Why welfare to work won’t work in the UK

Why the current model of welfare reform won’t reduce poverty

Perhaps the greatest danger of our national life arises from the power of selfish and unscrupulous wealth
which influences public opinion largely through the press

Joseph Rowntree (1836 – 1925) , businessman and philanthropist, - one of the first people in Britain to do research
proving poverty was not caused only by alcoholism or the laziness of those in poverty.

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Summary

Tabloid newspaper owners and the leaders of the main parties in both the US and the UK have promoted myths about the causes of unemployment and poverty and so the solutions to them. The ‘welfare reform’ narrative of the tabloids and the Labour, Conservative, Republican and Democratic parties has been that there are plenty of jobs for everyone but that the supposedly ‘out of control’ growth of the welfare state has led to generations of people in the same households deciding to live on benefits as this gives them a better and easier life than working would. This is portrayed as involving all of, or the majority of, unemployed people - and as having placed an increasing burden on those who do work and as being the main cause of poverty. Just as US welfare to work from the 1990s on returned to a 19th century view of poverty as due to the moral failings of the poor (especially ‘laziness’ and being ‘unwilling to work’) the same has happened in theUK, with government adviser and Labour MP Frank Field  advising the Conservative-Liberal coalition that poverty is primarily caused by bad parenting rather than low incomes.

This is coupled with political rhetoric about ‘social mobility’, ‘meritocracy’ (whether Labour or Conservative) ,‘equal opportunity for all’ and a ‘classless society’, in which politicians talk as though getting everyone into work will increase all of their incomes and get them out of poverty, as though there are enough jobs with a living income for everyone. The assumption is that as more people come off benefits and into work the welfare bill can be cut, the welfare state can be cut further or gradually phased out as the private sector takes over from it - and everyone will be better off.

Surveys show these claims have influenced British public opinion to become more hostile to those on benefits, with a majority now seeing them as lazy and opposed to increased redistribution of wealth through taxation and welfare.

The trouble is that even politically massaged Government figures, along with research by charities like the Joseph Rowntree Foundation and think tanks like the IPPR, shows that there are between hundreds of thousands and millions more people unemployed than there are job vacancies in the UK through recessions and economic booms over past decades to present.

Employers also told researchers that, far from the unemployed being unwilling to do the kind of jobs they used to do, most applicants were considered over-qualified by the employer

They also show that large numbers of people going into work remain in poverty (under 60% of median income or £119 per week for an adult or £288 for a couple with two children) or in deep poverty (a third or less lower income than that) – and that there are more people in work and in poverty than out of work and in poverty in the UK, with newly created jobs increasingly becoming part-time and/or low paid over the past two decades and over 1 million people who want full-time jobs only being able to get part-time ones.

Despite the tabloid myths this is not due to over-generous benefits, but due to low minimum wages, a lack of enough in-work benefits for those on low incomes. For instance unemployment benefit is only between £51.85 and £65.45 a week depending on age in theUK, just as it was under the previous Labour government.

While many of the measures of poverty used are relative to they are reliable indicators that many of those on these incomes are suffering some forms of absolute poverty – i.e are unable to afford some basic necessities and so suffering frequent hunger, cold and subsequent long term health problems for adults and developmental problems for children. For instance the JRF’s 2000 study found 9.5 million people in Britain could not afford to heat their homes adequately, 4 million couldn’t afford either two meals a day or fruit and vegetables to eat ; and 6.5 million people went without essential clothing such as a warm waterproof jacket or decent shoes (with 2% of children lacking a warm waterproof coat or properly fitting shoes and many unable to afford a healthy diet). One parent interviewed in a later report ate nothing but bread so their children could eat better diets, while another (in 2008) said being in poverty meant “Being hungry, only having enough food to give the children, hoping they would leave some leftovers on the plate, so I wouldn't be so hungry.”)

There are also absolute measures of poverty used, based on the number of people in any year whose income has fallen below 60% of what was the median for a chosen benchmark year. The British government used 60% of the median in financial year 1998/1999 as it’s measure of poverty until 2010, when 60% of the median in 2010 was chosen as the benchmark for the next decade (though the new government may well choose a different definition).

Treasury figures also show that welfare spending in the UK has actually fallen as a percentage of GDP (national wealth) between 1997 at 7.76% (during an economic boom with lower unemployment) and just over 7% in 2009 (during a deep recession with higher unemployment) – (credit to Duncan’s Economics blog for pointing this out). Despite the “there is no money” rhetoric the UK increased it’s GDP per capita (wealth per person) by around 67% over the same period on World Bank figures.

This is even more striking as 1997 was an economic boom year with relatively low numbers of unemployed people (and so a lower cost in unemployment benefit) while 2010 was a deep recession with relatively high unemployment levels and benefit costs.

If looking for unfair government spending going to those who neither need nor deserve it there are many better candidates for cut. These include Private Finance Initiatives or ‘Public Private Partnerships’, which the Conservatives began, Labour expanded and the Coalition are planning to expand again, leading to increased taxes for cut services; Export Credit Guarantees to British Aerospace for arms and dual use equipment going to dictatorships and human rights abusers (often including those who later become our enemies such as Saddam Hussein’s forces in the past); and military aid to dictatorships.

US government figures and independent studies show ‘welfare to work’ programmes in the US have led to greatly increased poverty and homelessness.

Cutting benefits and public sector jobs during a period of recession also risks further reducing demand in the economy and a spiral of falling demand and increased job losses in the private sector.

This may well lead to many of those persuaded to vote to punish those on benefits for supposedly all being workshy fraudsters suffering alongside many of them due to the reality that many are poor or unemployed through no fault of their own – and that even if everyone who isn’t working tried to get work there aren’t enough jobs.

