Welfare To Work

A solution to unemployment?

Currently, many thousands of people in Britain are caught in a so-called unemployment trap. Because wages are so low, many people in full-time employment are not even able to earn a "living wage", i.e enough money to live on, generally accepted to be around £3.50 an hour for an individual. This problem is even worse for working families - even if both partners are earning £3.50 an hour, this is barely enough to support themselves, never mind their children. What is worse, in many areas of employemnts, £3.50 an hour is considered a good wage. Some workers, such as shop assistants and waitresses, are being paid as little as £1.10 an hour!! As a result of this, many people find that they are making more money, in real terms, by drawing Social Security thank by working. This is partly due to low wages and steadily increasing benefits, but also because any working person not only has to pay income tax on their earnings, but also loses all their previous benefits, thus dropping their real income below the "poverty line".
In order to attempt to solve this problem, the Labour party has introduced a controversial new scheme, known as Welfare to Work. This scheme, costing £3 billion, is to be funded directly by the Windfall Tax. The name "Welfare To Work" is fairly self-explanatory - working people will still be allowed to draw welfare if they are earning less than a certain amount - this amount being around £90 a week for each family member in full time employment. Furthermore, such families will recieve an income tax rebate on all earnings below £90 a week. The government intends to continue to fund the Welfare To Work scheme by introducing means testing on Child Benefit (a benefit which is currently paid to everyone with children, regardless of wealth. This was previously known as Family Allowance). Child benefit, at the moment £11 a week for one child, £14 a week for two, £16 a week for three, £18 a week for four and £22 a week for five, will be paid on a sliding scale according to affluence, and taxed for all those earning more than 85% of an average wage. However, the Welfare to Work scheme has become a topic of great controversy in the press recently. Here is a brief summary of the arguments on both sides:-

FOR

• The scheme will break the employment trap for many families, thus allowing them to work and regain their self-respect.
• The scheme will discourage layabouts from living off the state when they can find other employment.
• The scheme will lower unemployment rates.
• British consumers will have more spending power, thus generating higher profits for British businesses and encouraging expansion and creation of new jobs.
• The distribution of wealth will become more equal.
• Overall levels of consumer happiness will increase.
• The scheme will make people feel more valued, giving more incentive for better work, and thus greater nationwide labour efficiency.
• Companies will be able to employ more people, thus creating more jobs.

AGAINST

• The scheme will cost a huge amount to implement - £3 billion from the tax payer.
• The scheme will increase the amount of welfare payment made - the Department of Social Security is already the biggest spending of all government departments.
• The scheme mollycoddles workers, leading them to expect more money for less work.
• In many cases, jobs such as cleaning and waitressing are not worth more than they are paid, as there is little or no skill or special training involved, and virtually anyone can do these jobs.
• The scheme will not encourage employers to raise wages - businesses will lower wages, knowing that the state will make up the deficit.
• The scheme will not encourage people to seek higher education in order to find better paid jobs, they will merely drop out of school knowing that they can earn a comfortable wage without education.
• The scheme will close the differential between high and low paid jobs, thus making people in higher paid jobs feel that all their extra work and skill is undervalued, thus demanding universal pay rises.
• The scheme will cost a good deal to administer, and will involve a good deal of official bureaucracy.
• The benefits of the scheme may not be significant to many people.

The decision, is, of course, yours. But the Labour party seem tot hink it's a good idea.

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You may also be interested in my other economics pages:

• The 1998 Budget
• The Windfall Tax
• The National Minimum Wage

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