Fair Work?

WorkhouseNews this morning of the Government’s plans to make those on unemployment benefit for over two years contribute something towards their payments from the State. As usual some on the right are delighted and some on the left are apoplectic. Cheers rise from those who think that a large proportion of those claiming Job Seeker’s Allowance are not seeking anything and boos resound from those who see this as nothing more than a 21st Century style workhouse approach.

Hmmmmm……

The plans are for claimants to work for 30 hours a week or they would lose their unemployment benefits. Whilst the idea of making some contribution towards the support the Government gives you is in principle a good idea, it raises all sorts of questions.

  • Isn’t this what national insurance is meant to pay for? Whilst admittedly the idea that your NI contributions are not just income tax by another name is dead and gone for all but final state pensions, surely if you have worked for decades and the find yourself unemployed it is rightly your turn to claim off the State?
  • Job Seeker’s allowance for those over 25 is £71.70 a week. Minimum Wage (from the 1st of October) is £6.31 an hour. I make it that Job Seeker’s Allowance is just under eleven and a half hours of work on the Minimum Wage. If we insist that some people need to work for their benefit then the most they should work is eleven and a half hours unless the Government pays them more. To demand someone works for 30 hours means they would be paid £2.39 an hour. That is unconscionable.
  • There is absolutely no way that unemployment claimants should have to work for any benefit that is also paid to those working (for example Housing Benefit). That would produce a situation where the Government treats unemployed people differently than employed people for the same benefit. That is patently unfair and unjust.
  • What are you going to do about claimants with children who fail to meet these new criteria? Will you take money away from those families? Will you penalise the offspring of those not doing their part?

In principle the idea that unemployed benefit claimants should do some work to contribute towards their money from the State has merit. But in practice there is the real possibility that we treat people in a manner that would otherwise be illegal (paying them a pittance) or penalising those who have done nothing wrong.

So, a few thoughts.

  • If we really want to move to a system where after a while on benefits you have to contribute something, then we need to create a much more European style of social insurance. If I contribute for 30 years into the central pot I should be able to claim benefits longer than someone who has only paid for a few years. And yes, someone who comes straight onto the Dole after education should expect to have to contribute towards their benefit from the word go. This would emphasise the point that everything costs something to someone and that no-one is owed anything by the State if they don’t give something back.
  • Work in exchange for benefit should be paid at very least at the minimum wage. It would be immoral (and possibly illegal) to do anything other. This means that most jobseekers should only have to work eleven or twelve hours, not thirty. It is a basic principle that the worker is worth his wage. If we create pittance wages for those long-term unemployed then we run the danger of creating a whole underclass stuck working 30 hour weeks for a tiny handout.
  • Furthermore the only people who at the moment do community service under compulsion are those who have committed a crime. Are we happy putting the unemployed in the same bracket? We must make sure that those who contribute towards their handout from the State are treated like real workers, not pariahs.

There is nothing wrong with helping people understand that there is no unlimited pot of money and that one needs to work to bring in a pocket full of cash. Yes, some people need to deal with issues around their unemployability and others need to work much harder to try and find a job. But in the midst of trying to help those long term unemployed find work we are in serious danger of creating an iniquitous situation where we force people to work for the benefit of the State for a pittance of a return, and we punish third parties for their failure to comply.

Let me know what you think whilst I go and find my copy of HG Well’s “The Sleeper Awakes“.

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  • Sigfridii

    In the Orwellian chaos into which we have descended since the War, words have become very slippery terms indeed. The idea that National Insurance relates to any of the benefits which are provided nowadays by the state is simply laughable. The amount which was paid in used to be reflected to a modest degree in the sums paid out when needed, but not any more. Even state pensions are now to be paid at a flat rate, irrespective of the amount of NI or tax paid during a working lifetime – now reckoned at 30 years rather than 43. And those who don’t qualify for the full (derisory) state pension will be able to make it up with other benefits. In other words, NI is no more than another tax these days.
    “Jobseeker’s” allowance is also an Orwellianism. No doubt some are genuinely seeking a job, but for too many people, when it is added to the raft of other benefits available, it simply becomes a chosen lifestyle. Enough to eat, provide housing, a modest standard of living, a 52″ TV and Sky package, 20 fags a day and an evening out drinking somewhere. The prospect of having to do manual work at the behest of the state will frighten some of this class of people into actually looking for work, and compel others to stop sponging off other people’s taxes. Those who are genuinely unable to find work, despite being able bodied, will be able thereby to contribute towards the full cost of keeping them – which is much more than just the Jobseeker’s Allowance.
    BTW the government should also cap Family Allowance at 2 children. The country can not cope with the explosion in population which is being brought about by all the freebies on offer to those who want to breed at other people’s expense. Indeed there should be a tax on the third and subsequent offspring.

    • http://www.peter-ould.net Peter Ould

      A tax on the third and subsequent offspring? Really? Good grief…

      • Sigfridii

        On reflection, perhaps the best method would be not to provide any financial incentives – and cancel Child Benefit. If people want to have children they should bear the cost.

