Impact assessment

Equality Analysis: Raising the Administrative Earnings Threshold (January 2023 change)

Published 17 April 2023

Version: V10

Author: [Redacted] – Employment Youth and Skills Directorate

Approver:

[Redacted] – Deputy Director, Employment Youth and Skills Directorate

[Redacted] - Deputy Director, Labour Market Analysis Division

[Redacted] – Senior Lawyer, Universal Credit

Owner: [Redacted] – Employment, Youth and Skills Directorate

Date Completed: 02/02/2023

Introduction

1. This document records the analysis undertaken by the Department to enable Ministers to fulfil the requirements placed on them by the Public Sector Equality Duty (PSED) as set out in section 149 of the Equality Act 2010.

2. The PSED requires the Minister to pay due regard to the need to:

a. eliminate unlawful discrimination, harassment and victimisation and other conduct prohibited by the Act;

b. advance equality of opportunity between people who share a protected characteristic and those who do not; and

c. foster good relations between people who share a protected characteristic and those who do not.

The Protected characteristics are:

• age
• disability
• gender reassignment
• pregnancy and maternity
• race
• religion or belief
• gender
• sexual orientation; and
• marriage and civil partnership

3. In undertaking the analysis that underpins this document, where applicable, the Department has also taken into account the United Nations Convention on the Rights of Persons with Disabilities (UNCRPD), and in particular the three parts of Article 19 which recognise the equal right of all disabled people to live in the community, with choices equal to others, and that the Department should take effective and appropriate measures to facilitate full enjoyment by disabled people of this right and their full inclusion and participation in the community.

4. The Department has also taken account of the United Nations Convention on the Rights of the Child (UNCRC), in particular Article 3 which requires the best interests of children to be a primary consideration; ensure the child such protection and care as is necessary for his or her well-being and that the institutions, services and facilities responsible for the care or protection of children shall conform with the standards established by competent authorities and at the forefront of a decision-maker’s mind when making a decision which may have an impact on children.

Background

5. The original policy intent of UC is to not only support out of work claimants to move into employment, but also to support working claimants to progress and increase their earnings.

6. When claimants earn more than their Conditionality Earnings Threshold (CET) they move into the Working Enough conditionality group, where no conditionality requirements are applied, and the claimants do not regularly interact with a work coach. The CET is a flexible threshold which is calculated based on the number of hours an individual claimant can reasonably be expected to undertake work or work-related activities based on their circumstances. In most cases, it is set at the rate equivalent to working 35 hours at the National Minimum Wage (NMW), but this can be adjusted to take account of health conditions or caring responsibilities.

7. Claimants earning under the CET with the lowest earnings are in the Intensive Work Search group (where full conditionality requirements apply). Claimants with higher earnings, but below the CET, are in the Light Touch group. Before 2015, claimants in the Light Touch group often received some form of work coach support, although there was provision for work search and work availability requirements to be switched off if a claimant’s weekly earnings (or a couple’s combined weekly earnings) were at a level where the Secretary of State was satisfied that requirements should not be imposed.

8. In 2015, reg 99(6) of the UC Regulations was amended to remove the Secretary of State’s discretion and set out in legislation that requirements must be switched off when a claimant was earning over the Administrative Earnings Threshold (AET). The introduction of the AET formalised the boundary between the Intensive Work Search group and the Light Touch group. This created a more certain legal framework for the In-Work Progression Randomised Control Trial (RCT) ^{[footnote 1]}, where DWP was testing different forms of conditionality with working UC claimants.

9. The AET was based around the Jobseekers Allowance (JSA) rates of benefit. It was implemented as a set earnings level to ensure it was transparent and simple for DWP staff and claimants to understand. In 2015, it was equivalent to the earnings of a single claimant working 12 hours at the NMW, and 19 hours for a couple ^{[footnote 2]}. This link to the JSA rates did not keep pace with increases in the NMW or the introduction of the National Living Wage (NLW). As a result, the number of hours of work at the NMW/NLW in order to earn over the AET has declined over time.

