The Times and the Sunday Times referenced Deven Ghelani in two articles on in-work benefits, renamed ‘Workers on Benefits’ or ‘WOBs’ (through in-work benefits such as tax credits or Universal Credit).
The first was a balanced piece by Nicholas Hellen, “Why strivers, not shirkers, are our biggest problem” (paywalled, 13/01/2013) asking how we deal with the issue of workers on benefits and topping up the wages of about 7m people through the tax credits and benefits system.
It references the minimum wage, the living wage and the minimum income standard as evidence that the government believes that this workforce is simply not capable of earning enough money unaided to support an acceptable standard of living. However, it also argues that our attitude to tax-credits and in-work benefits might change if we viewed them as a ‘wage subsidy’ to employers, and not a ‘benefit’ to strivers.
They used figures from the premium version of the Universal Credit Calculator to estimate the extent to which tax credits, and in time Universal Credit will top up the wages of low paid workers, doubling the ‘effective hourly rate’ of a lone parent working full-time in London on the national minimum wage from £6.19 to £12.65 an hour.
Of course, another reason for in-work subsidies is to make sure that work pays more than out of work benefits.
The second article was a piece by Camilla Cavendish in the Times, “Our welfare bill has run wildly out of control” (17/01/13) raising the question whether it is right that so many working people are permanently subsiding so many other working people through the tax credit system. It references figures from the Centre for Social Justice, calculated using analysis from Policy in Practice, that estimated that tax credit spent on working families in 2012, (excluding housing benefit and council tax benefit), was £22.2 billion.
It argues that the tax credit system does not do what it sets out to, as the inherent conflict between the aim to reward people for working (through working tax credit) and the aim to redistribute wealth to the poorest (those out of work, particularly through the child tax credit) generates a situation where work pays less: “If you want to reward people for working, you will pay more benefits as hours and income increase. But if you want to help the poorest, you will direct the money to them irrespective of whether they work.”
While the coalition has broadly decided to prioritise work through the Universal Credit system, the article argues that this system is sensitive to the risk that the rising cost of living is entrenching poverty and that, until it imposed the 1 per cent cap, the coalition had continued Labour’s policy of up-rating benefits in line with inflation.
This story will continue to run all year, particularly as Universal Credit comes in. Leave a comment to say what you think of subsidy, or support for people in work.