How Effective are Benefits Sanctions? An investigation into the effectiveness of the post-2012 sanctions regime for Jobseeker's Allowance claimants | Unemployment

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This report looks at the application of sanctions in the UK social security system. Sanctions are defined as the reduction or withdrawal of benefits from claimants on the grounds that they have failed to observe the conditions attached to their benefit claim. Whilst successive Governments have increased use of sanctions in the system, the current Government has expanded conditionality criteria and increased the length of sanctions since October 2012.
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  OXFAM RESEARCH REPORTS DECEMBER 2014 Oxfam Research Reports  are written to share research results, to contribute to public debate and to invite feedback on development and humanitarian policy and practice. They do not necessarily reflect Oxfam policy positions. The views expressed are those of the author and not necessarily those of Oxfam.  www.oxfam.org   HOW EFFECTIVE ARE BENEFIT SANCTIONS?  An investigation into the effectiveness of the post-2012 sanctions regime for Jobseeker's  Allowance claimants HOWARD REED LANDMAN ECONOMICS   This report looks at the application of sanctions in the UK social security system in relation to their impact on employment levels. Sanctions are defined as the reduction or withdrawal of benefits from claimants on the grounds that they have failed to observe the conditions attached to their benefit claim. Whilst successive Governments have increased the use of sanctions in the system, with the intention to increase employment, since October 2012, he current Government has expanded conditionality criteria and increased the length of sanctions. This was to align non-compliance of conditionality more to changes under Universal Credit, and to make conditions for receipt of benefits clearer. The current Government retains the intention to increase employment. However, this report finds that there is no evidence that increased use of sanctions in Jobcentre Plus districts between October 2012 and June 2014 led to decreased unemployment or increased employment. It therefore seems that sanctions are not achieving the desired goal to increase employment for claimants.  2 How effective are sanctions? EXECUTIVE SUMMARY This report looks at the use of sanctions in the UK social security system. A sanction is defined as the reduction or withdrawal of benefits from claimants on the grounds that they have failed to observe the conditions attached to their benefit claim. The particular focus is on the impact of recent changes to the sanctions regime that were introduced in October 2012, especially the expansion of conditionality criteria and increase in length of sanctions for people in receipt of Jobseekers Allowance (JSA  –  the main benefit for unemployed people of working age who are seeking work) and those claimants of Employment and Support Allowance (ESA  –  the main benefit for disabled people and those with long-term illnesses) who are assessed as capable of work-related activity. There is clear evidence that the number of all JSA and ESA sanctions given out each month has increased relative to the number of JSA claimants since the October 2012 reforms (DWP, 2014a). Just before October 2012, the number of adverse sanctions for JSA (sanctions decisions which resulted in benefit being stopped or the JSA claim being closed) in the preceding year as a proportion of total monthly JSA claimants was around 4.5 per cent; in the months between July 2013 and 2014 the number of adverse sanctions per month was always at least 5 percent of the total number of claimants, and sometimes 6 percent or more. ESA sanctions per month as a proportion of the total number of claimants in the work-related activity group increased from around less than 0.2 per cent per month before October 2012 to more than 0.9 per cent per month by May 2014. Successive Governments have justified sanctions on the grounds that sanctioned benefit claimants are not doing everything they can to get back into work, and the loss of benefits acts as an incentive for them to find work (DWP 2013a, Purnell 2008). Thus, if sanctions are working as intended there should be an increase in employment levels and a reduction in unemployment for individuals who have been sanctioned. Individual-level data on labour market outcomes for sanctioned benefit claimants are not available from either survey or administrative datasets, so it is necessary to use aggregated data from the Office for National Statistics and the Department for Work and Pensions to test the hypothesis that sanctions help reduce unemployment. The approach used in this report is to look at changes in employment and unemployment rates across the 37 Jobcentre Plus districts in England, Scotland and Wales over the 20 months since the changes in October 2012. If sanctions are an effective instrument for reducing unemployment and increasing employment, we ought to see a clear negative relationship between unemployment and use of sanctions across Jobcentre Plus districts, and a clear positive relationship between employment and use of sanctions. In other words, this analysis tests whether Jobcentre Plus districts with higher levels of sanctions use experience a faster reduction in unemployment and a greater increase in employment than Jobcentre Plus districts with lower levels of sanctions. The analysis also looks at the level of economic inactivity in each Jobcentre Plus district (with „ economic inactivity ‟ being defined as individuals of working age who are neither in employment nor actively seeking work), to see whether tightening the sanctions regime has resulted in the unintended consequence of pushing JSA claimants into inactivity rather than into employment. The results show no evidence that Jobcentre Plus districts with higher rates of sanctions between October 2012 and June 2014 experienced greater decreases in unemployment or increases in employment than districts where sanctions were used less often. There was also no strong relationship between the intensity of sanctions use and the change in the level of economic inactivity in each Jobcentre Plus district. When the measure of sanctions used was restricted to 'medium' (e.g. 13 weeks or 3 months) and 'high' level sanctions only (e.g. 26 weeks  How effective are sanctions? 