10. The design of the AET, a set earnings threshold, reflects the fact that UC is designed around earnings rather than hours worked. Young people under 23 who are not entitled to the NLW along with those on a lower NMW will have to work more hours in order to reach the AET, which aligns with the policy intent of providing all claimants earning less than the AET (regardless of the NMW/NLW status) with regular work coach appointments providing tailored support.

11. On 26th September 2022, the AET was raised from £355 to £494 (PCM) for an individual claimant and from £567 to £782 (PCM) for couples. The current AET is now equivalent to an individual claimant earning the NLW working around 12 hours per week and the claimants in a couple working 19 hrs per week.

12. The Government announced its intention to further increase the AET as part of the Growth Plan on 23rd September 2022. The change also complements the In-Work Progression offer announced in the 2021 Spending Review.

13. Increasing the number of benefit claimants on low earnings who will be expected to meet regularly with a work coach will ensure that claimants are taking active steps to increase their earnings by seeking more or better paid work.

14. UC claimants earning at or above the AET are placed in the Light Touch conditionality group meaning they do not routinely receive support from a work coach, although they can ask or choose to see a work coach.

The Proposed Change

15. Regulation 99 (6) of the Universal Credit Regulations 2013 will be amended to raise the AET to £617 for single claimants and £988 for couples from January 2023. This is equivalent to an individual working 15 hours per week at the NLW or the claimants in a couple working a total of 24 hours per week at the NLW.

Analysis of impacts

16. The impact of raising the AET on claimants with protected characteristics are addressed below. Where possible, we have included information on the sanctions rates in the Intensive Work Search regime for claimants with protected characteristics; this data is only available for age and gender.

Age

17. Based on ONS 2020 population estimates of the UK working age population, 16.9 percent are aged between 16-24, 52.1 percent are between 25-49, and 31.0 percent are 50-64 ^{[footnote 3]}.

18. Table 1 shows the age breakdown of Light Touch group, split by those who would remain in Light Touch and those who would move into the IWS regime because of the AET change.

Table 1 ^{[footnote 4]}

Age group	Move into the IWS (percent)	Remain in Light Touch (percent)	Total Light Touch (percent)
16-24	4.9	3.8	4
25-49	72.9	72.9	72.9
50+	22.0	23.1	22.9
Unknown/Missing	0.2	0.1	0.1
Total	100	100	100

Column totals may not add up to 100 percent due to rounding.

19. Young people under 23, who are not entitled to the NLW, along with those on a lower NMW, will have to work more hours to reach the AET. As such, the 16-24 age group comprises a larger proportion of those moved into IWS (4.9 percent) than in the (pre-measure) Light Touch caseload (4 percent). The measure will also bring more young people in scope of sanctions.

20. The sanctions rates for the Intensive Work Search regime, broken down by age, are set out in Table 2 below.

Table 2 ^{[footnote 5]}

Age group	Aug-22 (percent)
16-19	11
20-24	15.3
25-29	10.5
30-34	8.3
35-39	6.6
40-44	5.4
45-49	4.7
50-54	4.1
55-59	3.4
60-65	2.3
Over 65	0.3
Total	7.7

21. The sanction rate for young people under the age of 25 is higher than for other age groups, with the latest sanction rate at 11.0 percent for 16-19 year-olds and 15.3 percent for 20-24 year olds.

22. UC is designed around earnings rather than hours worked, with the policy intent being to provide more regular support to claimants earning under that threshold (regardless of hours worked). We know that young people face particular challenges with regards to finding employment and progression, and regular, tailored work coach support can help mitigate this.

23. We engage at a personal and individual level with all of our claimants, tailoring the support we give and any conditionality requirements to the specific circumstances of the young person in question, whether they are struggling with health conditions/disabilities or other circumstances.