This shows that the model of welfare reform adopted by the main parties in both countries is bound to lead to increasing levels of poverty for the unemployed and many in work alike unless it’s changed to expand the welfare state and public sector employment and government intervention to provide more in-work benefits for those on low incomes, along with increasing minimum wages and more public sector jobs

The Joseph Rowntree Foundation found that relative poverty for pensioners declined throughout New Labour’s period in government from 1997 to 2008/9 and relative and absolute child poverty fell too, but as out-of-work poverty fell, the numbers of people in work but in poverty rose.

The Institute for Fiscal Studies’ 2010 report estimates increases in the numbers of adults and children in poverty of hundreds of thousands each year as a result of the Coalition’s policies

This is not to deny that there are some people defrauding the benefit system or who are unwilling to work. It does show that there’s no evidence to suggest the tabloid rants claiming they are the majority of the unemployed or poor are true ; that ‘laziness’ is most definitely not the only cause of unemployment ; and that welfare spending and benefits are if anything too low and too hard to get in low income jobs.Any welfare reforms that would have a chance of reducing unemployment and poverty would have to provide more in work-benefitsm, or a higher minimum wage, or both, along with more public sector jobs.

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The return to the 19th century theory of poverty being caused by the failings of the poor

Labour MP and adviser to the Conservative-Liberal Coalition government - Frank Field - who believes poverty is primarily the result of bad parenting

A recent survey shows that, with the government about to implement ‘welfare to work’ “reforms” of a kind which have caused big increases in poverty and homelessness in the US, the majority of people in Britain are now more opposed to providing benefits to the poor and unemployed than under Margaret Thatcher in the 1980s (1).

This is probably due to the fact that most people have not been given the facts and figures on unemployment and poverty in the UK, due to a decades long propaganda campaign. This propaganda has been pushed by some newspapers owned by billionaires (e.g Rupert Murdoch) along with Conservative Party leaders – and from the 1990s, on, ‘New Labour’ leaders who had decided alliance with the media barons against the poor and the unemployed was an easier route to power than challenging their claims. Between newspaper headlines and party leaders berating benefit fraudsters and those who refuse work, as if there were well paying jobs for everyone who wanted them and benefits were generous, a wildly inaccurate picture has been painted of the majority of those on benefits being unwilling to work and living a life of ease and plenty from welfare payments at the expense of everyone else.

Labour MP Frank Field, now advising the Coalition government on “welfare reform” has come to the conclusion that poverty is not about levels of income , a conclusion that would be entirely at home in George Orwell’s 1984 in which people must believe the government even when it’s obviously lying through the enforcement of “doublethink” and “doublespeak” or be taken away for re-education or worse. Poverty is, by definition, a lack of sufficient money each week to buy what you need and to take part in society as an equal (2).

Field’s theory is that poverty is the result of poor education and a lack of work ethic, which are the results solely of poor parenting and a lack of working parental role models. In other words he’s returned to the 19th century belief that anyone who is poor is poor due to their own moral failings and that none are poor either due to the failure of companies and governments to provide enough jobs or the failure of governments to provide enough support to those who are unemployed, ill, disabled or too old to work. The trouble is, that like his 19th century predecessors, Field’s theories have been comprehensively disproven by research. To be fair what Field says is part of the truth – parenting is important in influencing children’s life chances – but claiming that bad parenting is the main or only cause of poverty flies in the face of the facts. (3)(4).

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The Social Mobility, Meritocracy or ‘Equal Opportunity’ Myths
1) that cutting back on welfare and public sector employment promotes social mobility –
and 2) that equal opportunities for all can end poverty and unemployment if everyone is made to get a job,
without increased welfare and public employment and government intervention

British Deputy Prime Minister Nick Clegg MP - one of the advocates of the theory that promoting social mobility will allow the welfare state to be scaled back

The Coalition’s ‘welfare reform’ policies are presented as being about stopping those in work from having to subsidise those who live on benefits; and about helping people in benefits help themselves by getting them into work and so increasing their income. This will supposedly reduce the tax burden on those who have always worked. This, along with an increase in the amount of income people can make before it’s taxed, will allow for “social mobility” according to Deputy Prime Minister Nick Clegg and ensure that people in poverty get out of it through work and lower taxes, rather than getting the “poverty plus a pound” of the minimum income guaranteed by the previous Labour government (5).

This echoes similar “reforms” under Tony Blair (PM 1997-2007), who said that “In future welfare will be a hand-up, not a hand-out” and under John Major in the early to mid 90s before him, who said his aim was “a classless society”. This is the ‘social mobility’ or ‘equal opportunity’ theory that if you just make sure everyone starts out with the same education and life chances then only the lazy who refuse to make an effort will end up unemployed or poor.

The facts show something very different. First much research suggests that social mobility has actually fallen under all of them (with people increasingly likely to be in the same income as their parents) and the UK and US are very low in the social mobility rankings compared to countries with higher welfare spending rates (6)(8).

Although social mobility rates are disputed by a few on the right, they are not the most important point. The really important point is that no amount of social mobility, on it’s own, will eliminate poverty or unemployment. Social mobility on it’s own is just a game of musical chairs with people moving between poverty, unemployment, middle or high incomes and back again, without any reduction in the overall rate of unemployment or poverty.

 The facts that show this in the UK are there are more unemployed people than job vacancies during recessions and booms alike – and many people getting jobs remain among the poorest. This means that even if we did have equal chances for everyone many would end up in unemployment or poverty (or both) anyway without an expanded welfare state and/or more public sector jobs and/or increased minimum wages and fairer taxes.

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The facts on unemployment : figures show always more unemployed than job vacancies

Doncaster Job Centre, UK, 2009 - are there really enough jobs for every unemployed person?

The myth that there are jobs for everyone has been promoted by tabloid newspapers and repeated by government ministers of both main parties. The statistics show it’s far from the truth.

