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Tuesday, January 24, 2006

 

Work makes you free

So, the government is going to put all the useless eaters to work, is it? As I have written before, the Government's rhetoric simply does not make sense. I thought that I would spell it out in simple steps. It runs like this:

1. People on Incapacity Benefit (IB) are living in poverty. Their lives are miserable.

2. As humanitarians, we want to improve their lives, and the best way to do that is get them off IB and into rewarding economic activity.

So far, so good(ish). But...

3. People on IB are disincentivised as work often is materially less advantageous than remaining on IB.

4. Therefore we must cut IB to incentivise them to enter into economic activity.

1 and 2 are consistent. 3 and 4 are consistent. 1, 2, 3 and 4 are utterly inconsistent, as if this reasoning is followed it will result in the former IB claimants entering employment that leaves them in worse straits economically. This runs against 1 and 2, the planks of the case derived from imperatives of welfare cited by Government.

And this is before we ask [a] if the jobs are there, [b] what an influx of low-skilled labour will do to pay and conditions and [c] how work will affect the health of IB claimants.

My suggestion is that 3 and 4 are consistent and are the sum of the genuinely held government position. 1 and 2 are merely well worked moral cover, the ‘humanitarian’ case for the imposition of neo-liberal dogma.

I commented on the post at Lenin’s Tomb, and said that I could not understand why someone has not torn this rhetoric to pieces when interviewing a junior minister live on TV. Which is an example of naivety on my part.

Comments:
People on IB are disincentivised as work often is materially less advantageous than remaining on IB.


That's not the argument at all. The argument is that they are disincentivised because the effective hourly rate they would be working for moving from IB to work is low because IB is high, not that they would be materially worse off from moving to work. Classic poverty-trap welfare economics. And you've not even calculated the non-monetary benefits accruing from not having the time to watch Cash in the Attic every day (which, having seen it once, have to be high).

Don't get me wrong: I agree broadly with you on IB. But that's just not the argument.

(Anyway, as I understand the NuLab line, they're only cutting benefits to make people attend 'work orientation interviews' or whatever Newspeak term they've invented for them. So Hutton claimed when interviewed at the weekend anyway. I haven't read the documents in full.)
 
I understood that it was the rhetoric of the public debate and the public communication. The stressing of the non-material aspects, especially the negative ones, of work, and conversely, the rewards of leisure, are something that our public debate is very bad at doing.

Leisure as a positive is especially absent from the debate when it involves the lower classes. We are far more interested in how they are overpaid and underemployed.
 
But, I do accept your correction, Jarndyce, especially on the point of 'effective hourly rate' of pay.

Returning to the argument rather than the rhetoric, if 1 stands, then we have a stituation where jobs are so poorly paid (and involve miserable conditions) that they remain unattractive to people living in miserable poverty. And a Labour* government can't think of anything but employing the stick to beat more human capital into the economy.

*It always amuses me when Labour politicians moan about unions and 'worker' politics. I mean, you can be opposed to these, fine. But not if you have joined the Labour Party. The clue is in the name.
 
More, unless the Government is will to at least develop a rhetoric of opposition to the market determination of wage levels, what we will have is a million of so people, the majority of whom have few qualifications, who all, by definition, have less experience than they might and have less than full health, entering the labour market. They will act as a nice drag on the wages (and conditions) of the un- and low-skilled.
 
we have a stituation where jobs are so poorly paid (and involve miserable conditions) that they remain unattractive to people living in miserable poverty.

There is another possibility - one that matches almost exactly my experience in knowing several people on IB: That they are in fact working, just not in jobs that authorities can see, and IB tops up the wage. Now obviously the sample is skewed, as you're unlikely ever to meet a properly housebound IB claimant unless it's as your job or in the family circle, by definition almost. But still, I do think there's a real problem here with people who aren't in fact sick claiming sick pay. The question is how to shift them, should they in fact want to be shifted. (You're forgetting another category of people: those who will accept very low amounts of cash plus a roof over their head in return for the ability never to have to work. Who value, as you said, leisure maximally. Probably not too many of those, though.)

So, as I'm in no way opposed to markets determining wage levels, I'd suggest Basic Income as a possible solution. That way your IB/unemployment benefit isn't cut when you return to work. Your bargaining power against shitty employers is vastly increased (you have a credible threat to leave). And redistribution as an end of taxation (not merely a means to achieve unachievable "equality of opportunity") is restored. But like you say, NuLab prefer stick to carrot.
 
