ippr Learning Exchange to New York – Summary of Findings

In June 2010, as part of its innovative project, Now it's Personal, ippr offered an opportunity for policymakers and practitioners to visit New York City (NYC) to facilitate learning and exchange of best practice between US and UK providers, advisers and policymakers. Delegates came together to learn from the US approach to welfare and to think creatively about new ways of responding to the current challenges in the UK.

Here we set out some of the findings from the exchange. This article explores the roles of the main bodies working to reduce welfare dependency in NYC, ranging from the large prime providers contracting out welfare to work services, to the not-for-profit organisations serving particular communities in the city. The concluding section identifies some key areas for the UK to draw on from the approach to welfare to work in New York.

NYC: A model approach?

Welfare reform in the US began in the mid-1990s with the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 and the Workforce Investment Act of 1998. These federal laws provide for block funding to be allocated to all US States. In the state of New York, the current conditions attached to block funding are that a work participation rate target of 50% is reached and benefits are time-limited by five years with the aim of reducing welfare caseloads and increasing employment.

In New York City welfare to work services use a prime provider model with payment by results. Large contracts are awarded to a small number of providers, with the understanding that these primes may sub-contract specialist services to other providers. The focus on outcome-based commissioning has resulted in an approach in the US which is heavily focussed on measuring and monitoring performance.

There is much evidence to show that welfare reform in NYC has been successful on its own terms – that is in achieving a huge reduction in welfare caseloads. Public assistance recipients fell from 1.1 million to around 350,000 (although in April 2010 there was a very slight rise due to recession). But behind this apparent success, unemployment is still high and poverty remains acute in many areas. There are currently 9.6% unemployed (three points higher since the economic crisis) and there has been little change in these figures between 2001 and 2006.

ippr learning exchange aims

ippr’s five-day programme included visits to the Deputy Mayor of New York and the Center for Economic Opportunity, a Job Center, prime contractors, sub-contractors and community based organisations.  The aims of the exchange were to:

• learn from the New York City’s experiences of contracting out services under a prime contractor model and to consider how lessons learned can be applied to the UK.
• gain an understanding of the City’s ‘Back to work’ programme and the approaches of different organisations to supporting and retaining individuals in work.
• consider how this learning can be applied to the UK welfare system. 

The ‘model’ job center:

A visit to a ‘model’ job center, which is currently rolling out a new approach to engaging with clients, showed an efficient service for the early stages of a client’s welfare application. Advisers receive 75 days of training before engaging with clients and customer service is given paramount consideration. A key focus for the ‘model’ job center has been to respond to the long waiting times which had led to clients being upset and disengaged in the past. The center operates a ticketing system which allows staff to record a client’s journey through the different areas of the center. The aim is to make the customer journey as seamless as possible and to be able to monitor and reduce waiting times where possible. Consideration of the atmosphere at the center was also a key feature. For example, the walls in the reception area are painted in the colour lavender to instil a calm environment.

Job centers are held to account by the Human Resources Administration (HRA), the body responsible for issuing contracts to prime contractors, and managers have to attend regular job stat meetings, where almost 40 separate indicators are scrutinised, including the numbers of people on certain benefits, waiting times and referral rates.

The environment at job stat was supportive, but challenging. For example, if waiting times had increased for clients, Job centers had to explain why, and outline a strategy for improvement. There was a marked difference in the higher success rates of the ‘model’ job center in engaging clients in employment, in comparison to other job centers.

The Prime Provider: NYC’s approach to contracting out services

The HRA has contracts with eight primes, (the commissioning model is set out in the chart below) which include both private and not-for-profit providers.

A hands-on approach to commissioning hasplayed a vital role in maintaining apparently successful day to day operations and has ensured a system that is flexible and responsive, not only for prime providers but also the organisations they subcontract with. Regular personal contact is comparatively easy to achieve at a city level. But there were principles that could be applied in the UK where the commissioning relationship will be between a national commissioner and a larger number of primes. These would include frequent and open dialogue and regular opportunities for public accountability.

There are innovative models for the UK to learn from, notably the approach taken by Seedco, a not-for-profit prime provider which thrives by partnering and capacity building with community-based organisations, acting as an intermediary to deliver Back to Work contracts. Its funding model allows smaller, community based organisations (CBOs) to engage in the welfare to work market. Seedco fronts the capital and just 50% of the CBOs payment is linked into outcome based performance targets, which mitigates some of the financial risks for the CBOs.

