Progression in work under Universal Credit

A study out today by Resolution Foundation on in work conditionality in Universal Credit risks raising undue alarm among tax credit claimants.

“@resfoundation: Study shows 1.2 million workers face threat to benefits under Universal Credit – our new press release out today http://t.co/ANNFvnTS”

In fact, in-work conditionality under Universal Credit is, for most, no more onerous than eligibility for tax credits today. For example: A lone parent has to work 16 hours to be eligible for tax credits today. Under Universal Credit, in-work conditionality would apply for a lone parent with young children in primary school if earnings were less than 16 hours multiplied by the national minimum wage. In addition, they would only be expected to seek work during school hours.

For most adults without caring responsibilities, in-work conditionality would apply for earnings below 35 hours x national minimum wage, currently £216.65 with the minimum wage at £6.19. This is not dissimilar from eligibility for working tax credit (30 hours), and less onerous than the current system if wages are above £7.22 per hour.

Progression in work under Universal Credit

In work conditionality must be sensibly managed, using advisors’ common sense. However, if this were achieved, then surely it would be a good thing if the welfare system also encouraged people to progress in (as well as move into) work?  It is also an important failsafe to prevent people from choosing to work few hours and subsidise their earnings through in-work support.

It may help to think of progression in work under Universal Credit in three stages:

Universal Credit - Progression in work

  • Social Value: Out of work households move into work:
    The primary objective of Universal Credit is to reduce the number of workless households.  This is where we see the most ‘social’ value being added.
  • Taxpayer Value: In-work conditionality ensures households don’t ‘game’ the system
    Households that are capable of part-time or full time work can’t be allowed to settle for working only a few hours each week indefinitely, through choice.  In-work conditionality is a necessary failsafe to prevent the system from being ‘gamed’.  It needs to be applied using an advisors common sense, and there is common sense guidance in the regulations so in-work conditionality does not jeopardise current work and life responsibilities.  The earnings threshold for in-work conditionality will typically be: Earnings above 36 hours x national minimum wage for people capable of full time work or 16 hours x national minimum wage for people with caring responsibilities.  These are no more onerous than tax credits today.  In-work conditionality could also apply to households with higher earnings to prevent gaming by households with high hourly wages, but deliberately choosing to work few hours.
  • Economic Value: Universal Credit shifts the economic emphasis toward progression in work.
    Universal Credit makes apparent a problem that already exists today, some households will be claiming an element of Universal Credit in-work support perpetuity.  It also shifts the economic emphasis for households and for policymakers, because if households can cost-effectively be encouraged to increase their earnings, (e.g. through skills development, better negotiation or career guidance) the household will benefit though higher take home income and taxpayers will benefit through lower levels of in-work support.

There are many challenges to be overcome in applying effective in work support, and to that extent concerns are understandable.  I have seen few (if any) proven and cost-effective models of in-work  support. Adding this responsibility to Jobcentre Plus and back to work providers will not be a simple.  However, the shift in emphasis is important because it does mean that policymakers can focus on another important problem: How can low income households be supported to progress in work.

A summary of the conditionality regime is available here.

You can use the calculator to see if in-work conditionality applies to you.

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