Thanks to Bob E and MBK for the various links.
The basic template for the Work Programme, also known as "back-to-work" or "work for dole", is as follows:
1. Two large political parties whose policies once in government are largely identical (it is merely the rhetoric which is different). This ensures continuity for all the people who are milking the taxpayer.
2. A "financial crisis" which is the inevitable outcome of a house price bubble, for which you need a good sold basis of Home-Owner-Ism.
3. This leads to more job insecurity and a climate of fear, which The Powers That Be use to...
4. Create a desperate desire among the populace that the government "do something" to sort all this out, they can get away with outrageous measures that would not be accepted in peacetime, such as massive bank bail outs, which is by and large outright theft, but they can easily sell this to the Home-Owner-Ists on the basis that the banks have to be bailed out and subsidised or else house prices will start falling...
5. To distract the electorate's attention from this massive 'bezzle, The Powers That Be have to play divide and conquer, which means pitting those who still have jobs against those who don't. The number of unemployed increases during a "financial crisis" so the cost of the welfare state also goes up, so it is not difficult to somehow convince people still in work that the recession is all the fault of people who have lost their jobs (or never had one). This is a bit like blaming the First World War on those who died in the trenches, but hey.
6. The Powers That Be can't all be bankers of course, so we have another group of people who realise that they can cash in on the anti-welfare claimant mood by setting up back-to-work schemes. The idea is that by spending a few hundred quid up front, they can somehow get people back into work, thus saving thousands of pounds a year in future. Which would be fine if there were any jobs available, but there aren't, but let's gloss over that.
7. They in turn need cheerleaders in the fakecharity sector, for example the Social Market Foundation who recommended something along the lines of the Work Programme back in 2009. That little report was of course funded by yet another taxpayer funded body called Remploy.
8. None of these back-to-work schemes actually work of course, the number of people on the schemes who find work is only about 3%, which is lower than the natural rate which would happen anyway of about 5%.
9. Even some of the politicians realise that this is all a complete waste of money and that it cannot possibly work, and the Public Accounts Committee mumbles about there a) not being enough jobs for the back-to-work people to fill and b) the whole thing being riddled with fraud.
10. At which stage the fakecharity cheerleaders suggest that maybe the back to work providers aren't successful because... the bar was set too high. All it needs for them to be successful is for the pass mark to be lowered, which is referred to as "grade inflation" when the same technique is used with GSCEs and A Levels.
11. So people on the dole are averse to going on the schemes. At which stage the lovely river of taxpayers' cash dries up a bit. No problem - all these private firms need is to be able to impose criminal penalties on claimants who refuse to go along with the charade.
12. At this stage, the back-to-work providers have achieved the same glorious positive feedback loop as the bankers: the bail outs (and the Quantitative Easing and so on) are supposed to help the economy recover, but this doesn't work of course, so a few months later, the banks come back and ask for another, bigger bail out. This doesn't work either, so a few months later, etc.
This is again similar to the tactics used in the First Word War - sending ten thousand men over the top to be slaughtered didn't work, so next time let's send twenty thousand.
No sane person would keep doubling up each time if something isn't working, unless of course he is the beneficiary of the doubling up rather than the person paying for it. Which applies to the back-to-work scheme, it doesn't work, but instead of just shutting them down, what they recommend is lowering the bar, increasing the payments to the scheme providers and allowing them to impose criminal penalties on those who refuse to play along.
13. While we're in the mood for harsh measures, the old give them vouchers instead of cash idea has reared its ugly head again.
Do Local News Editors Count On Their Fingers?
17 minutes ago
27 comments:
" a) not being enough jobs for the back-to-work people to fill"
But if you say this to yer average Daily Mail reader, they will say "but how about all those economic migrants from Eastern Europe? They can find jobs". I am not certain what the answer is to that one, except that it probably has to do with the housing bubble.
B lots of reasons. Mainly that the EE's who come over are willing to work harder for lower pay. And our welfare system is almost deliberately designed to discourage people from taking low paid jobs.
The same applies in both directions - those UK or west Europeans who have gone there to work have higher employment rates than the native EE's who stayed where they are. The level of unemployment will thus tend to equalise across countries, i.e. we now expect a lot of young Spanish, Greek and Irish people to come to north or west Europe. This makes those countries even worse off.
