Monday, 30 August 2010

Why do we pay people social welfare?

Nat O'Connor: We pay people social welfare because, in a democracy, every participant is entitled to a minimum share of our national wealth to provide themselves with the essentials for survival.

In which case, we should be worried if a proposed Government policy threatens to undermine the democratic basis for the social welfare system.

It is reported that the Minister for Social Protection has announced a new scheme for recipients of Jobseekers Allowance (JA) to engage in social employment "for 19.5 hours work every week by helping out with local after-school and childcare services, sports clubs, services for older people and environmental projects".

Note: JA is the allowance people apply for once the period of their Jobseekers Benefit (JB) expires. JB is an entitlement, based on social insurance payments, whereas JA has to be applied for and payments are means-tested. It is worth noting that recent budgets have shortened by three months the period for which people can claim JB, as well as doubling the amount of social insurance contributions required to receive it in the first place. So more people have been pushed towards JA, where payments to people under-25 have been much reduced.

The Minister is quoted as saying "We must create a better future for people who find themselves without a job; to provide them with work activity in the short term, to up-skill them and give them opportunities to get back into the mainstream workforce as speedily as possible."

These are real incentives and it is to be welcomed that people should have an opportunity to do some useful work while unemployed. However, the carrots are matched with a big stick. It is reported that "Those who fail to show up or miss hours will be struck off the dole under the plans."

The above report is not backed up by the official press release, which simply reports that employment schemes are being transfered to the Department of Social Protection, which was already flagged by the Taoiseach when he 'reshuffled' the cabinet recently. So, we can assume the Irish Independent had a further interview or some other information to draw on.

Anyway, if someone is flying a kite about 'workfare' there are a host of problems to be considered with this approach, including:
  1. Forcing people to engage in 'voluntary' work may undermine the volunteeristic spirit of those already taking part;
  2. Forcing people to work may result in very unhappy people with an attitude wholly unsuited to the role they are meant to play in voluntary activity;
  3. Cutting off welfare payments undermines the basic principle that in a democracy, we are all participants in decision-making and we all share the resources of our country;
  4. Cutting off welfare payments will lead to people suffering poverty, deprivation and a host of other problems - which could lead to increased mental ill health, addiction, crime, suicide, etc;
  5. It is likely that certain people will be badly affected, such are people who are already long-term unemployed due to mental health problems, including addiction. Neither forcing them to work, nor cutting off their dole, is in any way an intelligent or humane response. Dealing with our failing mental health system would be preferable. Offering people the option of work could be very constructive, but not as part of a work-or-else approach;
  6. These schemes are likely to rely on existing community and voluntary bodies providing supervision, training, etc in exchange for labour. This could overwhealm some of these bodies;
  7. There are other costs to be considered, such as insurance, transportation, etc.

To pick up on the final point, how will the additional costs be paid for? One of the reasons why many Western governments do not provide large schemes offering people useful work to do is because the operation of these schemes is likely to be significantly more expensive than simply giving people a basic umemployment payment. This is not to say that the longer-term benefits, in terms of upskilling, keeping people active, useful work achieved, etc. might not outweigh these costs, but it helps explain why the idea of 'workfare' hasn't be much developed.

I dislike the negative tone that so often surrounds the discussion about offering people on welfare some form of community work. It feeds into tired and disingenous arguments about forcing 'lazy scroungers' to work. But people receiving JA are not lazy scroungers. The vast majority of people who are unemployed want to work. The problem is economic. There are no jobs.

In economic terms, the supply of jobs is less than the demand for them. Hence, there is unemployment. In fact, in a well-functioning economy, there will always be an element of unemployment as people move between jobs. And moving between jobs is part of the vaunted flexibility we are supposed to be encouraging in our labour force.

The supply of jobs is low because (a) there is a lack of credit for businesses and (b) there is a lack of demand in the economy. The Government has done little to solve the credit problem, and has crushed demand with a will, by lowering welfare payments, cutting public pay and encouraging the private sector to cut pay. If people have less money, they spend less, so there are less jobs.

If the Government wants to fund thousands of worthwhile jobs in the community, then this should be a positive step towards addressing the unemployment crisis. Any such scheme would probably be over-subscribed by willing volunteers.

