Monday, 4 October 2010

Two Facets of Welfare Dependency

Over at CiF, Joseph Harker is bemoaning the cut to Child Benefits for high earners. His article illustrates (though apparently not realising it) two of the main problems with the welfare system both of which can be described as welfare dependency. The first is noting the poverty trap:

"The bizarre maths of Osborne's proposal is that if someone with five children earns £44,000, and they're given a £1,000 pay rise, they'll receive an extra £600 net income, and have £3,800 in benefits taken away."
More commonly expressed as being faced with a high marginal effective tax rate, this same affect effects all welfare payments. It's not just a result of Osborne's maths. But if Mr Harker can see it when it affects him, can he also see that it serves to discourage the poorest people from doing that little extra work? That one extra shift?

The second problem is that people forget what is really happening. They forget that the money is a gift from the people of the country to them and start to think that it is theirs by right. Thus Mr Harker declares:
"not since China's one-child rule has there been such a penalty for having kids"
 I'll just let that stand.

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