Bayard,
For twenty years I was a small employer. Many young men regard "The Social" as their basic salary and anything they can pick up through untaxed casual work as a bonus. As I was offering regular, full time employment, it didn't appeal very much. Tax and National Insurance rates were a big disincentive too.
If access to "The Social" had much stricter conditions attached, most of the jobs found by Eastern European immigrants would already have been filled by our own young people.
I know a young lady who is studying for her degree through the Open University whilst working part time as a waitress. She has a health problem but comes from the sort of working class family which does not believe in debt and is, by and large, never out of work. An older woman asked her why she was working as she could certainly claim disability benefits. She added that she should have a baby - then she would get a council house too.
This is the sort of perverse system we have. It has been around since Roy Jenkins created his "civilised society" . In a time of much fuller employment, he praised the contribution which "the voluntary unemployed" were making to society. All distinction between "deserving and "undeserving" recipients of state benefits were abolished. I knew a rising young social worker (eventually very senior) at the time and read the "trade" papers about what was intended.
We are now enjoying the fruits of his "civilised" intentions unto the third generation.
I personally would prefer to see food and transport tickets delivered rather than cash falling into the bank balances of benefit claimants.
'I personally would prefer to see food and transport tickets delivered rather than cash falling into the bank balances of benefit claimants.'
Well...at least you do realise that people who are unemployed do not qualify for free travel on public transport - unlike many people who write articles in newspapers.
M, so what you are saying is that hose with "get up and go" have got up and gone, and what we are left with is the idle bastards.
"If access to "The Social" had much stricter conditions attached, most of the jobs found by Eastern European immigrants would already have been filled by our own young people."
If access to "The Social" had less strict conditions attached, i.e you got it either as cash or as a personal allowance on your tax, no matter what, then again, most of the jobs found......
As a small employer, do you really want to employ someone who has been starved into work, doesn't want to be there and has not the slightest incentive to do a decent job? Because that's what the Daily Mail "force the idle bastards back into work" idea means. I did it once and never again. I dare say those who are keenest on starving the unemployed back to work are not those who would have to employ them. No, "someone else" can do that.
OTOH there is something wrong with a benefits system where keen industrious people cannot afford to work, because taking a job at minimum wage means that they lose more in benefits than they earn in pay.
EdS, the situation is particularly galling for small employers, but then the cards are completely stacked against them anyway.
However, this post was not about the design of the welfare system as such (as awful as it is) it was about the narrow issue of the Work Programme - miraculously enough, when they are dishing out 'voluntary' work placements, these seem to be with larger employers - which is £10 billion down the toilet.
SB, there we differ. Earmarked benefits are the worst type of benefits.
ALF, nice one.
B, yes, that's what I mean. As to your debate with Ed, that's a different topic. Taxes on income and subsidies to land ownership = unemployment (which we had long before we had the welfare state) etc.
But I was railing against the WP, from where I'm sitting, I'd rather give eight hundred unemployed families £10,000 each than give the boss of A4E an £8 million dividend. Because I know that if I really needed £10,000, I'd get it, but I'd never get the £8 million dividend because I am not mates with politicians and not that corrupt either.
I recently met a kindly professional man of impeccable character whom I had not seen for years, a retired solicitor.
In catching up on family matters, it was a matter of some distress for him to tell me that he had a son, (who must be now nearing his fifties) "who is just idle" and hangs around (at home at present). "But I think Mr. Duncan Smith is catching up with him. I certainly hope so" he said. So there are layabouts from all levels of society. This man had every advantage of a good home and educational opportunities.
"He that will not work, neither shall he eat" is an excellent biblical principle. It was introduced into the early Church at a time when some Christians "held all things in common" and their society, rather like a mini welfare state, became a magnet for spongers who saw easy pickings and a leisured life at the expense of others. Human nature doesn't change much!
EdS, we observe the same things happening with trustafarians. However, there are plenty of people who do no useful work who still make a handsome living, i.e. the rent seekers (such as the Work Programme providers, to get back to the post).
For clarification, I'm a great believer in collecting all the rents and dishing it out as a small universal income, which leads back to "he that will not work shall not eat" but at least there is equity between workers and non-workers, and also as between non-workers instead of a hierarchy with Duke of Westminster at the top, then bankers near the top, then politicians and quangocrats in the middle and yer unemployed layabouts at the bottom.
