The concept of workfare has been plunged into controversy with the news that one of the main private companies involved, A4e, are being investigated by the DWP over allegations that the company abused government contracts. In this specific instance revelations that jobseekers were forced to work in A4e’s own offices unpaid for a month at a time have come to light.
In addition, four former members of staff who worked in the company’s Slough office have been arrested by the police for alleged fraud surrounding false claims that people had been placed in employment. These allegations are specific to the company’s involvement in European Social Fund contracts.
This isn’t the first time that A4e has come under investigation. In fact, the company has been investigated on nine separate occasions since 2005 by the DWP and has been ordered to repay public funds five times as a consequence.
Though not the only private company engaged in operating DWP workfare contracts in the UK, A4e is by far the biggest. Founded in 1991 in Sheffield to help retrain redundant steelworkers, A4e now employs 4000 people in 250 centres across ten countries, among them Israel, where it operates under the name Amin and has come in for criticism for undertaking Israeli government contracts to operate in the Occupied Territories of Palestine.
The company’s founder and chairman, Emma Harrison, paid herself a dividend of £8.6 million in 2011, mostly funded by the taxpayer. She was appointed to the unpaid position of ‘families tsar’ by David Cameron in 2010 with a remit to get so-called problem households back to work. Former Labour MP David Blunkett acts as an advisor to A4e.
As part of their Jobseekers Agreement, claimants are compelled to take part in programmes run by companies such as A4e on pain of having their benefits suspended and/or cut.
Workfare been the subject of controversy since its introduction by the Labour government back in 1998, the year after it came to power as New Labour. It was introduced as part of the New Deal reforms to the welfare state (renamed the Flexible New Deal in 2009), and is an idea that was imported from the United States. At its heart is an emphasis on changing the dynamic between society and the unemployed, whereby the unemployed are no longer viewed as victims of personal and economic circumstances beyond their control and entitled as a consequence to financial support from the state as a right, but are held responsible for attempting to change those circumstances in return for this support.
The insidious result of this changing dynamic has been the stigmitisation by the government and its supporters in the mainstream press of the unemployed as workshy scroungers who are a drain on honest, hardworking taxpayers. In effect, it has gone some way to returning society’s relationship with the poor closer to the one which existed during Victorian times than the one heralded by the postwar settlement.
Under the Tories workfare has been expanded to include major companies such as Sainsbury’s and Tescos, and charities such as Oxfam and Shelter, with benefit claimants compelled to undertake extended periods of unpaid work in charity shops and supermarkets in return for their benefits. But this too is starting to unravel as a result of the impressive campaign by groups such as Boycott Workfare, which have succeeded in forcing some of the companies involved to reconsider their participation due to the negative publicity it has begun to attract, accusing them of profiting from slave labour.
The revelations of corrupt practices within A4e reflects the immorality of private companies making huge profits out of the misery of the unemployed, whose numbers are increasing week by week as a result of a recession. Blaming the victim is an age old approach to inequality and social and economic injustice on the part of the rich, big business and governments that govern on their behalf.
This is why the issue of workfare cuts to the heart of the ongoing assault on the lives of the working class. Basic human decency demands that workfare is abandoned and that the government’s focus is placed on eradicating poverty and unemployment rather than punishing the poor and the unemployed.
Clearly, no such switch in focus can be expected while the Tories remain in power. But Labour must take up the issue on behalf of the victims of workfare if it is to return to anything resembling a party of the millions rather than the millionaires it was under New Labour.
Amid the public’s understandable and justified anger over the role of the nation’s financial and banking elite in bringing about the recession, the government has responded with its intention of imposing a one year 50% tax on bankers’ bonuses over £25,000. Whilst any move to make the banking sector account for the criminal negligence which almost brought the economy to its knees last year is to be welcomed, the aforementioned measure, recently announced by the chancellor in his pre-budget report, is nowhere near bold enough in addressing the gross and distorting imbalance to the nation’s economy which the emphasis on the City has created over the past decade or more.
Moreover, it fails completely to begin to address the huge inequality which has defined New Labour’s term in office and which has had a corrosive effect on social cohesion and any notion of social and economic justice as constituting the objective of a government which enjoys the support of the majority of the country’s trade unions.