In order to make this model viable, Seedco also leverages money from additional sources, such as foundations and individual donations. Seedco has mostly worked with the same CBOs since initiation. It is evidently challenging for Seedco to establish new partnerships with CBOs because of the cost and resources required.

Within the context of an economic downturn, doing more for less is seen as increasingly important. F.E.G.S, a major prime provider (and not-for-profit) in New York delivering HRA contracts uses over 2000 volunteers in all its operations (across a range of activities). The service F.E.G.S provides is holistic, offering an integrated service provided on-site at a ‘one-stop-shop’. Imaginative approaches to vocational rehabilitation are employed, such as using on-site facilities to introduce clients to sectors, such as catering and cleaning. The retention rates at F.E.G.S are reflective of the wider HRA client base: 82% at 3 months (HRA 86%) and 74% at 6 months (HRA 80%). However there was a steep ‘funnel’ for clients who dropped off before the end of the programme; high retention rates reflect a smaller client base.

Community Based Organisations: Pioneering alternative approaches to supporting and retaining people in work

In a market dominated by a relatively small number of Primes, community-based organisations play an important role in innovation in NYC. Some of the community based providers, such as the influential STRIVE programme in Harlem and the Henry Street Settlement on the lower east side of Manhattan are putting a greater emphasis on establishing the ‘soft’ skills needed for work.

STRIVE’s approach focuses on 'attitudinal training' and works closely with the private sector to facilitate job placements and ‘green job’ placements in particular. Peer support is also an important feature of the success of the STRIVE model around retention and post job-placement support. While choosing not to contract with the HRA, STRIVE partners with the HRA to benefit from its wage subsidy program which provides a means to work with employers interested in hiring STRIVE’s clients.

The Henry Street Settlement however is sub-contracted by Seedco to deliver an HRA-funded ‘Back to Work’ programme and supports both voluntary and mandatory clients (1200 Back to Work clients with total client base of 50,000). The key advantage of their delivery is that they are a trusted community organisation with access to wide range of wraparound support. Despite the difficulties for Henry Street in meeting the financial challenges of Back to Work contracts, they view the benefits as far outweighing the disadvantages. These include being part of a network of providers helping to build their reputation, learning best practices from other providers, benefiting from joint analysis of data and trends and a leveraged voice to negotiate with the HRA.

Finally, the Centre for Economic Opportunity (CEO) is tasked by New York’s mayor ‘to implement innovative ways to reduce poverty in New York City’. Their programmes include conditional cash transfers, engaging disconnected youth and workforce development initiatives. The pilots are generating interest from across the US and the Obama White House and offer some exciting ideas to pilot in different settings.

Conclusions: What are the key areas for the UK to learn from?

In New York it is evident that local knowledge and the ability to play a role in local service integration, has been vital for the HRA’s commissioning strategy. In the UK, Local Authorities currently have an uncertain role in the welfare to work industry, particularly around the extent to which they should have a part to play in designing and delivering the local welfare to work market. This raises questions about the role of Local Authorities in working closely with the Department for Work and Pensions, particularly in the context of a strong policy focus on localism.

In the US a focus on job creation, green job initiatives and stimulus money to support initial job placements have been part of the approach to think creatively about ways to reduce welfare dependency. Learning by the example of the US in this area will be of continued importance for both policymakers and providers in the welfare to work industry.

The ippr Learning Exchange provided the opportunity to reflect on what is working well in the US and how this can be incorporated, or adapted, in the UK. But it also served as a reminder of what works well within our current system, in particular the emphasis on providing personalised services and the attempts to produce job outcomes that are sustainable in the longer term. The ‘work first’ approach to welfare reform, with a focus on performance and transparency, is evidently leading to high numbers of job placements in New York. But the degree to which the approach leads to long term retention in work and advancement is harder to assess; a more qualified approach to ‘work first’ may prove more successful in the longer term.

In addition it was clear that ‘creaming’ and ‘parking’ was still a feature of the Back to Work Programme, despite efforts from commissioners and providers to eliminate the problem.In the UK Welfare to work providers and policy-makers in the will need to continue weighing up the focus on performance and outcomes with the need to support people who are furthest from the labour market, and to work towards supporting people into jobs that are sustainable in the longer term.