INCREASING EMPLOYMENT OUTCOMES USING PERFORMANCE MANAGEMENT INCENTIVES Jason A. Turner Practical Government Solutions Milwaukee Wisconsin USA Former Commissioner, New York City Human Services Agency;

WELFARE SITUATION  Continuous increase in welfare dependency in good economy and bad.  All efforts to increase employment outcomes had failed to result in significant positive change.  National employment program 1989, coincided with increase in welfare caseload by one-third a few years after introduction.

USUAL JOB TRAINING IMPACTS $10 BILLION ANNUALLY Wages 2 ½ years after: Men + 5% Women +10% Youth – female+1% Youth - male- 4% Youth - male, crime - 22%

WISCONSIN MAJOR FEATURES  POLICY Welfare benefits paid only after work activity  MANAGEMENT Fully privatized with companies at financial risk  PERFORMANCE INCENTIVE Private companies earn money through reduced government costs resulting from employment.

Contract provisions  Vendors paid only from benefit savings - Vendor earns first 7% of all government benefit savings resulting from welfare case reductions Additional benefit savings: - Vendor retains 10% - 45% to state government - 45% to local government

PROCESS CHANGES BY VENDORS  Critical attention to important outcomes, including caseload and employment.  Managers paid on performance basis.  Staff changes from social workers to business representatives.  Increased salaries for line staff. PROCESS CHANGES BY STATE AGENCY  Relaxation of process rules to vendors.  Attention focused on support services for employment

EMPLOYMENT TWO YEARS LATER  Total welfare cases at start 39, %  Closed because of earnings24, % WELFARE DEPENDENCY AFTER 3 YEARS  Statewide caseload before55,000  After11,000 POVERTY DECLINE AFTER FIRST YEAR Milwaukee child poverty 26% to 20%

NEW YORK CITY  Over 100 employment and training vendors  Vendors paid on cost plus basis  Central office had little influence on local operations (communication by mail).  Agency did not track employment status of recipients.  Bureaucratic culture  Agency lacked a program mission and reward system.

Compare

NYC CONTRACT PAYMENTS 1. Create Employment Plan $ Place in job and keep 30 days Still employed at 90 days Still employed at 180 days Bonus for case closing and wage gains MAXIMUM TOTAL $5500

Significant Achievements Progressive improvement in overall Center performance JobStat City Index Scores May - December, 2000

NYC EMPLOYMENT GAINS  First full year after change:  2 X more job placements  1/3 lower expenditures to government  Weak vendors dropped out of program voluntarily  Working in the private economy - - Mothers without High School degree: Working 1995:16% Working 2001:44%

UNITED KINGDOM  New Labor Blair government, 1997, changed orientation in favor of work-first employment policy influenced in part by US experience.  Employment efforts over ten years yield minimal results.  Blair government hires David Freud to write white paper exploring changes,  Labor government introduces partial performance payments,  Conservative government combines elements of Wisconsin and NYC performance incentives, 2011.

UK Performance Payments

Pricing placements Job Seekers Vendor cost per job 0 Contract $$ per placement

Performance payments by category

CONTRACT PRICE COMPARISON UK BEFORE NEW PROGRAM  ACTUAL COST PER PERSON PLACED - - $48,600 NY CITY CONTRACT MAXIMUM PER PLACEMENT - - $5500 UK NEW PROGRAM CONTRACT MAXIMUM - - $4480 UK LOWEST VENDOR CONTRACT BID FOR PLACEMENT - - $2300