Andrew,

I've heard complaints about the reduction in IB, I haven't heard you present a solution. What is answer to the problem: "How do you get people who are not sick anymore off IB?" (since having people on IB is not good for the economy, nor the tax burden of the people)
 
I would suggest that we need to offer more carrots than sticks. We are, so the logic goes, dealing with pretty miserable (in a non-judgemental sense) people.

A good suggestion would be the Basic Income suggested - at least on this blog - by Jarndyce. As he says, this empowers people in the labour market, guarantees that all people will have the material means to access the basics, and more, I have heard serious arguments that the reduction in administrative (and enforcement etc.) expenses will make it cheaper than many 'cheap labour' propagandists would have us believe.
 
The basic income (BI) theory sounds interesting, but I don't think it is feasible.

According your Majesty's website, http://prebudget2005.treasury.gov.uk/page08.html, the government collected £483 billion in revenues. Even if you pay the basic income of a meager £10,000/year, multiplied by 60,000,000 people, you would need to pay out £600 trillion...and increase in expenditures of an order of magnitude of over 1200 just to cover costs of basic income.

Of course revenues would be higher, but would it be enough? I'm not an economist, but all this manufactured money could lead to high inflation. The BI could result in a drastic forced redistribution of wealth.

Like I said, there isn't enough info about it but it is interesting to discuss the economic theory of it.

Another point is more philosophical. What is the purpose of government? Obviously, you and I will have different answers.
 
As usual, tc wilfully misinterprets the point. The bill for BI would not apply to the entire population but those above 16; would not apply to everyone above 16 but those earning less than £10k; would not even apply to all of these since many would remain "economically inactive", eg housewives/househusbands etc.

Makes a little dent in his figures innit.
 
As usual, miss princess doesn't read correctly. The theory of BI as described in the jarndyce link says:

"Yes, everyone gets it whether they work or not. It replaces unemployment pay... child benefit... There is no means testing, no withdrawal of the income as you work. Anything you earn is over and above the benefit."

That means there isn't a pay level when you get the benefit. That means children would get the benefit, because otherwise people would complain that they are being penalized for having children. If you decide to give a single woman the benefit but not a housewife....that is called MEANS TESTING...of which there is none.

Your "revision" of BI completely negates BI's stated purpose and is much more similar to the current IB.
 
I think the UK gov't should pay people £100,000 a yr, plus free housing and med care and 365 days of vacation. No one should have to work. Then everyone would be happy. [/sarcasm]
 
I think that any society that does not work to provide decent (and equitable) health care, housing, education, material and psychic satisfaction for all its members is a sick society. How we go about it is the question, but if you disagree with those principles then I have little to say to you.
 
I think society can and should help others. It is our Christian duty. As you suggest, we differ in the methods.

I think that big government programs are inefficient and more open to corruption. I feel that on charity should begin with the people, not the government. On lower levels, through local charities and personal involvement, money can be distributed better and there is less chance for corruption. Volunteers also help, eliminating overhead required for a large bureaucracy.

Giving and volunteering should be come from a person's desire to help others, not from taxes. With big government programs, people's sense of personal responsibility to help others is removed. They default action to the government. People scream: "Why doesn't the government do something?"... not "what can I do?"

The UK spent £147 billion on social protection (not including healthcare)? Yet, 17% of British are below the poverty line. There must be a problem and I'd start with the plethora of do-nothing bureaucrats (oh sorry, civil "servants").

How can society be sure that people will donate? Alms giving is a tenant of many religions. When people start worshiping Prada or Coronation Street instead of God, they lose all focus about others.

The more money and services that are given to the government realm, the more power government officials have. When you concentrate a large portion of money in a few hands, corruption is likely.

On another note, after further thought, I really think the BI scheme is infeasible. Although my figures were off in the last post, (it should be $600 billion, not trillion), you would need £600 billion. Where are you going to get £600 billion from? Obviously you can't give people £10000 and then just ask for it back in taxes. You need to collect it from others who are richer. However, even if you collected every penny from earned above £40,000 from every soul in Britian, you wouldn't get close £600 billion. Then follows inflation.
 
"I think that any society that does not work to provide decent (and equitable) health care, housing, education, material and psychic satisfaction for all its members is a sick society."