Disability

24. Only UC claimants who have declared a health condition and/or disability that doesn’t affect their ability to work or those awaiting a Work Capability Assessment (WCA) are affected by the change in AET. UC claimants who have been assessed as, having limited capability for work (LCW) or having limited capability for work-related activity (LCWRA) are not affected. Our analysis shows that 2.3 percent of claimants who will leave Light Touch group because of the rise in AET are awaiting a Work Capability Assessment (WCA) ^{[footnote 6]}.

25. Raising the AET will therefore result in more claimants who are awaiting for WCA being in the IWS regime. This means that if they fail to comply with work-related requirements without good reason, they will be liable for a sanction. However, we know that people with health conditions/disabilities often have varied and complex needs when it comes to finding work, which regular work coach support can help with.

26. In common with the general approach in relation to conditionality, any support will be tailored to an individual’s circumstances. Where a work coach identifies that a claimant’s medical condition is on-going, they will be referred for a work capability assessment at the appropriate point.

27. Sanctions data is not available on disability for the UK working age population or Universal Credit claimants.

Gender reassignment

28. We have no evidence or reason to suspect that this change will disproportionately affect anyone with the protected characteristic of gender reassignment. Data is not available on gender reassignment for the working age population or Universal Credit claimants.

Marriage and civil partnership

29. We have no evidence or reason to suspect that this change will disproportionately affect anyone based on the protected characteristic of their marriage or civil partnership.

30. Table 3 below provides proportions of current Light Touch claimants in single and couple contracts, broken down by those who would move into the IWS group because of the AET change and those who would remain in Light Touch. Current data is unable to link this to marriage and/or civil partnership.

Table 3 ^{[footnote 7]}

	Move into the IWS (percent)	Remain in Light Touch (percent)	Total Light Touch (percent)
Single	64.2	52.4	54.5
Couple	35.8	47.6	45.5
Total	100	100	100

Column totals may not add up to 100 percent due to rounding.

31. Claimants in couple contracts may not all be required to undertake activities associated with being in the IWS regime. If a claimant has characteristics that mean they could fall into more than one regime, the regime with the lowest conditionality will always apply. The work coach will ensure they are allocated to the regime that is appropriate to their circumstances.

Pregnancy and maternity

32. We have no evidence or reason to suspect that this change will disproportionately affect anyone with the protected characteristic of pregnancy or maternity.

33. Table 4 below provides proportions of parents and lone-parents in Light Touch group, broken down by those who would move into the IWS regime because of the AET change and those who would remain in Light Touch.

Table 4 ^{[footnote 8]}

	Move into the IWS (percent)	Remain in Light Touch (percent)	Total Light Touch (percent)
Non-parents	32.8	28.9	29.6
Parents	67.2	71.1	70.4
Total	100	100	100
Of this total, percentage who are Lone Parents	38.3	30.8	32.2

Column totals may not add up to 100 percent due to rounding.

34. The application of conditionality for pregnant women and parents with young children will be in line with the existing approach (for example, after 29 weeks of pregnancy, claimants will be moved to the No Work Related Requirements regime).

Race

35. We have no evidence or reason to suspect that this change will disproportionately affect anyone based on their race.

36. Table 6 show the breakdown of the UK working age population by ethnicity.

Table 6 ^{[footnote 9]}

	UK working age population (percent)
White	84.5
Asian	5.9
Black	3.6
Mixed	1.7
Other	4.2
Total	100

Column totals may not add up to 100 percent due to rounding.

37. The level of non-completion of the voluntary Equality Survey in the claimant UC portal represents both the level of uncertainty around the figures and means the likelihood of responder bias is more prominent. The effect of responder bias could be quite substantial, yet unquantifiable. Therefore, any attempt to infer meaning from these figures would likely be misleading. Consequently, no information on the ethnicity of UC claimants will be released. This information would not be meaningful until the completion rate is at 70 percent or above. Work is on-going to improve the completion rate.

Religion or belief

38. We have no evidence or reason to suspect that this change will disproportionately affect anyone based on their religion or belief. Data is not available on religion or belief for the working age population or Universal Credit claimants.