British government statistics show that in the first quarter of 2010 there were around 1 million more people claiming unemployment benefit than there were job vacancies. Due to long delays between losing a job and being able to claim unemployment benefit – and the fact that some people don’t claim it – the actual number of unemployed is far higher than the claimant count though ( (9) ONS 2010 and (10) IPPR 16 Sep 2010, page 55 and also Fig 4.2)

By the third quarter of 2010 government figures show there were 2.45 million people unemployed and just 453,000 job vacancies – that’s almost 2 million more people unemployed than job vacancies – or over 5 people unemployed for each job vacancy ((11) ONS Labour market statistics 17 Nov 2010 ).

The jobs gap figure has been under-reported even in those articles referring to the IPPR report as around 330,000, probably based on the summary article on the report. The full report states this is actually the projected figure for the end of 2011 based on guesses on economic growth rates. It’s also based on the number of long-term unemployed people projected on those growth rates – 875,000 – not the total number of people projected to be unemployed but the number they estimate might have been out of a job for over 12 months by then(12) . IPPR 16 Sep 2010, page 55).

 This is not unusual. There are always more people unemployed than job vacancies during any recession – and the private sector is not guaranteed to provide enough jobs for everyone even during an economic boom. 

For instance in 2000, during an economic boom, then Chancellor Gordon Brown claimed there was a job for every job-seeker - but resorted to using discredited statistical methods, which he had condemned himself when they were used by the previous Conservative government, to support this dubious claim. International Labour Organisation statistics showed a shortage of 600,000 vacancies relative to unemployed workers. British Trade Union Congress studies of unemployment , whose results are mirrored by academic studies commissioned by the Economic and Social Research Council,  put the number of unemployed people in Britain at around 4 million in 2000 compared to around 1 million job vacancies – a ‘jobs gap’ of 3,000 (13)(15).

Due to various serious flaws in the way the unemployment figures have been compiled for decades the actual number of unemployed people – and so the number of unemployed exceeding the number of jobs available – is likely to be even higher than some of the figures above suggest (16).

Only government can guarantee that it will provide full employment – and no British government so far has ever guaranteed to do that. The current government plans to sack another 500,000 public sector employees, estimated by the Treasury as likely to lead to another 700,000 knock on private sector job losses (17). The bad public relations this created for the new government’s policy led to political revision of these estimates.

Even once the economy is on a growth period again there will still be more unemployed people than job vacancies. So the theory that providing good parenting will allow the private sector to provide well paid jobs for everyone that wants one is false. Far from people not being willing to do low status or low paid work employers reported the opposite. The IPPR reported that “Employers we interviewed said that the volume of applications for job vacancies had increased dramatically since the recession started, and that applicants were far more qualified than the positions demanded.”(18).

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The facts on poverty and work – many people in work also in poverty

A protest demanding an end to child poverty in the UK, December 2010

On top of this another IPPR report found that each year for the last decade there have been more households in poverty in which someone is working than there are households in poverty in which everyone is unemployed (19) = IPPR 13 Sep 2010 p5). (Before anyone complains that this may be because those on welfare get too much benefit , Employment Allowance is currently set at £51.85 a week for people under 25 and £65.45 for people over 25 (20). Levels were just as low under Labour in 2009 when it was called ‘Job Seekers Allowance’.(21) .

The fact that there are more people of working age who are in work and in poverty than unemployed and in poverty is confirmed by other research, including some commissioned by the Joseph Rowntree Foundation, which also found that 3.5 million of the very poorest – those defined as in ‘deep poverty’ - are also in work. This was the majority of those in deep poverty – 3.5 million out of 5.8 million. Deep poverty is defined in the report around as a third or more below the poverty line of 60% of median income (the poverty line being under £119 per week for a single adult) – so deep poverty would be a total income of roughly £80 a week or less (22).

One of the reasons for this is that of those people in work over 1 million who want full time jobs can only get part-time work ; (23). This is a long term trend which has increased over decades.

 So unless government steps in to increase the minimum wage, or to provide in-work benefits to employed people on low incomes, then getting people off benefits and into work may leave most of them in poverty.

So the other part of the neo-liberal welfare reform theory that getting people into work gets them out of poverty is false in millions of cases.

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Defining Poverty – relative versus absolute

Some will make the usual objection here that some of this depends on your definition of poverty and that poverty in the UK is only “relative” poverty, not ‘real’, or absolute poverty.

The definition of poverty used in most of the studies referred to above is below 60% of median income. This is certainly a relative measure, but before anyone jumps on that, the amount involved is £119 a week for a single adult or £288 a week for a couple with 2 children for poverty. For ‘deep poverty’ it’s £80 a week for a single adult or £192 a week or less for a couple with 2 children. While no-one will starve to death on either income most people will agree that it will be extremely difficult to e.g get 2 or 3 healthy meals a day, heat your home, get warm and waterproof clothes and pay all the bills on either income without struggling and suffering hunger and cold much of the time, with a serious long-term toll on adults’ health and the development of children (24).

One exception is the 2010 report by the Institute for Fiscal Studies which estimates the likely effects of the Coalition government’s policies on both the number of people in relative poverty defined as 60% of median income and absolute poverty based on the number of people below a lower, fixed level of income over time (using the government’s own definition of absolute poverty) (25).

The definition of ‘absolute poverty’ used by the government used over the last 13 years had been 60% of median income in financial year 1998/1999, but the 2010 Child Poverty Act changed this to 60% of median income in financial year 2010 for measuring increases or falls in poverty to 2020 (26). It seems likely the new government may change this definition.  

Coalition spokespeople have wrongly claimed that this study uses only relative poverty and not absolute poverty as a definition (27).

All these measures are very different from the UN’s definition of poverty which is an income of under $1 or $2 a day calculated in terms of PPP or ‘Purchasing Power Parity’ dollars to take account of the different prices of basic necessities of life in each country.