What's decent; and what's equitable; and what exactly is material and psychic satisfaction? Is the role of society (government) to free people from want? By your definition EVERY society prior to the post-modern Western example would be considered 'sick', because none of them as a whole provided for those things mentioned above.

Pardon my original hyperbole, but in the long run, a society of equitable outcomes is unworkable.

P.S. I enjoy reading your blog. I don't agree w/ many of your points, but it is interesting and fun to read.
 
The key words in my comment, JJ, were 'work to'. This means that it is the striving for these outcomes that makes these societies decent. 'Unworkable'? I think you might mean unachievable - but that is true of all great human projects - from truth in science to perfection in sport. We will never conquer all disease, but that does not prevent scientists, doctors and politicians for working in pursuit of this goal.
 
The Christopher - you make some interesting points that I'm sure many people would enjoy debating with you. But you are probably not helping yourself by being snide and unpleasant about civil servants. You may think that there are too many of them, but to suggest that, as a collective, they all do nothing is a crass and unnecessary generalisation.
 
To Andrew: I see your point, but you didn't answer my question about what is 'material and psychic' satisfaction. At what point is someone 'materially' satisfied? Roof over their head, basic clothing, and food on the table, or something more?

To Katerine: At least in the USA, my experience, and I have had my fair share, is that the vast majority of civil servants are either arrogant, incompetent, lazy, or some combination of all three. Between my time in the military, dealing w/ government organizations such as the department of motor vehicles and with the various regulatory bodies in my regular working job in the insurance industry I have encountered mind-boggling arrogance, incompetence and laziness. I don't know if it's the people or the culture, but it's something.

Pardon me if you're a civil servant, but that's been my experience.
 
No, I'm not a civil servant. I have been in the private sector for most of my working life and have spent some time dealing with local government also. My personal experience is that most people in either sector are the same - people. Some are arrogant, some are lazy, some are incompetent. Many are not. There are different cultures, but then their aims are different. I prefer to deal with and assess people as individuals rather than as homogenous masses myself.
 
---I prefer to deal with and assess people as individuals rather than as homogenous masses myself.

As do I, but part of my dislike for government programs is the culture that breeds in government offices.
 
Okay, TC, here are some calculations for you:

Table A3.1 of the 2005 Budget lists four pages of tax reliefs. By abolishing VAT exemptions and zero-ratings and income and inheritance tax reliefs, we could save over £90bn. And this doesn’t touch tax reliefs in savings or capital gains.

Table C11 shows that we’d save another £121.4bn by abolishing social security benefits, £15.2bn by scrapping tax credits, and £3.2bn from the Common Agricultural Policy; all these handouts would of course be replaced by the CBI. And table C13 shows that we’d save another £6.8bn from scrapping the DTI and Department for Culture, Media and Sport.

This gives us almost £240 billion. With an adult population of 45.5 million, this would give a CBI of just over £5200. That’s £100 a week, which is £18 a week more than the basic state pension.


From here. Note, this is without any tax increases at all, which for sort-of-egalitarians like me is unthinkable. It also doesn't assume any savings in administration bureaucracy, any increased economic activity due to cuts in regulation, or anyone converting their dodgy income they're making from benefit fraud to legit money they're earning on top of BI, and therefore taxable. All these seem unrealistic assumptions, and we'd certainly want a BI to be much higher than 100 quid a week. These are very rough numbers, obviously, and can be pulled apart (pointless) but they show it's perhaps practical.

Second, hate to agree with JJ, Katherine, but there's a big difference between civil servants and non-public sector workers. Those who work in the private sector and show the kinds of attitudes/competence that I've come to expect from e.g. Hackney Council, CICA, the DSS, LEAs, and so on, would be fired. (And would probably go and work in the public sector, where they'd be guaranteed never to be.) I think we can take it as read that we should judge people as individuals. But if we can't generalise (fairly) accurately, then we all might as well shut up.
 
Oh, I've certainly come across some shockers in the public sector. My initial comment was a fairly spikey reaction to The Christopher referring to civil servants as "do nothing". I wasn't aiming for a wholesale defence of the entire sector. As generalisations go, I think that's neither fair nor accurate. Perhaps my experiences with local government have been more positive than most.

Anyway, this is all off topic and I apologise to all for starting a side argument.
 
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