E.S. wrote: "For twenty years I was a small employer. Many young men regard "The Social" as their basic salary..."
It forms an artificial margin, the real margin - the highest point of natural productiveness open to labour without the payment of rent is now non-existent since all land is now enclosed. Without it we would have riots + revolution (or a radical reform of the tax system).
See here: http://www.henrygeorge.org/pchp15.htm
None of these back-to-work schemes actually work of course, the number of people on the schemes who find work is only about 3%, which is lower than the natural rate which would happen anyway of about 5%.
Absolutely. They're also promising "sustainable" employment, meaning taking anything going, even temporary, to get them off govt books, only to reappear weeks later.
I have some time to kill while I wait for a friend's phone call, so... :)
Given that:
A) Price floors are either ineffective (if they are set below the equilibrium price) or reduce demand and create a "surplus" (if they are above the equilibrium price);
B) Subsidies shift the supply-demand curve so that the price charged by the supplier goes down and the amount demanded goes up;
C) Increasing employment creates positive externalities;
and
D) The employment rate may be well below its socially optimum level, with unemployed workers losing skills with each passing day;
Therefore, a Pigovian subsidy on labor (that is, giving those who are employed a certain amount for every hour worked, in order to increase employment to the socially optimal level) coupled with an equivalent reduction in the minimum wage (so employers can hire marginal workers for less than they can at present) should reduce unemployment.
I keep trying to convince the U.S. federal government to try a wage subsidy pilot program in a poor state like Mississippi or Louisiana, but they have yet to acknowledge my brilliance. :D
And as an added bonus, it would be private businesses putting people to work, rather than the government bidding up wages in a make-work scheme. Better to provide services and make widgets that are actually worth something than to dig holes that could more efficiently be done with a backhoe or bulldozer.
P, good link.
Snarf, yes, your subsidy idea is a bit like the idea behind tax credits in the UK. which didn't work at all on any sort of level.
That's the point of the flat rate citizen's income, isn't it?
Yes, any sort of welfare payment like CI must reduce willingness to work and so push up wage levels a bit, however marginally.
But it also subsidises people on low wages (or it certainly does compared to the current UK welfare system where you lose your benefits if you take a job, however low paid) and so it pushes wages down a bit, however marginally.
These two marginal effects would more or less cancel out, so we have a welfare system which does not create unemployment or distort things. And in any event, if it is universal, then the amount of money being paid to each person per week is not going to be very high anyway.
I reckon the root problem is the world price of 'ordinary' people's labour fell and smart people moved manufacture where it was cheapest. There was a misplaced hope (or downright lie) that new design, selling and financing work would fill the gap. It can't because there are not enough 'truly smart' people to go round. Finance was stoked up madly to compensate - and blew up.
So, all hands to the pumps, bail out the banks and pay 'cunning smart' people good money to goad 'ordinary' people into impossible action whilst 'smarter' people trumpet 'if only they'd work all would be well'. Trouble is it won't because the root cause is still there. No-one has found a way to utilise 'ordinary' people. Government dare not admit this for a moment.
So what will Cameron do? Cut benefits, cut 'ordinary' education (the grammars and private schools produce enough smarties), cut health. May I add a suggestion - cap all unfunded public sector pensions at £45K max - no more for anyone from Cameron down - past and present. A sincere statement of 'we feel your pain'.
R, we're getting off the topic again but you are heading in the right direction.
The root cause of unemployment is almost certainly our tax (and regulatory) system which discourages work and business and encourages speculation in land and hence finance.
The welfare system (and the national minimum wage) came long after that, it's a crude sticking plaster (and a badly designed on at that). We still had mass unemployment and poverty during earlier 'financial crises' long before the welfare state or the minimum wage was invented*.
And if you are right, that there are plenty of people for whom there is no point working, well why don't we just accept it, give them their Citizen's Income and leave them in peace? If we could fix the tax and regulatory system so that smart people could only make money from running a business and employing people and it was impossible to make money from speculating in land, then all the better.
* There was no unemployment in our North American colonies as long as land was free, almost literally, but once the land had been allocated to private owners, the rot set in.
ES, your aquaintance should be proud of his son. He (the son) sounds just the sort of person who could be earning a nice public sector salary doing nothing productive and costing the taxpayer far more than he does drawing the dole.
