The economic arguments for the change are based on the disincentive effects of high benefits. £500 a week or £26,000 a year represents an income that is equal to average earnings (£35,000 before tax and equal to average family income). If benefits are higher than in work income there is less reason to leave unemployment. So this is a supply side measure to increase the participation rate and increase the use of resources.
There is a further argument based on deficit reduction. Social Security is the largest spending department by far.
But jobs are few and far between. Is it really as simple as this to get people to leave benefit for work?
The arguments against this move are based largely on compassion. Some families could not afford their current homes on the new maximum benefit and would have to move. Others point out that needs vary between families and a single maximum benefit is unfair and some ask for Child Benefit to be excluded.
This is a supply side measure that seeks to improve the way the labour market works. The benefits should be an improvement in long run capacity by incentivising the voluntary unemployed. However the cost will fall on some who are powerless to change their circumstances.
For those interested in constitutional matters this may hasten the reform of the Lords as the unelected Church of England Bishops abuse their undeserved position yet again.
Would I be right in also saying that in the long run, such a concept will lead to long term unemployment? if so, then surely the cost benefit principle should be considered here.
ReplyDeleteI don't think it would lead to long run unemployment. It may lead to a lower real income.
ReplyDeleteFirstly, the definition of unemployment seems to be misconstrued, yet again. The term unemployment suggests the active search for a job; therefore showing willingness. So if someone is unemployed, surely they are not considering receiving benefits. If anything, they are trying to negate this.
ReplyDeleteSecondly, the government has assumed that people eligible for this benefit all have the same circumstances, Is there even a national income, all variables considered? I think not.
I think that this increase in the amounts of benefits will be good in the short run as it will improve the quality of life of all. But in the long run I think people will see unemployment as a much more enjoyable choice and overall it will go up.
ReplyDeleteInitially I believe this will cause an increase in unemployment as people will be unsatisfied with the reduced family benefit as it will cause a decrease in the standard of living and this in turn will lead to more people actively seeking for work. Also this policy will increase the gap between the rich and the poor, the poor people on benefits will have less opportunities to earn a decent living as they stay unemployed, and also their children will also have lack of opportunities in life due to a worse education than others in the country which could just keep repeating for generations.
ReplyDeleteYet in a good economy it will work as an incentive for people to go out and work and increase the workforce of the UK as there will be more job vacancies available. Yet in the current economic climate, I believe it will be very hard for these people to find work and will just add the the unemployment list. This in turn could demoralize people, and in the future where getting a job may be easier than it is today, may lead to people not applying for jobs and just staying on benefits as they have been demoralized from this previous experience. But I believe that the cut to the benefits should take place, only if the government spend this money in creating jobs elsewhere. People in work will now spend money in their surrounding community and pay taxes, this way it could cause a positive multiplier effect in the surrounding area for local business's as well as the government; and as people on benefits tend to group in council housing, this could provide and an economic uplift for the surrounding community.