18 July, 2012 – 16:34 — George Edwards
Earlier this week the Department for Work and Pensions (DWP) released new statistics on benefit claimants at risk of being affected by the Government’s planned benefit cap.
Due to take effect from 2013, the cap – first announced in 2010 – aims to ensure that “no workless family can receive more in welfare than the median after tax earnings for working households”. The logic of this move is to increase incentives for jobless adults to move off benefits and into work.
The release of the figures prompted a confident reponse from the Work and Pensions Secretary, Iain Duncan Smith – quoted in the Mail, Express and Independent:
“These figures show the benefit cap is already a success and is actively encouraging people back to work.”
But do the figures show this?
The data itself is based on indicative information received in reply to letters sent out by the Government to 58,000 claimants deemed ‘at risk’ of being affected by the cap (who currently receive or are likely to receive in excess of the cap). This showed that 1,700 had moved into work and a further 5000 ‘indicated that they would like to receive support to get back to work’.
The DWP stress that these are not subject to quality assurance checks associated with National Statistics – so while we have no reason to believe the data itself is inaccurate, it is prudent to exercise caution before jumping to conclusions about the indications of the data.
However, implicit in Mr Duncan Smith’s claim is that the proposed introduction of the cap is a fundamental cause of the 1700 individuals (re-)entering work and the further 5000 seeking additional support to find a job.
This assumption is not in any way, however, substantiated by the data.
Concentrating on those who have entered work, the figures alone do not tell us why these individuals have become employed.
Although it is a reasonable hypothesis that the benefits cap may increase incentives for those with sustained periods of economic inactivity to enter the labour force or to increase their efforts to find work, it is also possible that they would have done so without the threat of their benefits being reduced in April 2013.
According to the DWP’s fact sheet on the benefits cap, 39 per cent of households affected receive Jobseekers’ Allowance. With this in mind, we can conclude that a considerable number of those affected are ‘currently unemployed and looking for work’ and thus have a chance of (re-)entering employment irrespective of the implications of the cap.
With this in mind, it’s plausible that the 1700 individuals highlighted by Mr Duncan Smith would have found work even without the threat of proposed the benefits cap. Unfortunately, data isn’t available to prove or disprove this.
Although it is entirely possible (perhaps even likely) that the threat of benefit reductions would provide the necessary incentive for economically inactive individuals to enter work, the figures alone are not enough to prove causality – it is equally plausible that those who have entered employment (or increased their efforts to find a job) would have done so anyway.