The Resolution Foundation published two reports on work, poverty and benefits either side of the weekend. Last week’s An Ocean Apart contrasted the developments in employment and welfare in the UK and USA over the last 20 years. This week’s report on Universal Credit recommended a redesign of the in-work benefits system.
In his commentaries on both reports, Gavin Kelly points out that the political rhetoric on poverty and work is two decades out of date. As he says:
[T]he UK’s longstanding problem of workless families has been transformed since the late 1990s: once viewed as the biggest social ill facing the country, the rate of worklessness in households in which there are no disabled adults has plummeted.
There are big structural problems in the UK jobs market: low pay, low labour productivity, insecure work for the young, and next to no incentive to earn more for those on tax credits (or indeed Universal Credit). These should all be near the top of our problem list. Falling levels of worklessness needn’t be. Welfare policy – and ministerial rhetoric – are yet to catch up with this.
And on Universal Credit:
The real problem with UC stems not from this understandable desire to integrate benefits, but from its narrow view of the social problem that benefit integration could be used to fix. At root, UC is a policy shaped by the view that the towering problem facing the UK today is mass worklessness; it has fragments of ‘Broken Britain’ in its DNA. Yet, as RF research showed last week, worklessness among non-disabled couples with children has plummeted over the last fifteen years. As things stand UC will end up being a missed opportunity to make in-roads into one of the real social-ills of our time: in-work poverty and the low pay trap.
We see the same theme in comments about cutting the welfare bill. The high cost of social security is still framed as a worklessness problem.
Yet the proportion of people claiming out-of-work benefits has been falling steadily for the last 20 years. The worst recession in living memory caused a slight rise but even this didn’t take it back to its 1990s level.
Of those without work, only a minority have been without it for long. Many go through what the Joseph Rowntree Foundation describes as the low-pay no-pay cycle, moving between periods of unemployment and low wage work. This seems to have continued during the downturn. Even the worst recession in living memory didn’t have that much effect on labour force participation. In the UK, most people kept looking for work and employment bounced back reasonably quickly. If ever the British were work-shy, we’re certainly not now.
The flip side of this rise in employment, though, has been the rise in in-work poverty. A lot of these jobs don’t pay very much and have to be supported by benefit payments. Alongside the fall in the proportion of people on out of work benefits, there has been a rise in spending on tax credits and housing benefit.
In 2012, the number of working families in poverty overtook the number without work. (See previous post.) Among those households below the official poverty line, the working poor now outnumber the unemployed, retired and sick put together. Not only do the in-work poor outnumber the workless, nearly half of them are in families where all the adults have jobs.
Despite all this, MPs still talk about the “something for nothing” welfare state and the Conservative Party issues press releases saying that this is why the welfare bill is out of control, reinforced by a poster campaign featuring a man with his feet up. The Prime Minister has just appointed as Employment Minister someone who said that the British are “among the worst idlers in the world“.
Like its view of industrial relations, the government’s image of poverty and welfare is stuck in the 1980s. Strikes and powerful unions are, for the most part, long gone but that doesn’t stop Conservative politicians making blood-curdling speeches about the dangers of industrial action. Likewise, the association of poverty with idleness and unemployment shows a lack of understanding about how the nature of work has changed.
As the Resolution Foundation’s Adam Corlett said, the debate about work and welfare “sometimes feels like it’s stuck in a time-warp”. Assumptions about the link between poverty and lack of work no longer hold true. These days, those claiming benefits are more likely to be cleaning offices, making sandwiches, picking vegetables and looking after the elderly. If the UK’s social security costs really are out of control it’s not because lots of people are sitting around with their feet up. It’s because lots of people are in jobs that just don’t pay enough.
Today’s Welfare Trends report from the Office for Budget Responsibility compares the UK’s benefit spending to that of other European and OECD countries.
The UK has one of the lowest levels of spending on unemployment benefits:
When it comes to support for low-income families, though, it’s a different story. The OBR notes:
On the SOCX definition, public spending on support for families amounted to 4.3 per cent of GDP in the UK in 2011, significantly above the OECD average of 2.6 per cent. (In Chart 3.20, we have combined the cash benefits and tax expenditures figures for the UK, to be more consistent with the presentation of tax credits under ESA10 in our forecasts.)
Tax credits are the largest component of spending on families in the UK. Spending on them has doubled as a proportion of national income since 2002-03.
Then there’s housing benefit:
Some of the UK’s relatively high figure is because other countries support housing costs through other benefits, so in some places what we class as housing benefit would come under, say, unemployment benefit. Even so, our spending is way ahead of the average. I’m guessing that rents in London and the South-East must push the figure up.