While the measures of poverty used in the UK are different, even the relative definition of poverty in the UK is based partly on surveys of what people in Britain think constitutes poverty – and are also reliable indicators that many of those on these incomes are suffering some forms of absolute poverty – i.e are unable to afford some basic necessities. For instance the JRF’s 2000 study found 9.5 million people in Britain in 1999 could not afford to heat their homes adequately, 4 million couldn’t afford either two meals a day or fruit and vegetables to eat ; and 6.5 million people went without essential clothing such as a warm waterproof jacket or decent shoes (with 2% of children lacking a warm waterproof coat or properly fitting shoes and many unable to afford a healthy diet) (28).

One parent interviewed in a later report ate nothing but bread so their children could eat better diets, while another (in 2008) said being in poverty meant “Being hungry, only having enough food to give the children, hoping they would leave some leftovers on the plate, so I wouldn't be so hungry.” (29)(30))

There is also considerable evidence that high levels of inequality, even in relatively wealthy countries, causes physical health problems which cannot be explained by factors other than the low social status or income of the poorest.Though these include poor diet the effects are so large that diet and housing alone can’t account for them and are thought to be largely based on peoples’ own subjective views of their own status, but with the main thing determining peoples’ views of their own status being how others treat them. This research has been summarised in the book ‘The Spirit Level’.

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Economic growth does not guarantee the poorest won’t be worse off in absolute terms if inequality is too great

The claim that economic growth always benefits everyone in absolute terms, no matter how unequally the proceeds of growth are distributed, is not always true either. While generally speaking, in the ‘developed world’ or wealthier countries which have some kind of welfare state, economic growth does benefit everyone (though often the richest far more than the poorest), there is nothing inevitable about this if inequality grows too great.

 For instance in Britain according to the Department of Social Security and the Joseph Rowntree Foundationwhile real average incomes rose by around 40% the income of the poorest 10% of the population fell by 8% when housing costs are included  (government statistics frequently exclude housing costs when working out changes in real disposable income, allowing them to show every income group as having increased its income)(31) .

This was a period over which British wealth per person (whether measured by GDP per capita in US dollars or in PPP dollars) roughly doubled on World Bank figures (32).

In the US the Reagan and Bush senior years (1980 to 1992) produced a 10% fall in incomes for the poorest 10% of the population - while doubling the incomes of the richest 1% of the population (33). The number of people in poverty increased by 7 million - around 3 million of those newly made poor were made so by cuts in welfare payments (34). Over the same period, on world bank figures, US GDP per capita doubled (35).

There are at least two possible reasons for this. First the operations of the private sector and changes in government policy (e.g price regulation or lack of it, changes in taxation, benefits, etc) can take both existing wealth and wealth created by economic growth from the poorest and give it to the richest just as easily as it can do the opposite.

Second, even if the income of the poorest increases, prices of basic necessities will tend to rise based on average or median incomes, so those whose income either does not rise, or rises by significantly less than average, may end up with reduced real spending power, as their income has not risen as fast as prices.

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UK Welfare Reform modelled on US welfare to work – which increased poverty

President Clinton signs the 1996 Responsibility and work opportunity act which gave federal approval to state 'welfare to work' laws

The Coalition’s ‘Welfare reforms’ are modelled on the ‘Welfare to Work’ policies implemented in the US in the 1990s. These were pushed by Newt Gingrich and others on the right wing of the Republican party, but approved by President Clinton – considered a ‘liberal’ Democrat - and involved getting people to work for their benefits and cutting off their benefits entirely – including child benefit for single parents – if they were out of work for 6 months or more.

The leaders of both main parties in the UK started trying to copy the American model, along with the right of the Lib Dems (known as “orange book” Lib Dems). Both Labour and the Conservatives said during the 2010 election campaign that if elected they would cut benefits for those who refused jobs – but Labour was at least planning to provide more public sector jobs to reduce the jobs gap. The Conservatives presented benefit cuts for those who were held to have refused work as if it was a new idea. In fact the previous Labour government had adopted it already, with Labour Work and Pensions minister Peter Hain MP saying in 2007 that “Those who deliberately refuse to co-operate in getting back to work, will have their benefits reduced. This is only fair.” (36)(38).

The Conservatives plan to go further though and have a ‘three strikes and you’re out’ policy in which, if people turn down job offers, they get benefits cut more for turning down a second and third job offer. Without major increases in in-work benefits and/or the minimum wage this will result in more people being forced into working for poverty wages, so will not reduce poverty.

'Welfare to work' in the US greatly increased inequality and poverty in the US - and a great deal of the 'welfare reform' on both sides of the Atlantic has moved people from being unemployed and in poverty to in work but still in poverty. In the U.S since 1996 President Clinton approved welfare ‘reforms’ made by individual states which involve benefit termination - in other words no state support - for individuals or families who have been out of work for more than 2 years  in a row or 5 years of their entire life (39). In other words the least skilled, least able, long -term unemployed were penalised most heavily. As a result the number of people receiving unemployment benefit was halved in 3 years, but not because unemployment or poverty had ended.  Only 39% of unemployed Americans received any unemployment benefit by 2001 ; (40). Many proud boasts of reduced welfare rolls by politicians turned out to be due to people being denied benefits though they had not moved into work, for infractions of ‘workfare’ rules as minor as arriving late for ‘workfare’ (41).  Most of those who went from unemployment to a job were earning an average of only $6.61(£4.13) an hour in 1999 and remained in poverty (42)(43).

A study using US Census Bureau data foundthe average incomes of the poorest 20 percent of female-headed families with children fell from 1995 to 1997 despite continued economic growth, as welfare system changes took effect on a large scale due to state reforms and enactment of the 1996 federal welfare law.’ (44).

