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There have been changes in how the Department for Work and Pensions (DWP) contracts with the network of non-profit and for-profit providers who deliver employment programmes. In 2008, DWP's 'Commissioning Strategy' outlined how it would further reshape this 'welfare to work' market through the introduction of prime contractors, whose funding would primarily depend on their success in securing sustained job outcomes. Prime contractors already deliver the Jobcentre Plus Support Contract, European Social Fund provision, and 'Work Choice', a specialist disability employment programme. From mid-2011 they will also begin to deliver the larger Work Programme (WP). The British approach to commissioning and managing outsourced employment services has been influenced by comparisons with, and learning from, developments in the contracted out Australian employment assistance system. This project reviewed literature on the development and impacts of the Australian outsourced employment services system and the transition from the Job Network (JN) to Job Services Australia (JSA). Another phase included interviews with 20 senior policy makers, providers, and research and advocacy organisations in November 2010.

In many countries employment services and labour market programmes, whether delivered by public agencies or contracted providers, are found to be less effective in meeting the needs of more disadvantaged job seekers compared to other unemployed people. This article reviews evidence on how countries that outsource employment programmes design outcome-based payments, contracts and differential prices to ensure more equitable outcomes. It considers the extent to which such mechanisms have mitigated the risks of 'parking' and 'creaming' which are commonly associated with contracted out employment services.

Despite the relative effectiveness of recent reforms to the employment and skills system the Leitch Review (1996)identified some key problems. Welfare to work programmes had few incentives to focus on skills, job retention and progression; the skills system had little focus on employment outcomes; and the targets and incentives in both systems did not encourage a joined-up service for individuals or employers. The UK Commission for Employment and Skills (UKCES) subsequently proposed the integration of employment and skills provision and the use of outcome based commissioning. The Government is now seeking to implement such changes and to ensure that providers' success is defined and measured in terms of their responsiveness to labour market needs and the outcomes from their provision. Debates about outcome based commissioning and contracting, and their application to employment and skills provision, have frequently referred to the experience of other countries, especially the USA and Australia. The USA was the first to introduce explicit performance and outcome standards in its employment and skills system and to connect these with financial incentives and penalties. Australia has sought to create quasi markets in its vocational education and training and is the only OECD country to fully privatise its employment assistance system where a major part of provider income is dependent on securing job outcomes. This report assessed the commissioning and contracting processes through which employment and skills provision is procured in both these countries and sought to identify design and implementation issues that may have implications for the reforms currently being introduced within the British system. The findings reveal that in the USA and Australia respective federal Governments increasingly have set explicit performance and outcome targets within wider reform strategies designed to increase employment rates, reduce welfare dependency and increase skills attainment and utilisation. Performance management systems have been redesigned with public sector employment and skills delivery agencies subject to greater scrutiny and accountability and, where service delivery has been made contestable, challenged by the entry of other providers, including those from the private sector. There are multiple variations in the performance and outcome standards that apply to training and employment services but in the USA they typically include job placement rates, earnings, retention in employment and, for training programmes, skills and qualifications obtained. Studies in both countries show that delivery of employment and skills programmes is subcontracted to a wide range of public and private agencies with performance standards and outcome measures reflected in service delivery agreements and/or contracts with providers. The terms of such contracts differ widely, with varying amounts of provider income dependent on securing agreed outcomes or performance standards. Only in some welfare to work and employment programmes is a major part of provider income dependent on securing sustained job outcomes. It is important to note that these contracts are not exclusively outcome based and typically have other performance and process requirements embedded within them. Views on the success of such contracting systems are mixed and even where the results may appear impressive, it is difficult to disaggregate the impact of the outcome based contracting system from that of other policy changes. Moreover, whilst the cost and efficiency gains claimed for US and Australian models appear significant relatively little is known about how far these gains have been offset by high transaction costs or reduced service quality, especially for the most disadvantaged. There is evidence that minimising cream-skimming, creaming and parking are significant challenges in both public and private sector incentive and target driven delivery systems. Such risks may be reduced through contract design and oversight. The inclusion of measures related to job retention, wages and benefits, and earnings gains, for example, all help diminish any incentive to place participants into poor quality jobs. Measures indicating completion of assessments and activities and regular surveys of participant and employer experience help limit the ability of providers to service clients differently. The challenge is to design such process and outcome measures in ways that do not create unnecessary administrative burdens and allow providers flexibility in how they secure outcomes. The findings show that the implementation of performance and outcome based commissioning and contracting has been dynamic and that government agencies and 'purchasers' frequently have had to revise performance standards and contractual terms as problems have arisen and conditions have altered. In both countries there has been much 'learning by doing' and constant adaptation as officials have sought to establish performance management and payment structures that now aim to increase the duration of job outcomes, reduce creaming, integrate skills provision, improve service quality, and control any potential for perverse incentives or 'gaming' of systems. In this process much knowledge has been gained about different contracting models, the relationships between service delivery and performance incentives, and how to define relevant outcomes. This knowledge, and that developed within the UK, must inform policy makers' efforts as they seek to operationalise employment and skills outcomes, such as those proposed by UKCES, into more effective performance management and contracting systems. The review findings show that in both the USA and Australia there remain legitimate differences in the outcomes sought from 'work first' employment and welfare to work programmes and those sought from vocational education and training systems. Efforts to improve the connections and coordination between these 'work first' and skills development programmes are, however, hampered by these differences and by the distinct funding streams and bureaucratic mechanisms through which such outcomes are sought. Such problems are shared in the UK employment and skills system where variation in Government targets and incentives makes coordination and integration of services more difficult. This is particularly evident in the contrasts between the sustained job outcomes that DWP requires contracted employment providers to secure against the short term employment entries that enable Jobcentre Plus to meet its employment targets. It is also clear in the primacy given to qualification attainments in the skills system with less regard given to subsequent employment or whether the skills acquired are actually valued and utilised in the workplace. In addition to more general findings from this study there are three particular proposals that, when tested, might augment current efforts to better coordinate and integrate employment and skills provision in the UK. The first proposal concerns how to better integrate skills provision within DWP employment programmes for the long term unemployed. It concerns adapting the redesign of job focused outcome payments within the Job Services Australia system for use with FND and other contracted out DWP programmes. It would involve giving incentives to providers to broker training places with employers and rewarding them when participants they have helped access training are placed in jobs that make use of the skills developed. The second proposal concerns enhancements in the assessment of the employment outcomes from skills programmes and of the qualifications gained. This should involve the use of enrolment and destinations data, collected administratively or through leavers' surveys, to establish the employment and wage rates of participants. Such data could be used to establish whether participants improved their employment position as a result of their training and the extent to which they utilise any skills gained in their current employment. Such data could be combined into a measure of workforce quality as suggested in Australia. Finally there would be value in swiftly reviewing the many contrasting outcome requirements that exist within the British employment and skills system, and in how they are measured, with a view to developing 'common performance' or 'return on investment' measures, similar to those being developed in the USA. Such agreed common measures would help minimise different performance, outcome and reporting requirements and facilitate co-commissioning and the alignment of skills and employment funding. They also would help facilitate greater coherence in the performance and outcome standards that providers have to meet. At the same time such a review could critically audit the varying contracting and financial practices of the different public agencies involved in procuring skills and employment provision. The aim should be how to simplify such requirements and, if budgets cannot be integrated, to consider the extent to which 'master contracts' might reduce complexity in the system and assess whether employment and skills purchasing might be better managed by the recently proposed single professional procurement agency.

