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Sunday, 31 March 2013

Making Work Pay?

It's an admirable ambition - the idea that people who work should be better off than those who don't. It's great politics because it carries the suggestion that people are choosing not to work and all we need to do is to put the right incentives in place to stop the "benefit scroungers" leaching off of hard working people.

Now, if you're a temporarily unemployed merchant banker, the incentives to get a job paying £100,000 and stop claiming £71.70 a week Jobseeker's Allowance are pretty massive. Some more humble folks have an incentive too:

  • Take Mr Single Youth, aged 23 and still living with his parents. His JSA will be £56.80/week. Out of that he'll have to pay jobseeking essentials such as travel, phone, Internet and newspapers (although he may wangle some of these for free). He gives his mother £10/week towards his food and then there's clothing replacement and maybe an occasional drink with friends (which can be partially "justified" as networking)
  • He may even end up with £10/week to do what he likes with.
  • Now, suppose  Single Youth gets offered an apprenticeship at the miserly minimum wage of £2.65/hour a short walk from home. He only has to work around 22 hours/week to be (slightly) better off. If the apprenticeship is full-time or if he gets an ordinary job at £6.19/hour it's even better.
So, this person has a real incentive to work unless he's comfortable with only £10/week pocket money.
  • Now take Ms "Benefit Scrounger", a single parent, in a large  house with 5 unruly children. I calculated her benefit payment using the government's own calculator as £651.82/week but very soon this will drop to £500/week because of the "benefit cap".
  • She has very little chance of getting a job that  pays £651.82/week
  • If she has a job at all, around 70p of every pound will be lost as her benefit reduces.
An effective "tax" rate of 70% is little incentive to work as those on the top rate of income tax (recently reduced to 45%) will tell you.

Worse still, the price of having this "incentive to work" available is that if  she fails to find work through no fault of her own, she's £150/week worse off.

Some will criticise her for having five kids in the first place. Years ago, you could get away with comments about her being unable to keep a man. Some politicians will talk about sending "messages" that you can't just bred like a rabbit and have the state pick up the bill.

The problem is that she didn't plan to end up as a single parent on the dole with five kids - very few people do.

So, "making work pay" can't be achieved for everyone. We know and respect the fact that it can't work for many people living with disability. The sad truth is that  Ms Benefit Scrounger cannot realistically earn herself out of the "benefits trap". It's also quite unlikely that she can train herself out of it either. "For you have the poor always with you"

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