Between 1995 and 2008, the percentage of single mothers in poverty with neither work nor any welfare payments as income in the US more than doubled, to 35 percent (45). This was not merely due to the recession following the financial crisis as child poverty rates in the US were already rising from 2000 to 2007 (46). The poverty rate across the US as whole has risen steadily through the entire last decade (47). In Wisconsin, one of the first states to adopt ‘welfare to work’ the numbers of homeless people in homeless shelters and hungry people seeking food from charities increased rapidly (48).

(There were some benefits in social terms for many who did manage to get work for a reasonable period. Those who did get jobs had more contact with other people - and marriage rates increased as a result (49).

As a result of ‘welfare to work’, when the recession hit after the 2007 financial crisis many people were left hungry in the US. They were not starving to death, but many are going hungry because they can’t afford to buy food at many times. This is especially bad for children, whose growth and brain development can be damaged by lack of a healthy diet (50)(51).

(This was despite emergency measures to provide extended periods of unemployment benefit, the renewal of which were blocked by Republicans in 2010 until they got an extension of tax cuts for the very wealthiest,  tax cuts which even many millionaires had petitioned the President to end (52)(54) )

The Coalition government in the UK, following the US ‘welfare to work model’ plan exactly – right down to the required hours per week - plan to make the unemployed do 30 or more hour weeks of work at around £2 an hour in benefits or else lose their benefits ;(55). They’ve laughably called this part of their plan “voluntary work’, perhaps on the basis that the “volunteers” have the option of starving instead of getting the poverty income of £65 a week for 30 hours work (classic doublespeak). By getting the unemployed to work at these rates for councils and private companies they will certainly save both money. These councils and companies, having people forced to work for them at third world pay rates, will presumably use them to cover the gap left by sacking large numbers of employees who were paid the minimum wage or more. So many of the people who voted Conservative in outrage at having to subsidise those on benefits will join them on benefits – and probably have to work for their vastly reduced income of £65 a week too.

The Joseph Rowntree Foundation found that relative poverty for pensioners declined throughout New Labour’s period in government from 1997 to 2008/9 and relative and absolute child poverty fell too, but as out-of-work poverty fell, the numbers of people in work but in poverty rose (56).

The Institute for Fiscal Studies’ 2010 report estimates increases in the numbers of adults and children in poverty of hundreds of thousands each year as a result of the Coalition’s policies (57)

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The Myth of out of control Welfare spending

British Prime Minister David Cameron and Chancellor George Osborne have repeatedly claim welfare spending in the UK under their Labour predecessors was 'out of control' - the figures don't back them up on that

New Labour, being ‘Third Way’ in it’s economic and social policies – and (until the Sun changed sides again with it’s Mrs Duffy set up in 2010) in alliance with Rupert Murdoch and the Sun newspaper - did not increase the proportion of national wealth spent on welfare, despite the endless claims by the Conservative party, the Daily Mail and the Sun that welfare spending is out of control.

Welfare spending certainly increased in the UK between 1997 and 2010, just as it has done under every other government (including Thatcher’s) in this and every other country, but not as much as national wealth (GDP per capita – i.e per person – did).  While the UK’s GDP per capita increased by around two-thirds in this period on World Bank figures, the percentage of GDP (national economic output – or wealth) spent on welfare - actually fell slightly between 1997 and 2010, from 7.76% to a but over 7.0%  (58) – (59) (credit to Duncan’s Economic Blog – no relation -  for pointing the second part out).

This is even more striking as 2010 was a period of recession, when unemployment (and so unemployment benefit payments) are at their highest, while 1997 was an economic boom, with unemployment is at it’s lowest point.

If looking for unfair government spending going to those who neither need nor deserve it there are many better candidates for cut. These include Private Finance Initiatives or ‘Public Private Partnerships’, which the Conservatives began, Labour expanded and the Coalition are planning to expand again, leading to increased taxes for cut services; Export Credit Guarantees to British Aerospace for arms and dual use equipment going to dictatorships and human rights abusers (often including those who later become our enemies such as Saddam Hussein’s forces in the past); and military aid to dictatorships.

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Conclusion – We don't need welfare to work but an expanded welfare state and more public sector employment

Cartoonist Steve Bell on British welfare minister Ian Duncan Smith MP's welfare to work plans

Field and the government are still operating on the same theory as Blair and Major before them that ‘equality of opportunity’ on it’s own is enough. It’s not. We still need a welfare state and large numbers of people employed by the public sector to provide enough jobs and enough support for those out of work – as well as either higher minimum wages or increased in-work benefits for those working in low paid jobs – and supplemented by more public sector jobs to provide for the gap between job vacancies and numbers of people unemployed.

With the longstanding record of between hundreds of thousands and millions more unemployed than job vacancies over decades; falling demand likely to fall further in the UK and Ireland due to public sector job cuts and knock on private sector losses; and an increasing number of new jobs being part-time or low wage from the 1980s on, the Coalition’s plan to get the private sector to get everyone into work and so get them out of poverty is either wishful thinking or a fraud. Cutting benefits, freezing public sector pay and sacking public sector workers are likely to combine with the recession in Ireland (our main trading partner) to further weaken demand in the economy, leading to private sector business failures and job losses.

Neo-liberals, conservatives  and adherents of the Blairite ‘third way’ share a theory of the causes of poverty which focuses on the supposed personal failings of, or lack of opportunity given to, those who become poor. However this theory does not accord with the facts as shown by large amounts of research by the IPPR and the Joseph Rowntree Foundation, nor with British government statistics on unemployment and poverty on which this research is partly based.

It employs a nineteenth century caricature of the poor as almost all being poor due to their own failings, the failings of their parents, or their lack of education. It ignores the persistent failure of the deregulated private sector to provide enough jobs. It ignores the low pay in many of the existing and newly created jobs, leading to poverty for many of those in work. It ignores  the failure of governments to provide enough public sector jobs or welfare to support those who are out of work.

