Social Security in Britain: to work or not to work?

The issue of tackling poverty while simultaneously incentivising work has been one of trial and error between the two contrasting economic philosophies of laissez-faire and interventionism over the centuries. Going as far back as 1601 to the introduction of the Poor Law which aimed to tackle poverty initially, also resulted in work de-incentivisation due to maladministration of generous benefits through local parishes (Fraser, 2017). In contrast to this interventionalist approach - the laissez-faire mantra of Thatcherism, which saw many state benefits withdrawn and some taxed, subsequently unemployment increased by 9% between 1974 and 1982-83 (Fraser, 2017). Those earning 60% of the median income increased by 8.8% between 1979 and 1990. This resulted in an increase in poverty and a huge demand for employment. These two philosophies can be used to help understand contemporary governance and their measures to tackle these two core issues. This essay will discuss the Universal Credit System which was formed under the 2012 coalition government as part of the ‘Welfare Reform Act’ and the increasing prevalence of ‘zero-hour contracts’, to identify to what extent policies introduced to tackle poverty and incentivise work are compatible.

The UK Government describes zero-hour contracts as employment contracts whereby the employer can utilise a workforce to meet their individual requirements and the employee has no obligation to meet these requirements (DBIS, 2013). While these can be attractive to workers looking for flexibility within employment (Farina et al, 2020), the reality is very different. A study on UK care-workers on zero-hour contracts described workers as having very short ‘on call’ visits to residents, with large periods of ‘off-call’ time of which they were not eligible for pay. This meant that although they were essentially completing a full day’s work, they were only being paid for the hours ‘on-call’ (Ravalier et al, 2018). The unreliable pay and hours often results in employees on zero-hour contracts being unable to heat their home and pay rent (despite working full days), as well as an inability to maintain a work-life balance (Ravalier et al., 2018). However, with a growth of 2.3% between 2006 and 2017 of these contracts (ONS cited in Farina et al., 2017) it could be argued that they act as an incentive to work - due to their flexible nature, but this is merely a smoke screen for unpredictable income and ultimately exacerbates the problem they aims to solve – poverty. A further study by Brinkley (2013) found that not only are these contracts unpredictable, they also come with fewer benefits and protection rights as employers can assign individuals as workers rather than employees. This means rights like statutory sick pay and redundancy pay, minimum leaving notice, and requesting flexible working aren’t granted as part of these contracts, which reinforces the smoke and mirrors nature of this measure as workers are pitched a flexible contract; but in reality, they have little to no agency and are one illness away from no income, or potentially no job. A contemporary report on poverty in the UK by the Joseph Rowntree Foundation found that in 2018/19 around 402,000 workers in the food and accommodation services on minimum wage were in poverty, as well as 4 in 10 of these same workers being at a very high risk of losing their job (JRF, 2021). Here lies a triad of issues: working poverty, job insecurity, and suppressed wages, with zero-hour contracts at the core. The Conservatives have not addressed these issues and the Department for Work and Pensions Secretary Ian Duncan Smith has claimed these contracts provide workers with ‘satisfaction of security’ and a ‘good wage packet’. This illustrates a clear disconnect in the reality of these contracts and the Governments’ perception of the reality, which is fuelled by their individualism philosophy, making the issue of unifying work incentivisation and tackling poverty difficult, as the Government see no reason to intervene to alleviate these stigmas around the contract, which would subsequently help to achieve these two aims.

Universal Credit (UC) was implemented as part of the coalitions ‘Welfare Reform Act’ of 2012 by Ian Duncan Smith, by combining six benefits - Job Seekers Allowance, Employment and Support Allowance, Income support, Child Benefit, Working Tax Credit, and Housing Benefit (Fraser, 2017). One of the conditions to receive UC is that you must be looking and applying for work and writing CVs (UK Government, 2012). In theory, this reform seems promising with regards to work incentivisation and tackling poverty via a means tested allowance, but the nature of sanctions prevents this. Sanctions result in claimants having their benefits stopped for between 7-182 days depending on the sanction level, as a result of failing to meet the conditions for claiming UC (UK Government, 2012). The reality is cut-throat, take for example 59-year-old David Clapson who was found dead next to a pile of CVs – he died of ‘diabetic ketoacidosis’ due to low insulin, with £3.44 in his account, no food and electricity, a month after having his jobseekers allowance sanctioned due to one missed appointment at the Job Centre. A clear illustration of the brutal nature of this system as there are no second chances, nor any consideration for reasons as to why the claimant missed their appointment. Again, it is clear that while these measures on paper would point to work incentivisation, they drive people to the abyss of poverty. This measure is not limited to erosion of physical health, with many claimants reporting depletion of their mental health with many left feeling suicidal (Mahase, 2019). Furthermore, this issue is not specific to older age groups, a report of over 200 homelessness charities and councils illustrating that under 25s experiencing sanctions was the cause of 10% of homeless cases in 2014, a shocking 8.3% increase since 2013 – around the time of the UC rollout. In parallel with zero-hour contracts we see a triad of UC related issues – homelessness, undermined mental health, and at the extremes, death with sanctions at the core of it. On the other hand, these sanctions appear to improve employment rates in the short term, however, overtime this regresses as well as suppressing wages and negatively affecting job security (Arni et al. cited in Williams, 2019), ultimately worsening the issues around zero-hour contracts, creating a vicious cycle, as more workers are driven to claim UC to sustain a basic standard of living. It is clear that while this reformation was brought in as a means to tackle poverty and incentivise work; it only drives claimants further into poverty as a result of the cut throat nature of sanctions and does not encourage long term employment. Despite all of this, the Conservative attitude through to the current day has not deviated from the laissez-faire philosophy, as demonstrated in the recent £20 cut to UC which was previously brought in as a lifeline for claimants through the Covid-19 pandemic. It is expected that this intervention will drive 800,000 people into poverty, with 300,000 already working full-time or part time. When interviewed, Chancellor Rishi Sunak suggested differently believing that people will not be forced into poverty and claims that the evidence shows, the best way to tackle poverty is through employment. This was further supported by PM Boris Johnson who claimed that: “claimants should rely on their own efforts.” This highlights the clear disconnect between the impact the Conservatives believe these interventions will have (encourage work long term), versus the reality (exacerbating poverty rates), failing to recognise that many claimants do in fact work.

In conclusion, the goals of work incentivisation and tackling poverty appear to be incompatible under laissez-faire governance. Considering the aforementioned, Zero-hour contracts’ employment figures point towards work incentivisation, but this is driven by the flexible rhetoric of these contracts, ultimately a front for no workers’ rights, working poverty, and no work-life balance. Meanwhile, the Universal Credit Systems’ use of sanctions has shown to incentivise work in the short-term; however, long-term this declines and further depletes job security and exacerbates wages. It is clear that both measures drive poverty, whether working or via sanctions, but what is evident is that the laissez-faire mantra of the State has accelerated and exacerbated this issue, due to interventions that force thousands into poverty behind the façade of self-help and employment. With State officials rejecting the reality of these interventions or not recognising the need to intervene, the issue of tackling poverty and while incentivising work is only going to exacerbate with time as more and more workers experience financial hardship.