3 or 6 months up to 3 years) (to check whether more severe sanctions had any impact), the results were very similar. Overall, this report finds that sanctions are an ineffective tool for improving labour market performance. It finds no evidence that labour market outcomes are better    in areas where Jobcentres are using more sanctions. The new regime means that sometimes people have no option but to turn food banks due to a significant reduction or total loss of their income (Perry, Williams et al., 2014). It cannot claim to be responsible for improving employment outcomes. Given that sanctions cause unnecessary hardship without delivering improved labour market performance, this report makes the following policy recommendations: The Government should undertake a broad and independent review of the operation and impact   of social security sanctions, as well as the planned extension of sanctions to working and self-employed claimants and partners under Universal Credit. This should be a follow-up to the Oakley review, which looked only at operational factors. The review should encompass the effects of sanctions on labour market outcomes as well as poverty and hardship among families containing JSA and ESA claimants. Decision makers should have their right to arbitrarily suspend social security payments removed pending investigation. The implementation of policies (in terms of who is sanctioned, why, appeals, why they are successful) needs to be reviewed to ensure that practice is transparent, evenly applied and fair. The differences in sanctions rates between different Jobcentre Plus districts (and indeed different Jobcentres within districts) should be investigated. Decision makers who repeatedly incorrectly sanction claimants and whose sanctions are overturned on appeal should have their performance addressed.  4 How effective are sanctions? 1 INTRODUCTION This report looks at the use of sanctions in the UK social security system  –  the reduction or withdrawal of benefits from claimants on the grounds that they have failed to observe the conditions attached to their benefit claim. The particular focus in this report is on the impact of recent changes to the sanctions regime introduced in October 2012 which have increased the length of sanctions for non-working people in receipt of JSA and those claimants of ESA who are assessed as capable of work-related activity. As discussed below, successive Governments have defended the increased use of sanctions in the benefit system on the grounds that sanctions encourage benefit claimants to find work. For example, Neil Couling, Director of Work Services at the DWP said in April 2014: “My experience is that many benefit recipients welco me the jolt that a sanction can give them. Indeed, I have evidence...of some very positive outcomes from just those kinds of tough conversations. Some people no doubt react very badly to being sanctioned  –  we see some very strong reactions  –  but others recognise that it is the wake-up call that they needed, and it helps them get back into work. But the current evidence on the effectiveness of sanctions for the UK is limited, while international evidence is mixed (see Chapter 3 below). This report provides new evidence by using data on the number of sanctions and the rates of employment, unemployment and inactivity in Jobcentre Plus districts across England, Scotland and Wales to test whether increased use of sanctions really do improve labour market performance. The report is structured as follows. Chapter 2 describes the sanctions system for JSA in detail, looks at recent trends in the use and severity of sanctions and analyses the number of sanctions by age group, gender and ethnicity. The chapter also looks at recent trends in the number of sanctions for ESA. Chapter 3 looks at existing evidence on the effectiveness of sanctions in an international and a UK context. Chapter 4 explains the methodology used in this report to assess whether the recent changes to the sanctions regime are an effective tool for boosting employment and reducing unemployment. Chapter 5 presents the results of the empirical analysis, Chapter 6 suggests policy implications and Chapter 7 draws final conclusions. 2 THE SANCTIONS REGIME: THE OCTOBER 2012 CHANGES Sanctions in the social security system are nothing new and have been a feature of benefits for unemployed people in the UK for several decades. Before 2012, claimants of Jobseekers  Allowance were already subject to various work conditionality criteria  –  for example they were required to sign on fortnightly at the Jobcentre Plus office, to seek work actively, and to take up suitable employment when available. If they failed to meet these conditions, a sanction  –  reduction of benefit for a certain period of time  –  could be applied. Though sanctions have operated in the UK‟s benefit system for several decades, the amount of conditionality being applied to jobseekers has increased in recent years. At the same time, the number of non-working benefit claimants subject to sanctions has increased, for two reasons. Firstly, since October 2010 non-working lone parents whose youngest child is aged at least five
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