It also makes the false assumption that equality of opportunity alone is enough to ensure that if everyone makes an effort they will all prosper. In fact the private sector , left to itself, overall constantly redistributes wealth from the majority to a minority. Government intervention is required to redistribute some of this back from the minority to the vast majority – and especially the poorest. The neo-liberal theory also assumes that the welfare state is outmoded and can be phased out by giving everyone an equal start and letting the private sector largely do the rest. This is a proven failure. If anything, as technology progresses, unemployment – and long-term unemployment - is likely to increase due to the greater efficiency of technology – and so the welfare state needs to be extended and benefit levels increased rather than cut.

It is effective only in getting positive headlines in tabloid newspapers which peddle a cartoon view in which everyone receiving benefits is doing so because they are a fraudster or don’t want to work – and even more ludicrously – supposedly because they are living well on the £51 to £68.50 they receive in unemployment or disability benefit each week.

 True, there are a minority who abuse the system or commit benefit fraud – the amounts involved are dwarfed by tax evasion, legal tax avoidance and government subsidies to private firms such as PFIs, PPPs and Export Credit Guarantees though ;  and ‘welfare reform’ so far continues to involve punishing every unemployed or disabled person in order to punish a small minority. What’s more since there are far more unemployed people than job vacancies even during periods of growth, even those abusing the system are offered no way to get a job by the reforms – as a result a continuation of these policies will be force them and many people who already want work into homelessness and/or crime.

The Coalition has said that it’s single ‘universal benefit’ will be available to people in work as well as those out of work. They’ve also said they’ll ensure people who’re working make more money than they would get on benefits. However that doesn’t guarantee an above increased income to those in work on low incomes – for all we know so far it could as easily mean cutting benefits for those who aren’t in work.

George Orwell wrote that certain words used by many politicians had become “meaningless” because “Words of this kind are often used in a consciously dishonest way. That is, the person who uses them has his own private definition, but allows his hearer to think he means something quite different.”

Listening to the advocates of “welfare to work” talk about “fairness” and how “progressive” their policies are, about “voluntary work” which you either do at poverty pay rates or go without any income at all, about “a hand up, not a hand-out” ; and and about getting people “out of poverty and into work”, it’s clear that the speakers are either kidding themselves due to adopting outdated ideologies and disproven theories – or else want us to believe they mean something very different from what they actually mean – or maybe that they just don’t care about the result so long as it gets them positive newspaper headlines and the chance of winning an election.

Whichever it is, it’s time to stop demonising and victimising people who have been unfairly lumped together with the small minority of benefit fraudsters, to stop pretending there are plenty of jobs for everyone, to stop pretending forcing people into jobs which, without government support, will still leave them and many children in poverty (and stop pushing more people into poverty along with them) will end that poverty ; and to end the myth that the private sector can solve all our problems on it’s own if the state just bows out.

No doubt Rupert Murdoch and some other people whose desire for money and power seems to be insatiable will object to them or their corporate empires paying enough taxes to provide jobs or welfare – or both – for the unemployed and those in low paid jobs. No doubt they’ll keep their newspapers filled with screaming headlines presenting all the unemployed as workshy and benefit fraudsters and pretending everyone in poverty is poor due to being unemployed and too lazy to work. We shouldn’t pay them the slightest attention though.

Back to contents links/ top of page

List of sources by section

Return to the 19th century theory of poverty

(1) = Guardian 13 Dec 2010 ‘Britain 'more Thatcherite now than in the 80s' says survey’,
http://www.guardian.co.uk/education/2010/dec/13/social-survey-thatcherite-britain

(2) = Guardian 03 Dec 2010 ‘Frank Field's poverty report challenges 'welfare state sacred cows',
http://www.guardian.co.uk/politics/2010/dec/03/frank-field-welfare-sacred-cows

(3) = Final Report - Independent Review on Poverty and Life Chances ; The Rt Hon Frank Field MP ; 3rd December 2010 ; A New Strategy to Abolish Child Poverty, http://povertyreview.independent.gov.uk/final_report.aspx and http://povertyreview.independent.gov.uk/media/20254/poverty-report.pdf

(4) = See (1) above

The Social Mobility, Meritocracy or ‘Equal Opportunity’ Myths

(5) = guardian.co.uk 09 Nov 2010 ‘Poverty plus a pound isn't enough’, by Nick Clegg MP,
http://www.guardian.co.uk/commentisfree/2010/nov/09/poverty-plus-pound-not-enough?CMP=twt_gu

 (6) = London School of Economics ‘Disturbing finding from LSE study - social mobility in Britain lower than other advanced countries and declining’, http://www2.lse.ac.uk/newsAndMedia/news/archives/2005/LSE_SuttonTrust_report.aspx

(7) = Jo Blanden, Paul Gregg and Steve Machin (2005) ‘Intergenerational mobility in Europe and North America’,
Centre for Economic Performance, April 2005, http://cep.lse.ac.uk/about/news/IntergenerationalMobility.pdf

(8) = guardian.co.uk 10 Mar 2010 ‘OECD: UK has worse social mobility record than other developed countries’,
http://www.guardian.co.uk/business/2010/mar/10/oecd-uk-worst-social-mobility

The facts on unemployment : always more unemployed than job vacancies

(9) = Office for National Statistics (2010) Statistical Bulletin: Labour Market Statistics, July 2010 www.statistics.gov.uk/pdfdir/lmsuk0710.pdf

(10) = IPPR 16 Sep 2010 ‘Now It's Personal? The new landscape of welfare-to-work’ by Clare McNeill, p55 and Fig 4.2, http://www.ippr.org/publicationsandreports/publication.asp?id=775

(11) = ONS 17 Nov 2010 Labour market statistics,
http://www.statistics.gov.uk/cci/nugget.asp?id=12