Snarfangel: "Therefore, a Pigovian subsidy on labor (that is, giving those who are employed a certain amount for every hour worked, in order to increase employment to the socially optimal level)"
I think Patrick Minford had a paper explaining why this was too vulnerable to corruption as people mis-report their working hours. The "second-best" way to get at this would be to abolish income tax.
Fake edit: it was actually Sheikh Selim. The paper is Sheikh Selim (November 2010)
Optimal Tax Policy and Wage Subsidy in an Imperfectly Competitive Economy.
Thanks, Richard Allan. I'm actually for abolishing the income tax (with of course Georgist and Pigovian taxes taking up the slack).
I agree that people would have an incentive to misreport their working hours if they got paid based on how many hours they worked, but I think employers would be far less likely to.
So the question is, how can you minimize misreporting of hours worked under a wage subsidy scheme, assuming that you still have underemployment in a state without taxes on income, capital, or trade? :)
RA, S, I think it is more or less impossible to have a specific "per hour worked" subsidy, either because it would be fiddled, or because there is a reasonable ground for including some unpaid work as worth subsidising (like looking after kids, sick parents etc) etc. Of course employers would fiddle it as well, it might be less prevalent than workers fiddling it, but why burden the employer with making the claim. And even if you went to the huge administrative cost of making it 100% "accurate" you will still not know what distortions you have introduced.
When it comes down to it, there are some people who are so unproductive, it's best if they aren't clogging up the buses and roads and getting in the way of people who are more productive, and if we accept that there will always be people who are net unproductive, we might as well accept the fact they are better off at home and give them a bit of money in compensation.
So when it boils down to it, a flat rate Citizen's Income is just the best way of doing things (whereby I can see arguments for a CI of anywhere between £nil and £100 a week).
.. and the "per hour" thing is iffy. I can see that morally, somebody who earns £350 an hour and works one hour a week is somehow less worthy than somebody who slogs away 35 hours at £10 an hour, but what if the latter gets offered the chance of working night shifts at £20 an hour for basically the same work but totally unsociable hours? Would he still qualify for the "per hour" subsidy?
I totally agree with Mark here. CI is the way to go. While wage subsidies, tax credits, etc. are better than nothing, they have a distorting effect on employment and a deadweight cost. Just as taxes (or their mirror image subsidies) on specific uses of land tend to push land into suboptimal use just for the sake of the subsidy, so taxes/subsidies on wages tend to put people into uneconomic jobs. And long term that's bad whether we're talking land or people.
If you're going to tax or subsidise people's land or income you have to make it universal to avoid this type of distortion.
Just as taxes (or their mirror image subsidies) on specific uses of land tend to push land into suboptimal use just for the sake of the subsidy
That's a good summary of my argument against making the CI into a LVT-only "exemption" as been argued elsewhere :)
D, ta for back up.
Kj, that's a narrower point. By and large, for about half of households, their LVT will be more than their CI, so whether you call it "CI" or "personal allowance" comes to the same thing.
It makes it easier explaining the maths to the Home-Owner-Ists, i.e. "The median household will pay precisely zero tax and receive zero benefits". Which deals with the KLN that "Poor people won't pay any LVT and rich people won't pay any either because they'll move abroad".
And of course, when I'm in charge, the bottom half will get more CI than they have to pay LVT, so they get the net difference paid out in cash.
Thus while nominal total LVT will be about a third of GDP and nominal CI will be about a third of GDP, the actual net cash changing hands from the top third to the bottom third will be quite small, probably about a tenth of GDP. So Georgism is not some massive redistribution scheme.
MW: agreed on that. I was referring to a discussion that was going on at the LandCafé forum on Yahoo, where some were suggesting that the CI only be allowed to be used for LVT liabilities, and referred to as a universal exemption. For those who will have an LVT-bill equal to or larger than the CI, this distinction is irrelevant, but for those on the lower margins, I'm in favour of giving it out as cash net of any LVT, as you say.
Heh, heh. Yes, I guessed you were referring to that, KJ.
6 sounds like "jobcreationism" and submission to dependency culture. Would it be better to say:
"In general, people willing and able to work cannot find it. The question is, what is stopping them?"
We all know the answer to that one.
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