The Department for Work and Pensions (DWP) contracts with an extensive network of non-profit and for-profit providers for the delivery of employment programmes. Over the past ten years there has been significant change and the Government now has committed to a strategy of 'welfare market' reform. This will involve 'black box' contracts that are less prescriptive about processes and will reward providers on the basis of getting participants into sustained employment. The principles of this strategy will be applied first to the 'Flexible New Deal' (FND) and 80 per cent of funding for external contractors will be paid for placing participants into jobs. Employment programmes are designed to provide enhanced assistance to service users with particular barriers to entering or staying in employment. Despite the positive impacts of many programmes, evidence suggests that most of them, whether delivered by public agencies or external providers, are less effective in meeting the needs of the 'hardest to help'. This outcome can be a function of poor programme design but it also reflects the reality that the front line delivery and intensity of employment assistance is impaired by the constraints of the available funding, the character and scale of job opportunities and the tractability of the barriers faced by some of the hardest to help. The particular risk of outcome-based payment systems is, however, that they may provide greater incentives for 'creaming' and 'parking', where providers work most with those who are more easily placed and provide a minimal service to the harder to help. In this context the DWP Commissioning Strategy stresses the importance attached to overall 'excellent customer experience'. It commits also to 'trial different models of outcome payments' and work with providers to 'develop more sophisticated, differentiated models' that identify service users who may be helped quickly and those who need more intensive support. Such a differential payment model may have the potential to increase the number of overall outcomes secured and target extra incentives at the harder to help.