Sexual orientation

39. We have no evidence or reason to suspect that this change will disproportionately affect anyone based on their sexual orientation. Data is not available on sexual orientation for the working age population or Universal Credit claimants.

Sex

40. 49.9 percent of the UK working age population are male, and 50.1 percent are female ^{[footnote 10]}.

41. Table 5 shows the gender breakdown of Light Touch group, split by those who would remain in Light Touch group and those who would move into the IWS group because of the AET change. Women are impacted by this change more than men, with more women being brought into scope of sanctions.

Table 5 ^{[footnote 11]}

	Move into the IWS (percent)	Remain in Light Touch (percent)	Total Light Touch (percent)
Male	32.1	35.9	35.2
Female	67.6	63.7	64.4
Unknown/Missing	0.3	0.4	0.4
Total	100	100	100

42. Table 6 shows the Intensive Work Search regime sanction rate. Women have a lower sanction rate than men. As explained above, the policy intent is to provide all claimants earning less than the AET (regardless of their characteristics) with regular work coach appointments providing tailored support.

Table 6 ^{[footnote 12]}

	Aug-2022 (percent)
Male	10.3
Female	4
Total	7.7

Evidence Summary

43. We cannot identify the following protected characteristics from the UC data set readily available to analysts at this time: gender reassignment, pregnancy and maternity, race religion or belief and sexual orientation.

44. To conclude, the decision is to keep the policy unchanged despite negative impact. Having identified some adverse impacts (primarily that young people are those not entitled to the adult NLW will have to work more in order to reach the AET), we have decided to proceed with the change, as we assess the benefits of providing intensive support to people earning lower amounts will outweigh the potential negative impact. We will ensure that our evaluation of the September 2022 AET rise includes looking at the impact on young people, so we can refine and improve our approach further from January 2023.

Communications

45. On the 23 September 2022, the Chancellor announced this policy as part of the Growth Plan. The national coverage at the time has meant that there is already some awareness amongst claimants and stakeholders about this policy change. We will explore the potential for further national communications nearer the implementation date.

46. The process for the September 2022 AET change was to send claimants impacted by the AET change a journal message explaining the change, before sending them an invitation to the Claimant Commitment review meeting. This first meeting with the work coach will provide an opportunity to explain the change of conditionality regime, what this means for the claimant, and to ensure that the claimant commitment is tailored to reflect their circumstances.

47. We also issued information on the AET rise to welfare advice organisations, business representative organisations and sector bodies, the Youth Employment Group and organisations with an interest in disability and welfare. We will do the same for the change to the AET taking place in 2023.

48. We will evaluate and learn from the September 2022 AET rise so that we can refine the approach to communicating and engagement with claimants and stakeholders if necessary, working with operational colleagues to ensure clear and concise messaging.

Sign Off

Name of person who carried out this analysis: [Redacted], [Redacted]

Date analysis completed: 02/02/2023

Name of Senior Responsible: [Redacted] (deputising for [Redacted])

Date assessment was signed: 16/02/2023

1. Universal Credit: in-work progression randomised controlled trial - GOV.UK (www.gov.uk) ↩

2. Rounded from 11.71 and 18.64 hours. ↩

3. Analysis of population estimates tool for UK, Office for National Statistics, 2021. ↩

4. Analysis of internal UC data, June 2022. ↩

5. Benefit sanctions statistics to July 2022 (experimental) - GOV.UK (www.gov.uk) ↩

6. Analysis of internal UC data, June 2022. ↩

7. Analysis of internal UC data, June 2022. ↩

8. Analysis of internal UC data, June 2022. ↩

9. Annual Population Survey (APS), 2022, Nomis. ↩

10. Analysis of population estimates tool for UK, Office for National Statistics, 2021. ↩

11. Analysis of internal UC data, June 2022. ↩

12. Benefit sanctions statistics to July 2022 (experimental) - GOV.UK (www.gov.uk) ↩