We don't need to cast a shadow over this by making community work manditory. This feeds into negative stereotypes about people claiming welfare payments and encourages sadistic diatribe about forcing 'lazy' people to work. That way lies the Gulag.


Sparks said...

Point 8: Some roles mentioned (such as childcare) are simply not menial unskilled labour; but require a degree of competence and Garda vetting in some cases.

So this measure would actually cost the state money because that vetting work is paid from from public funds.

Nat O`Connor said...

EAPN Ireland have produced a blog post criticising the proposals.

The Poor Can't Pay said...

The Poor Can't Pay also has a discussion on this

One point that Nat leaves out of his fairly comprehensive analysis is the impact on subsequuent job opportunities of being forced to undertake such work. Philip O'Connell in the ESRI has demonstrated that people who have participated in Community Employment Schemes are less likely to get a job than similar individuals who have not done so. They argue that this is due to the stigma that employers associate with the scheme. Similar results have been found with schemes in the UK. So you may actually be damaging someones long term chances of a decent job when you force them onto such a scheme. You are also underming the positive advantage that real volunteering will have on your CV by blurring the distinction between volunteering and workfare.

Vast sums of money have been spent on evaluating such schemes over the last few decades. Now when we need to concentrate on what we have learnt actually works, they have decided to go back to the beginning again.

Michael Burke said...

An additional motivation for paying welfare (there are many) is that a key economic effect is to act as an 'automatic stabiliser' to the swings in the business cycle.

This was dramatically demonstrated in this economy by the government's decision to cut those welfare payments, ie remove the stabilisers when the road became most treachorous.

In the 1930s, falling employment led directly to falling consumption, in the absence of significant social welfare payments. In the OECD and most especially the Euro Area that did not occur in the current crisis; falling personal consumption accounts for only one quarter of the recession.

By contrast, here there was a severe fall in personal consumption which was in reaction to the 2008-09 Budget measures. Overall, personal consumption in this economy fell more than 7 times the fall in the Euro area as a whole, with all the negative inevitable consequences on the wider economy,investment employment and of course taxation revenues.

Rory O'Farrell said...

In Denmark there is greater labour market mobility than in the US because of their better unemployment benefit.

People are more likely to take the risk of switching a job because they know if things don't work out they have a safety net.

Nat O`Connor said...

It also occurs to me that the controversy over forcing people on welfare to engage in employment is a convenient smokescreen for the Government to reverse some of the cuts they made in Community Employment schemes, without admitting they were wrong to cut them in the first place.

Anonymous said...

The thing that annoys me most about this is that it's not a real proposal. The Department can't provide any detailed proposals because there aren't any!

The Minister appears to have thrown a (bad) idea out there to convey the impression that something's being done to tackle our unemployment problem when the reality couldn't be further from the truth.
He's accused unemployed people of widespread fraud, without offering them any hope of getting a real job.

We've seen the biggest recorded job losses in the history of the state, and Minister O'Cuiv thinks the numbers are high because people are refusing jobs, or working and claiming - what jobs does he think are out there? Employers are complaining because they're inundated with applications for any job advertised, not because no-one's applying! Meanwhile, the IDA is complaining that it doesn't have the resources it needs to attract new jobs into the country.

Even if he somehow managed to get this crackpot idea in place, the programmes he mentions aren't intended to get people back into regular employment; they don't even have a training budget.

We know, from our own not so distant history i.e. the mid 1990s on, that once there were jobs being created in the economy, our unemployment figures plummeted. Unemployed people grabbed those jobs with two hands - they needed no 'encouragement' or 'motivation' or 'activation', just available jobs. If government was really serious about solving the unemployment problem, this is where it would be focusing its energies, not chasing cheap media thrills.

No unemployed person wants 'work activity' - they want a decent job. In the absence of that, we should be investing in skills, with the ready availability of high quality training and education, so that we might have some hope of actually realising this 'knowledge economy' government keeps banging on about.

I won't hold my breath.

Dr.Pauline Conroy said...

The OECD has something to say about activation.
See link:

SlĂ­ Eile said...

@Nat perhaps the initiative in question is the official response to 'active citizenship' post-recession. by the way the following is very apt