Work for the Dole doesn’t work, says economist Jeff Borland. Citing a study he and Yi-Ping Tseng carried out using data from the late 1990s, he argues that it does nothing to create long-term employment opportunities and too little to build skills. But maybe Borland is missing the point. Maybe Work for the Dole isn’t meant to help participants find work.
An alternative rationale for Work for the Dole is to convince people who can find paid jobs to stop claiming unemployment payments. The theory is that there’s a group of people who are happy to remain on unemployment payments if it allows them time to do other things. Some may be busy as homemakers, some may own their own home or get support from family and others may have cash in hand work. For people with low levels of skill, poor health or other difficulties, staying on unemployment payments may be more attractive than a combination of low paid, insecure work and periodic job search — at least, that’s the theory.
For policymakers who buy into this theory, the challenge is how to tell the difference between people who genuinely can’t find work and those who could if they were less choosy and tried harder. Nineteenth century poor law reformers worried a lot about this problem. They had two solutions. The first was to have overseers carefully investigate applicants to discover which were genuine. The second was to insist that paupers must work in return for support or leave their homes and enter a workhouse. The second were sometimes called ‘repressive’ measures and according to 19th century commentator Thomas Fowle, they were generally less costly and more effective than investigation.
Today the policy community avoids terms like ‘repression’ and prefers to use the language of economics but the underlying rationale is the same. Here’s how the OECD explains the case for programs like Work for the Dole:
There can be a case for workfare if there is heterogeneity in the benefit caseload. Individual situations probably vary along a continuum, but the general argument applies when there are just two groups:
A. The unemployed who have a relatively high marginal utility of income (probably because they have little alternative source of income) but are unable to find work, i.e. those who are involuntarily unemployed.
B. The unemployed who have a relatively low marginal utility of income (they may have income from assets or other family members, or be engaged in legal domestic production or illegal undeclared work, etc.) and are “voluntarily” unemployed, i.e. they could find work, but for them the difference between the net wage and benefit levels is not large enough to cover the disutility of work.
Workfare requirements de facto eliminate the benefit option for group B which is voluntarily unemployed: its members will not enter workfare, since this has the same disutility as market work, but pays less. At the same time, workfare requirements maintain a minimum level of social protection for those who most need it, the individuals in group A. Workfare can increase social welfare through better targeting of benefits (targeting benefits where the marginal utility of income is highest) and increased output in the economy (output by group B members who enter work).
Governments that embrace this rationale may give up trying to make workfare participants more employable. Programs that develop work skills and help participants into work are likely to be expensive. In contrast, all a ‘repressive’ measure needs to do is be unpleasant and waste participants’ time. That’s likely to be cheaper. Of course the organisations that run workfare projects will almost certainly try to offer participants something better than this. But a cash-strapped government that’s given up on the employability goal probably won’t want to pay for quality.