Private provision of employment and training services in the UK

Until the 1970s, delivery of most public services across Europe was almost exclusively the responsibility of the state. Since then, many Member States have extended the role of the private sector in delivering public services in pursuit of improved choice, quality and efficiency.

Formerly, the UK public sector directly supported unemployed people with benefits advice, training, job searches and referrals to other agencies through local job centre offices. Now, Job Centre Plus, part of the Department for Work and Pensions (DWP), acts only as the first point of contact and referral for the first three months of unemployment.

The rest is outsourced under a programme known as the Work Programme under which, training, job search and brokerage are managed entirely by large private-sector companies (‘prime contractors’). The majority of prime contractors’ income is derived from a payment-by-results system, designed to incentivise the achievement of sustainable work outcomes for clients.

Nearly 1.5 million people have joined the Work Programme over the past two and a half years; around 18% of these have found sustained employment.

Contractors’ perspective

A contractor interviewed for the UK case study in a new Eurofound report on private-sector delivery of public services stated that the payment-by-results system was effective, as payments for new referrals had decreased over time, and the contractor’s income was now primarily determined by clients’ achieving sustained work outcomes (the payments to the contractor being increased after three months of the client’s employment, and again after six).

However, the recent upturn in the labour market has meant a decline in the number of new referrals from the job centre (as clients with minimal support needs are finding work more quickly than they had been before). In turn, this has meant an increase in the proportion of clients whose need for support is greater.

Policy expert's perspective

In the view of a policy expert interviewed for the case study, the private sector copes reasonably well with routine job searches and support packages for clients who are ‘work ready’, as it is termed. But resources are not adequate to support job-seekers whose needs are more demanding – those in recovery from drug and alcohol addiction, for instance, dealing with mental health problems, or presenting with offending behaviour (situations that job centres are better equipped to deal with).

Improvements in the aggregate number of successful job outcomes have taken place, but generally in groups closer to the labour market; moreover, the proportion of clients securing sustained work within 12 months of entering the programme is now falling.

It was the expert's view that the payment-by-results system for the Work Programme encouraged contractors to prioritise ‘work-ready’ clients for acceptance onto the programme, thereby inflating successful outcomes and filtering out those whose needs were more complex.

Perspective of jobs club

Job clubs in the UK are independent, non-profit organisations that seek to provide a network of contacts and support for unemployed people. Staff and volunteers at a job club interviewed for this case study felt that their job-seeking clients were being channelled towards low-paid and temporary work with limited prospects, irrespective of their work history or skills.

For clients themselves, the pressure to apply for and obtain work was an ever-present concern. The ‘work first’ approach meant that clients’ main focus had be on conducting job searches, completing applications and engaging with employers. Clients reported significant pressures to apply for all the job notices that were published. This resulted in a lack of time to engage in training, development and confidence-building, which they felt could make employment more sustainable in the long term.

Commentary

Although some improvement can be seen in the aggregate number of successful job outcomes, this is the case only for groups closer to the labour market. At the same time, however, there is a general misalignment of incentives in the payment-by-results system, as the ‘work first’ model places great emphasis on job searches and not enough on the quality and sustainability of employment outcomes. These could be better secured through tailored, intensive programmes of skills training and confidence-building.

Generally speaking, it is not the involvement of the private sector that is gives rise to many of the problems reported here. Rather, a combination of policy, market management and funding pressures create issues with cost, accessibility and quality.

Large-scale privatisation policies such as the Work Programme, formulated at ministerial level and effectively imposed on state agencies, appear to create the greatest rigidities in respect of implementing, running and monitoring services. High-volume contracts – combined with weak management of the performance of large private-sector providers – are in danger of effectively replacing one form of producer-driven monopoly with another.

In contrast, where funding and quality control is devolved to a local-authority level (as is the case in childcare and adult care, and detailed in the report), there appears to be greater scope for public servants to innovate and manage standards effectively using local knowledge of both supply and demand.

Further information

The report Delivering public services: A greater role for the private sector? is an exploratory study, which examines how the role of the private sector has grown in the provision of public services in Lithuania, Spain, Sweden and the UK. It focuses on three areas of services: early childhood education and care, employment services and training, and social care for adults.

 

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