    • Wolf Paul

      this at a time when we are wondering whether fewer and fewer working people will be able to afford paying for more and more retired folks? Somehow I don’t think this makes sense. The population explosion may exist in India or China, but certainly in no European country. And the folks in India and China will NOT pay for our pensions.

      • Sigfridii

        There is a population explosion in the UK on an unprecedented scale in modern history. Public services are under a massive strain to cope with the surge in numbers, and there is nowhere for all the new inhabitants to live. The UK still has some green space left, but at the present rate it will be grossly overpopulated within 50 years if more and more children are born, and have large families in turn. We are unable to feed them, and water is already in short supply. “The folks in India and China will NOT provide” these things.
        The Chinese government does try to control its population, but India is growing exponentially and faces massive problems because of the huge numbers of new mouths to feed.

        • Fiddlesticks

          You do realise that the Chines government ‘controls its population’ by arresting women and giving them forced abortions/hysterectomies?

        • Peter Den Haan

          There is no unprecedented population explosion. The Office for National Statistics projects a modest 10M increase in 25 years http://www.ons.gov.uk/ons/rel/npp/national-population-projections/2010-based-projections/sum-2010-based-national-population-projections.html . I think you’ll find that other countries have thrived on much worse. In other news, let’s hope they are right; because if birth rate and/or migration come out lower than expected, we will all be in enormous demographic and economic trouble (pensions? what pensions?)

          Please, we can do without unsubstantiated scare stories.

          • Sigfridii

            I don’t know which country you live in, but an additional 10m in the UK is an enormous number for a small country to absorb, and it is a serious underestimate when many of those will in turn expect to have large families all funded by the state.

            • Peter Den Haan

              Living in the UK. That growth corresponds to about 0.8% a year, clearly significant but hardly cataclysmic. And it’s the only way to mitigate the demographic time bomb we’re sitting on. A stable population would not be good news at the moment.

              I think you’ll find that the vast majority of migrants are here to work hard, not to live on state handouts. That’s what my wife tells me, and she is an immigration lawyer who gets to see the good, the bad and the ugly on a daily basis (and she’s neither naive nor a soft touch).

              • Sigfridii

                The economic benefits of migration are seriously mixed. The UK’s resources, especially housing and medicine, are seriously overstretched already. A migrant who takes a job which would otherwise be available to an existing resident is also likely to bring their extended family. Whatever they contribute by way of taxes will be more than absorbed by the social security costs to the state of maintaining their family.

                • Peter Den Haan

                  Be careful – macroeconomics is not a zero-sum game. The migrant may or may not take up a job that an existing resident might have done (many do work that natives sniff at), but (s)he will also expand the economy. Migration and other sources of population growth create new jobs.

                  Your second argument is a complete non-starter. You seem to make the implicit assumption that most migrants won’t be able to provide for the families and therefore these would be a burden on the taxpayer. In actual fact, before you can bring your family over, you have to demonstrate that you can support them by earning £18,600 for a spouse, £22,400 if you also want your child.

                  http://www.ukba.homeoffice.gov.uk/visas-immigration/partners-families/citizens-settled/spouse-cp/can-you-apply/financial/

                  I’m speaking as a migrant who is proud to have provided a net positive contribution to the UK economy over the last 15 years.

                  • Sigfridii

                    Meanwhile there are already just under 1m UK residents under 25 who are out of work. Whatever the Daily Mail says, they are not all scroungers who refuse to work, and many of them are recent graduates with high qualifications. However they have to compete for jobs with people from all over the world, attracted here by the high pay on offer and the astonishing social benefits provided for their families. The politicians fail completely to provide for their own citizens. preferring instead a laissez-faire attitude which says (on one hand) that they provide cheap labour, and on the other, that they will provide a pool of new Labour voters. The rest of the consequences are overlooked in the scramble for profits/voters.

                    • Peter Den Haan

                      Youth unemployment (across the board) is indeed a huge problem. It is really rather interesting that you’re focusing on migrants, rather than the lenders, banks and regulators who precipitated the greatest recession in living memory in the first place.

                      The word “scapegoating” comes to mind.

                      If you dig a little bit into it, you’ll find that it isn’t exactly easy for an economic migrant from outside the EU to get in. Those that do, contribute £7-£16 billion to GDP according to the OECD.

                      http://blogs.telegraph.co.uk/news/jameskirkup/100221789/immigration-and-the-british-economy-the-awful-truth-is-revealed/

                    • Fiddlesticks

                      True. If you do not have refugee status, you have to provide a lot of evidence of ability to sustain well paid employment and also pass an exam that most British born citizens couldn’t pass. Your employer has to have good reason for giving the job to you and not to a UK citizen that wouldn’t give them so much paperwork to do (i.e. you have to have something special to offer).