(12) =  See (6) above

(13) = Guardian 1 Mar 2000  ‘Brown attacked for using ‘fiddled’ figures on jobless’,
http://www.guardian.co.uk/politics/2000/mar/01/uk.politicalnews3

(14) = Tribune magazine 18 Feb 2000 Jobless figures are 'increasingly misleading' claim leading academics Mike Naughton, http://www.tribunemagazine.co.uk/

(15) = Guardian 3 Mar 2000 TUC attacks Brown claim of jobs for all who want them,
http://www.guardian.co.uk/money/2000/mar/03/workandcareers.uknews

(16) = David Webster (2002) ‘Unemployment: How Official Statistics Distort Analysis and Policy, and Why’, Radical Statistics no. 79 (2002), http://www.radstats.org.uk/no079/webster.htm

(17) = guardian.co.uk 29 Jun 2010 ‘Budget will cost 1.3m jobs – Treasury’,
http://www.guardian.co.uk/uk/2010/jun/29/budget-job-losses-unemployment-austerity

(18) = IPPR 16 Sep 2010 ‘Now It's Personal? The new landscape of welfare-to-work’ by Clare McNeill, http://www.ippr.org/publicationsandreports/publication.asp?id=775

The facts on poverty and work – many people in work also in poverty

(19) = IPPR 13 Sep 2010 ‘In-work poverty in the recession’, by Glenn Gottfried and Kayte Lawton,http://www.ippr.org.uk/publicationsandreports/publication.asp?id=774

(20) = direct.gov 10 Dec 2010 ‘Employment and Support Allowance Rates’,
http://www.direct.gov.uk/en/DisabledPeople/FinancialSupport/esa/DG_171896

(21) = Liverpool City Council ‘Job Seeker's Allowance (income based and contributory)’, Last updated on 27/4/2010, http://www.liverpool.gov.uk/Health_and_social_care/Social_benefits/a_z_benefits/job_seekers_allowance/index.asp

(22) = Joseph Rowntree Foundation 6 Dec 2010 ‘Monitoring poverty and social exclusion 2010’, by Anushree Parekh, Tom MacInnes and Peter Kenway ,
http://www.jrf.org.uk/publications/monitoring-poverty-2010
and
http://www.jrf.org.uk/sites/files/jrf/poverty-social-exclusion-2010-summary.pdf

(23) = Office for National Statistics 17 Nov 2010 ‘Employment Rate rises to 70.8 per cent’,  http://www.statistics.gov.uk/cci/nugget.asp?id=12

 

Defining poverty

(24) = Joseph Rowntree Foundation 6 Dec 2010 ‘Monitoring poverty and social exclusion 2010’, by Anushree Parekh, Tom MacInnes and Peter Kenway ,
http://www.jrf.org.uk/publications/monitoring-poverty-2010
and
http://www.jrf.org.uk/sites/files/jrf/poverty-social-exclusion-2010-summary.pdf

(25) = IFS Briefing Note 115, by Mike Brewer & Robert Joyce (2010) ‘Child and working-age poverty from 2010 to 2013’, http://www.ifs.org.uk/publications/5373

(26) =  Joseph Rowntree Foundation 6 Dec 2010 ‘Monitoring poverty and social exclusion 2010’, by Anushree Parekh, Tom MacInnes and Peter Kenway ,
http://www.jrf.org.uk/publications/monitoring-poverty-2010
and
http://www.jrf.org.uk/sites/files/jrf/poverty-social-exclusion-2010-summary.pdf, page 10

(27) = guardian.co.uk 16 Dec 2010 ‘Spending cuts 'will see rise in absolute child poverty'’,
http://www.guardian.co.uk/politics/2010/dec/16/spending-cuts-rise-absolute-child-poverty

 (28)  = Joseph Rowntree Foundation 11 Sep 2000 ‘Major new poverty survey finds two million children without ‘necessities of life’’, . http://www.jrf.org.uk/media-centre/major-new-poverty-survey-finds-two-million-children-without-%E2%80%98necessities-life%E2%80%99

(29) = Joseph Rowntree Foundation ‘Experiencing Poverty’, http://www.jrf.org.uk/reporting-poverty/experiencing

(30) = Joseph Rowntree Foundation 29 Jul 2008 ‘Engaging and empowering women in poverty’,
http://www.jrf.org.uk/publications/engaging-and-empowering-women-poverty

 

Economic growth does not guarantee the poorest won’t be
 worse off in absolute terms if inequality is too great

(31) = Professor John Hills (1998) ‘Income and Wealth : The Latest Evidence’ Joseph Rowntree Foundation, York, UK, 1998, http://www.jrf.org.uk/sites/files/jrf/spr368.pdf
and http://www.jrf.org.uk/media-centre/income-gap-remains-wide-despite-mid-1990s-fall-inequality

(32) = World Bank Data Catalog Dec 2010 ‘GDP per capita (current US$)’,
http://data.worldbank.org/indicator/NY.GDP.PCAP.CD and http://data.worldbank.org/indicator/NY.GNP.PCAP.PP.CD/

(33) = Krugman , Paul (1994) ‘Peddling Prosperity’ Norton , New York & London , 1994  ; p135 - figure 7

(34) =  Krugman , Paul (1994) ‘Peddling Prosperity’ Norton , New York & London , 1994  ; page 156

(35) = World Bank Data Catalog Dec 2010 ‘GDP per capita (current US$)’,
http://data.worldbank.org/indicator/NY.GDP.PCAP.CD and http://data.worldbank.org/indicator/NY.GNP.PCAP.PP.CD/

 

UK Welfare Reform modelled on failed US welfare to work – which increased poverty and homelessnesss

(36)  = Channel 4 News 11 Apr 2010 ‘Labour manifesto 'to end life on benefits', http://www.channel4.com/news/articles/politics/domestic_politics/labour+manifesto+to+rule+out+aposbig+spendingapos/3608697.html

