheme.

A significant break from the current DWP policy and practice

These are bold changes, representing a significant break from current DWP and policy practice. And we are speaking about a department which hasn’t been a hotbed of positive change in recent years. But why am I hopeful? In foregrounding the economy when discussing welfare policy, Kendall is speaking in very different terms to others who argue for reform of the DWP, which tend to focus on fairness or justice, not cold hard productivity.

Such arguments have not proven particularly effective in recent years; despite endless press releases, campaigns and reports, we still have one of the stingiest working-age social security systems in the developed world. We need a different narrative and economic arguments are often the most powerful. Kendall’s emerging productivist vision for DWP could be just that.