                      Sadly, many refugees fleeing war or persecution find their qualifications are of little value in the UK. They are not competing with UK graduates – they’re getting jobs as cleaners. If UK graduates cannot get a job, it’s because companies are no longer hiring and the graduate schemes have dried up. They are not competing with international students (who get chucked out pretty quickly after graduation if they cannot find a job) and they’re certainly not competing with asylum seekers.

            • Fiddlesticks

              Well, aren’t you a modern day scrooge: “If they would rather die,” said Scrooge, “they had better do it, and decrease the surplus population.”

    • Peter Den Haan

      Interesting. The fact on the ground, as opposed to tabloid cloud cuckoo land, is that there are few people for whom benefits are a “lifestyle choice”. Life on benefits is pretty grim. In addition, despite the political rhetoric there are virtually no “benefit culture” families where long-term benefits span multiple generations. See e.g. http://www.jointpublicissues.org.uk/wp-content/uploads/2013/02/Truth-And-Lies-Report-smaller.pdf

      A tax on the 3rd and subsequent offspring means making the children the victim of their parents’ bad choices. All it will accomplish is perpetuate the cycle of material and spiritual poverty and underachievement.

      I’m really curious what all these benefit claimants are supposed to be doing during these 30 hours’ of almost-unpaid slave labour. Is this going to displace actual jobs that people could and should be paid a living wage for? If so, we would be creating an underclass of virtual slaves whose potential jobs have been obliterated precisely by the measures that are supposed to flog them into employment.

      Finally, I wish there were a mainstream politician brave enough to point out the sheer lunacy of all this supply-side pressure when it is demand for labour that’s weak, not supply.

  • Tim Vaughan

    If the government pays at least minimum wage for community service work, it ends up competing unfairly with other employers and would probably make unemployment worse (why bother doing a normal job if you can get paid just as much for community service?). I’m ok with this work paying below minimum wage as it retains the incentive for people to look for work in the marketplace.

  • gerv

    I agree that NI is no more than another form of income tax. In fact, various people (like the Taxpayers Alliance) are arguing that it should be reclassified as such, as a simplification and transparency measure.

    I’m surprised that you equate the payment of the minimum wage with what is moral and what is not. “The worker is worth his wages” – but how do you decide what those wages are? The original context is that you shouldn’t _expect_ gospel workers to teach you the gospel for nothing. Which is true. But for a more ordinary job, surely “his wages” are whatever the market can bear? If the government said I had to pay a cleaner £20 an hour, would it be immoral (as opposed to illegal) to pay them £19?

    I agree with the above commenter that (if you assume the existence of both the welfare state and the minimum wage) the incentives get entirely messed up if you pay people the same amount on welfare as you pay them on the minimum wage. Then there would be zero financial incentive to get a private sector job.

    There is a tension here between the idea that the minimum wage should be the minimum someone needs to live on, and the idea that benefits should be below minimum wage to incentivise people to find a job. (Don’t ask me how to resolve it – I might suggest scrapping both :-)

    “There is absolutely no way that unemployment claimants should have to work for any benefit that is also paid to those working (for example Housing Benefit).”

    You’ll need to expand on this. If one thinks of benefits as what you get back as a result of your contributions (this whole system is screwed up, but trying to think within it) then why should someone who is working and contributing to the tax base and the economy not get benefits as a result of that work, and other people who are not working are asked to do work in order to get those same benefits?

    “If we create pittance wages for those long-term unemployed then we run the danger of creating a whole underclass stuck working 30 hour weeks for a tiny handout.”

    Is this better or worse than having a whole underclass stuck doing nothing for a tiny handout?

  • http://u-church.blogspot.com/ David Shepherd

    The purpose of unemployment insurance lies in its economic stabilisation effect. Unemployment benefit primarily dampens the effect of business cycles, so it can significantly mitigate the loss of real GDP during a recession.

    In the simplest terms, the benefit sustains the buying power of the unemployed in order to prevent a domino ‘loss of trade’ effect on other businesses. Ergo, trying to make the benefit proportionate to the level of contributions into the central pot defeats its primary objective. It’s purpose is not focussed on redistributing income, but maintaining spending.

    That said, the Chancellor’s focus on the long-term unemployed is a shell game. Under past administrations, we’ve been variously told to focus on the caricature ‘hate-figures’ from the new Samaria. The dodgy idle benefits scrounger woh has not had the decency to flog his mobile phone and flat-screen TV before joining the dole queue. The fake disability claimant with a penchant for short-term cash-only labour and quick-release neck braces. The spendthrift single mum, binge-drinking on family tax credit while her ‘home-alone’ kids fend for themselves, or the Eastern European ‘crime-wave’ asylum-seeker who absconds from one of our many luxury detention centres.

    Meanwhile the outrageously wealthy hedge funds, private equity firms enjoy tax loopholes worth over $20 billion and multi-national corporations, like Starbucks and Google can run rings around HMRC: reporting seven-figure profits on ten-figure UK turnover or even a loss, all due to phantom royalty fees to holding companies, internally inflated raw material prices and European tax regime disparities.

    Impunity doesn’t even begin to describe it!

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