(37) = News Statesman blog 20 Apr 2010 ‘New Tory poster swerves to the right’,
http://www.newstatesman.com/blogs/the-staggers/2010/04/refuse-work-poster-cameron

(38) = BBC News 11 Nov 2010 ‘'Bruising' week sees welfare-to-work reform moves’,
http://www.bbc.co.uk/news/uk-wales-11737587

(39) = US Department of Health and Human Services Sep 1996 ‘Fact Sheet - The Personal Responsibility and Work Opportunity Reconciliation Act of 1996’, http://aspe.hhs.gov/hsp/abbrev/prwora96.htm

(40) =     Guardian 16 Nov 2001 ‘Disunited. A tale of two Americas’,
http://www.guardian.co.uk/business/2001/nov/16/usnews.internationalnews1

(41) = NYT 15 Apr 1998 ‘Tough Workfare Rules Used As Way to Cut Welfare Rolls’,
http://www.nytimes.com/1998/04/15/nyregion/tough-workfare-rules-used-as-way-to-cut-welfare-rolls.html?scp=1&sq=workfare+welfare&st=nyt

(42) = Daily Telegraph 04 Aug 1999 ‘American welfare rolls halved by time-limit reform’no longer available online but said that ‘There are now 7.3 million people collecting social security compared to 14.1 million when President Clinton took office in 1993 and 12.2 million when, despite protests from Democrats, he agreed to sign the conservative legislation.

It means fewer Americans, as a proportion of the population, are on welfare than at any time since 1967.

Only one tenth of the decline is because of the booming economy, according to the President's council of economic advisers. One third is due to the 1996 reform of welfare, the first since the New Deal 60 years ago.

American welfare rolls halved by time-limit reform’ – no longer available online but said that ‘About a third left without finding jobs, and their means of support is unknown. But three fifths of those who left were in work, the Urban Institute found, and earning an average of $6.61 ( pounds 4.13) an hour. Many were cleaners or in the fast food industry.’

(43) = Miller-McCune 28 Oct 2010 ‘Welfare Reform Failing Poor Single Mothers’,
http://www.miller-mccune.com/politics/welfare-reform-failing-poor-single-mothers-24778/

(44) = Center on Budget and Policy Studies ‘Average Incomes of Very Poor Families Fell
During Early Years of Welfare Reform, Study Finds’,
http://www.cbpp.org/cms/?fa=view&id=533

(45) = See (32) above

 (46) = Child Trends Research Brief Apr 2009 ‘Children in Poverty : trends, consequences and policy options’ Kristin Anderson Moore PhD et al/Child Trends, Washington D.C, 2008,
http://www.childtrends.org/files/child_trends-2009_04_07_rb_childreninpoverty.pdf

(47) = US Census Bureau 2010 ‘Current Population Survey 1960 to 2010’, Figure 4 Number in poverty and poverty rate: 1959 to 2009,
http://www.census.gov/hhes/www/poverty/data/incpovhlth/2009/pov09fig04.pdf

(48) =  Consortium for Economic Opportunity Jun 2002 ‘Passing the Buck W-2 and Emergency Services in Milwaukee County’, http://www4.uwm.edu/milwaukeeidea/ceo/newsletters/june02/page2.html

(49) = The Economist 23 Aug 2001 ‘Welfare Reform : America's great achievement’,
http://www.economist.com/node/751378

(50) = guardian.co.uk 17 Nov 2009 ‘Record numbers go hungry in the US’,
http://www.guardian.co.uk/world/2009/nov/17/millions-hungry-households-us-report

(51) = Newsweek 10 Aug 2010 ‘Food Insecurity Rising in America’,
http://www.newsweek.com/2010/08/10/food-insecurity-rising-in-america.html

(52) = The Economist 11 Nov 2010 ‘Cold comfort : Millions of jobless Americans will soon be left without benefits’,
http://www.economist.com/node/17465273

(53) = NYT 03 Dec 2010 ‘Millions Bracing for Cutoff of Unemployment Checks’,
http://www.nytimes.com/2010/12/04/us/04unemployed.html

(54) = NYT 06 Dec 2010 ‘Tax Deal Suggests New Path for Obama’,
http://www.nytimes.com/2010/12/07/us/politics/07cong.html

(55) = Observer 07 Nov 2010 ‘Unemployed told: do four weeks of unpaid work or lose your benefits’,
http://www.guardian.co.uk/politics/2010/nov/07/unemployed-unpaid-work-lose-benefits

(56) =  Joseph Rowntree Foundation 6 Dec 2010 ‘Monitoring poverty and social exclusion 2010’, by Anushree Parekh, Tom MacInnes and Peter Kenway ,
http://www.jrf.org.uk/publications/monitoring-poverty-2010
and
http://www.jrf.org.uk/sites/files/jrf/poverty-social-exclusion-2010-summary.pdf, pages 10, 12 - 17

(57) =  Institute for Fiscal Studies Dec 2010 ‘Child and working-age poverty from 2010 to 2013’, by Mike Brewer & Robert Joyce, http://www.ifs.org.uk/publications/5373 or http://www.ifs.org.uk/bns/bn115

The myth of out of control welfare spending

 

(58) = World Bank Data Catalog Dec 2010 ‘GDP per capita (current US$)’,
http://data.worldbank.org/indicator/NY.GDP.PCAP.CD and http://data.worldbank.org/indicator/NY.GNP.PCAP.PP.CD/

(59) = UK public spending welfare UK FY 1950 to FY 2011 (based on treasury figures - 2010 and 2011 are estimates so used 2009 as final year with definite figure),
http://www.ukpublicspending.co.uk/downchart_ukgs.php?year=1950_2011&state=UK&view=1&expand=&units=p&fy=2010&chart=40-total&bar=1&stack=1&size=m&color=c&title=Welfare%20Chart