INCREASING EMPLOYMENT OUTCOMES USING PERFORMANCE MANAGEMENT INCENTIVES

1. INCREASING EMPLOYMENT OUTCOMES USING PERFORMANCE MANAGEMENT INCENTIVES Jason A. Turner Practical Government Solutions Milwaukee Wisconsin USA Former Commissioner, New York City Human Services Agency; 1998 - 2002

2. WELFARE SITUATION 1964 - 1993 • Continuous increase in welfare dependency in good economy and bad. • All efforts to increase employment outcomes had failed to result in significantpositive change. • National employment program 1989, coincided with increase in welfare caseload by one-third a few years after introduction.

3. 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%

4. 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.

5. 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

6. 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

7. EMPLOYMENT TWO YEARS LATER • Total welfare cases at start 39,000 - 100% • Closed because of earnings 24,300 - 62% WELFARE DEPENDENCY AFTER 3 YEARS • Statewide caseload before 55,000 • After 11,000 POVERTY DECLINE AFTER FIRST YEAR Milwaukee child poverty 26% to 20%

8. 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.

10. Compare

12. NYC CONTRACT PAYMENTS • Create Employment Plan $250 • Place in job and keep 30 days 1500 • Still employed at 90 days 1500 • Still employed at 180 days 1250 • Bonus for case closing and wage gains MAXIMUM TOTAL $5500

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

14. 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%

17. 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, 2007. • Labor government introduces partial performance payments, 2009. • Conservative government combines elements of Wisconsin and NYC performance incentives, 2011.

18. UK Performance Payments

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

20. Performance payments by category

21. 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