The actual scale of this inequality, the sheer extent of its growth under New Labour, makes sobering reading. In 1997, the year that New Labour came to power, Britain’s richest 1000 citizens were worth a combined wealth of £98 billion. Ten years later those same richest 1000 were worth a combined wealth of just over £300 billion – a staggering 204% increase. This amount of wealth in the hands of the richest 1% of the population was higher than at any time since before the Second World War. At the same time the nation has seen a concomitant growth in poverty. Figures from the Joseph Rowntree Foundation reveal that in 2007/2008 13.5 million people were living below the 60% of the median earnings low-income threshold of £115 per week for a single adult with no dependents; £199 for a couple with no dependents; £195 per week for a single adult with two dependent children under 14; and £279 per week for a couple with two dependent children under 14. This figure of 13.5 million constitutes a growth of 1.5 million over the three previous years since 2004/05. The fact that this increase came after six years of decreases in the number of people living under the 60% threshold going back to 1998/99 is illustrative.
Lower down the scale, however, a different and even more malign picture emerges. In relation to people living under 40% of median income there has been a year on year increase over the eight years preceding 2007/08. As a result the number of people below this threshold is the highest since records began in 1979. Compared to most other EU economies, the UK has a higher proportion of people on low incomes. Out of 27 EU countries, only 4 have a higher proportion on low incomes than the UK.
The most significant reform implemented by New Labour designed to alleviate poverty was a National Minimum Wage. Taking effect in 1999, it is currently set at £5.80 per hour for adults; £4.83 for 18-21 year olds; and £3.57 for under 18s. However, as a serious measure in the fight against poverty, the minimum wage, as presently constituted, has done little except institutionalise low pay. In relation to prices, housing costs, and other living expenses, the NMW has failed to keep pace with inflation. Too, over the course of its life the minimum wage has acted as a brake on wage increases even during periods of economic growth. Furthermore, by bolstering the NMW with benefits such as working tax credits, the government has effectively been subsidising the profits of employers through the taxpayer.
All of the aforementioned, set in the context of the worst recession to beset the nation’s economy since the 1930s, puts a compelling case for a significant increase in the NMW along with the implementation of a maximum wage both to close the inequality gap and, in economic terms, to offset inflation.
There are a number of ways in which a maximum wage could operate in practice. There first of those is through a Relative Earnings Limit. This works by limiting the compensation any business is allowed to pay an individual employee either directly relative to a specific multiple of the business’s lowest earner, or to the number of people a given business employs and the average compensation paid overall. The strengths of this method are, in the case of the former option, it would limit wage gaps, while in the case of the latter it would encourage employment in order to allow employers to increase their maximum earnings. A second alternative is the implementation of a Direct Earnings Limit. This involves a limit being placed directly upon the amount of compensation which any individual can earn in a given time period.
The easiest method would be in the form of a Scaled Taxation, in other words a progressive income tax.
Of course, with the panoply of tax avoidance schemes currently available, any maximum wage would have to go hand in hand with a reform of the current tax laws in order to close any such loopholes, such as allowing remuneration in the form of share dividends to come under capital gains, which levies a low 18% instead of the full rate of income tax, currently a low 40-50% for high earners. Also required would be measures to limit the amount of wealth any individual could pass on in assets and a progressive tax placed on the value of said assets, such as property, at the point of sale.
What we’re talking about here is a root and branch structural reform of the nation’s economy, placing an emphasis on demand at its base rather than continuing with the present system of reigning back inflation through control of the money supply, and public spending through wage cuts for the lowest earners.
Another compelling argument in favour of a maximum wage is social cohesion. This is something which impacts on society as a whole. The evidence to support the fact that social cohesion has lessened with the deepening of inequality can be measured in the growth of the private security industry along with a spike in the country’s prison population over the past decade. Even at a more fundamental level, a major cause of depression and unhappiness in society is a sense of low self esteem directly related to how well we’re doing in relation to our peers.
In a society in which 1% of the workforce currently earns 17 times more than the bottom 10%, which is struggling with the effects of a global recession, the case for a maximum wage has never been stronger.