New Labour is introducing an 'employment first' welfare state. This article assesses the impact and limitations of the first wave of measures that, since 1997, have involved the introduction of New Deal employment programmes, tax and benefit reforms to 'make work pay' and mandatory work focused interviews for working-age claimants. The reform process now has accelerated and key elements of a New Labour third-term strategy are already clear. They involve full implementation of the new front line 'employment first' system delivered by Jobcentre Plus, radical reform of the Incapacity Benefit system and new Pathways employment programmes aimed at lone parents and people claiming disability benefits. There also will be renewed efforts to enable skills acquisition by those without qualifications and improve 'employment retention and advancement' among those moving into jobs. Effective implementation presents a major challenge and other reforms may prove necessary if New Labour is to realise its ambition of an 80% employment rate.

This study assesses the context and development of the British NMW and the evidence of its impact. The study outlines the earlier system of Wages Councils, abolished in 1993 as part of the British Conservative Government's policy that, from the early 1980s, had deregulated much of the British labour market. It explains how the campaign for a National Minimum Wage developed and attracted support from the trade union movement and Labour Party. It details the debate that took place in Britain about the impact of a minimum wage and the arguments for and against its implementation. It then describes the NMW legislation that was introduced in 1998 and the role the minimum wage plays in the New Labour Government's "make work pay" strategy. It reviews the reports produced by the independent Low Pay Commission that makes recommendations to Government about the rate and coverage of the minimum wage in light of prevailing economic circumstances and the representations of interested groups. This study also outlines the impact of the NMW on earnings, wage differentials, employment levels and poverty. It further explains how the NMW is enforced and considers related issues concerning the position of low paid workers earning less than the minimum wage. Finally it explains about a continuing debate on the rate at which the NMW should be set and enforced. ; Diese Studie bewertet den Hintergrund und die Entwicklung des gesetzlichen Mindestlohns in Großbritannien und die Belege für seine Wirkungen. Das vorausgegangene System der Entlohnungsbeiräte, 1993 im Rahmen der Deregulierungspolitik der konservativen Regierung abgeschafft, wird kurz skizziert. Es wird dann erklärt, wie sich die Bewegung für einen gesetzlichen Mindestlohn entwickelte und Unterstützung bei den Gewerkschaften und der Labour Party fand. Die Debatten über die zu erwartenden Wirkungen eines Mindestlohns und das Für und Wider seiner Einführungen werden analysiert. Die Studie beschreibt dann die 1998 eingeführte Gesetzgebung zum Mindestlohn und ihren Stellenwert in der Strategie der Regierung von "New Labour" zur Verbesserung der Arbeitsanreize. Sie fasst die Berichte der unabhängigen Niedriglohn- Kommission zusammen, die in Ansehung der wirtschaftlichen Lage und nach Beratung mit den betroffenen gesellschaftlichen Gruppen Empfehlungen an die Regierung über die Höhe und den Geltungsbereich des Mindestlohns erarbeitet. Die Studie fasst auch die verfügbaren Daten zum Einfluss der Mindestlohngesetzgebung auf Verdienste, Lohnunterschiede, Beschäftigungsniveaus und Armut zusammen. Sie erklärt außerdem, wie der Mindestlohn durchgesetzt wird, und geht auf verwandte Probleme bezüglich der Position von Geringverdienenden ein, deren Lohn geringer ist als der Mindestlohn. Schließlich erläutert sie die aktuelle Debatte über die künftige Höhe und Durchsetzung des Mindestlohns.

Abstract New Labour is constructing an "employment‐first" welfare state. It plans through Jobcentre Plus to transform the passive culture of the benefit system by creating more explicit links between individual behaviour and engagement with labour market programmes. The New Deal for Young People (NDYP) has been at the forefront of these changes. This paper reports on the findings from four case studies that explored how the NDYP has changed young people's experience of the welfare state. It establishes that NDYP offers a mixture of employment assistance and "pressure" and has made progress in developing front‐line services and helping young long‐term unemployed people into work. NDYP does not, however, work for all. In areas of high unemployment and for some disadvantaged groups intermediate labour markets could enhance the New Deal and make real the offer of "employment opportunities for all".

Welfare systems in the European Union and in other OECD countries are under pressure. In response, governments have embarked on major reforms aimed at creating work-based welfare systems. The new approaches involve radical changes in traditional welfare and employment agency bureaucracies. In most countries this has been coupled with decentralization and the increased use of local partnerships and organizations in designing and implementing new 'Welfare to Work' programmes. This article assesses these broad developments and describes the implementation of recent Welfare to Work strategies in three countries – Great Britain, the United States, and the Netherlands. The article compares and contrasts the approach of each country and outlines some of the key developments and implementation problems that have emerged. It briefly assesses the evaluation evidence so far available and analyses the potential and problems that more flexible local delivery arrangements are likely to generate.