Research and analysis

Breaking the low-pay, no-pay cycle (RR765)

Results on the implementation, impacts, costs, and economic benefits of the UK Employment Retention and Advancement (ERA) programme.

Documents

Breaking the low-pay, no-pay cycle (RR765): report

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Breaking the low-pay, no-pay cycle (RR765): summary

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Detail

By Richard Hendra, James A. Riccio, Richard Dorsett, David H. Greenberg, Genevieve Knight, Joan Phillips, Philip K. Robins, Sandra Vegeris, and Johanna Walter, with Aaron Hill, Kathryn Ray, and Jared Smith

This report presents the final results on the implementation, impacts, costs, and economic benefits of the UK Employment Retention and Advancement (ERA) programme. ERA’s distinctive combination of post-employment advisory support and financial incentives was designed to help low-income individuals who entered work sustain employment and advance in the labour market. Launched in 2003 in selected Jobcentre Plus offices, ERA targeted three groups:

(1) unemployed lone parents receiving Income Support and volunteering for the New Deal for Lone Parents welfare-to-work programme (2) lone parents working part time and receiving Working Tax Credit (3) long-term unemployed people aged 25 or older receiving Jobseeker’s Allowance who were required to participate in the New Deal 25 Plus welfare-to-work programme.

The effectiveness of the programme was evaluated using a random assignment research design.

The evaluation found that ERA produced short-term earnings gains for the two lone parent target groups. The early gains resulted from increases in the proportion of participants who worked full time (at least 30 hours per week). However, these effects generally faded after the programme ended, largely because the control group caught up with the ERA group.

More impressive were the results for the long-term unemployed participants (mostly men) in the New Deal 25 Plus target group. For them, ERA produced modest but sustained increases in employment and substantial and sustained increases in earnings. These positive effects emerged after the first year and were still evident at the end of a five-year follow-up period. The earnings gains were accompanied by lasting reductions in benefits receipt. ERA proved cost-effective for this group from the perspectives of the participants themselves, the Government budget, and society as a whole.