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December 19, 2006

Polly on Unemployment

Something a little confused here:

But let's keep this in perspective: there are only 100,000 of these hard cases, and the jobseeker's allowance is a pathetic £57.45 a week, not enough to survive on. I tried, and fell into unavoidable debt within weeks. Those in debt fear taking a job as loans sharks chase them once they start earning.

Loan sharks don't chase people who owe them money? But more basically, the unemployed don't get enough money. Possibly a fair comment.

Rents are sent sky high, making it impossible for the unemployed to lose housing benefit by taking a job.

The unemployed get too much money for it to be worth their taking a job. Also possibly a fair comment.

But put the two together, which Polly doesn't do, and what's the solution? More money or less?

I think that this gentleman would suggest that it is the abolition of the welfare state as we know it. A non-means tested income paid to all, irrespective of employment or not.

December 19, 2006 in Make Poverty History | Permalink


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You're right - he would. In this particular case, the social gains from forcing people to work are tiny:
1. The tax-payer won't gain much. What we save in JSA, we'll lose in higher tax credit payments - and in payments to bureacrats to harrass the unemployed.
2. The marginal product of the genuinely lazy will be very low indeed - who'd want to hire them?
3. There are adverse externalities to forcing these to work. I'd rather a smelly fat bloke watched the Jeremy Kyle show that sat next to me on the bus. And in the short-term, his getting a job will mean someone who really wants to work not getting one (the lump of labour is a fallacy only in the longer-run).
So, this is just about macho posturing, not economic efficiency.

Posted by: chris | Dec 19, 2006 10:29:05 AM

Jobcentre Plus and DWP have had the power to sanction claimants for ages - they just don't sanction benefit claimants of income support or Job Seekers Allowance. They could sanction them more or follow existing procedures correctly.

Plus, on state benefits - there are transitionary benefits in place. i.e. someone is weaned off housing benefit if they take a job and have passported benefits, if their job doesn't work out - i.e. they don't have to go through bureaucracy and wait of reapplying for benefits, but restore their previous claim. DWP has loadsa mechanisms for easing folks back into work.

But! the 100,000 are likely to be the hard core of the unemployable. Getting them into a job and staying in one would take a huge investment (talking £15-50k here) - the big question is - is it worth it? For those that genuinely want to work but who have real problems or barriers that aren't being dealt with - fair go, lets help them. But for those who don't want to work and can't, we need to think again.

Posted by: angry economist (Glenn Athey) | Dec 19, 2006 1:22:47 PM

I suspect that inspite of the rhetoric about getting these people back to work, the main concern of the government is to stop people signing on and moonlighting.

Posted by: james C | Dec 19, 2006 1:22:52 PM

James C, that's yet another advantage of basic income schemes; you can't commit benefit fraud and PAYE fraud at the same time. One or the other, yes, but not both. And if the employer and the employee had the same rate of tax (rather than much higher rates for employees) then there is no tax/benefits cost to be arbitraged away by the employee working cash in hand and the employer foregoing the deduction. Plus, in a country of 60 million, I think we can easily live with 100,000 hardcore unemployed.

Posted by: Mark Wadsworth | Dec 19, 2006 1:27:25 PM

£57.45 a week? In London maybe.

It's about £48 in Cardiff, or it was last february.

Posted by: Chris White | Dec 19, 2006 6:54:19 PM

"commit benefit fraud and PAYE fraud"

Why not? Do you mean because everyone gets the CBI, so it's impossible to fraudulently get it.

Posted by: Matthew | Dec 20, 2006 8:12:27 AM

Exactly. Under current system, the honest and the thrifty and the principled (and to be honest the stupid and the naive) lose out because they don't claim "what they are entitled to", because that bit of savings or that live in boyfriend they own up to ruins their claim.

So give it to everybody. Short of fake IDs, there will be no benefit fraud.

Posted by: Mark Wadsworth | Dec 20, 2006 1:15:27 PM