Can we get this straight please?

One in five are not paid enough to live on

This is not true.

The people are living on what they are being paid so obviously it is not true.

The calculation is rather different. The Joseph Rowntree lot conduct a survey each year. They ask a panel what is it that people should be able to do on their incomes without being regarded as poor. The answer includes things like going out for a couple of pints once a week, a simple meal out once a month and so on.

This is very much the Adam Smith approach to poverty. A linen shirt is not a necessity but if you live in a society that says that if you cannot afford a linen shirt you are poor, you cannot afford a linen shirt, then in that society you are to be regarded as poor.

It is actually the right way to calculate poverty. For poverty is an opinion roughly calculated by society. Thus you need to observe what society calculates poverty to be.

But note, no one at all is saying that this isn\’t enough to live on. It\’s not enough to live on and not be in poverty.

Having said that we can move on to the solution. The difference between the Living Wage (which is what allows you to live not in poverty) and the minimum wage is the tax and national insurance charged on low wages.

Note, and nota bene, that the Living Wage is a pre-tax number. This is before the income tax and NI that is charged to these wages. If you take those off (and I\’ve not done it for this year\’s number but I have for previous years) you find that the living wage of £7.20 (or whatever) an hour is within pennies of the minimum wage of £6.19 (or whatever) an hour.

Which leads us to an interesting conclusion. Let us accept, arguendo, that the Rowntree folks have got it right. That poverty is something determined by what society thinks poverty is. Further, that their calculation of the money required to not be in poverty is correct. What then is our problem?

It is not that wages are too low. The minimum wage is almost exactly what they say that poverty level is. It is that taxes on the poor are too high. Which is an easy problem to solve, something well within the government\’s power. Stop taxing the poor so much.

Which, when you come to think of it, is pretty obvious really. If you want to increase the incomes of the working poor then just stop taxing them so bloody much.

12 comments on “Can we get this straight please?

  1. “For poverty is an opinion roughly calculated by society. Thus you need to observe what society calculates poverty to be.” Thisa is a wonderfully productive notion for the poverty pimps, because it guarantees that the poor will always be with us, as the wee man famously observed. The more cash we give to raise people from such poverty, the higher the bar will be raised, and so even more money must be handed over. And so there are lifetime careers guaranteed for those who make a living off the poor.

  2. This a is a wonderfully productive notion for the poverty pimps, because it guarantees that the poor will always be with us

    Yet a “society expects” bar is a better one than the “x% of median income” one currently preferred. I can imagine a society where everybody has the basics of a reasonably enjoyable life (a continued reduction of the costs of basic goods) yet unless significantly more equal incomes are forced upon everyone (or the law repealed), then the legal definition will remain a burden on our necks.

  3. Dearieme makes a good point. Christopher Snowdon makes a similar point in “Sock Puppets” (http://www.iea.org.uk/sites/default/files/publications/files/Sock%20Puppets.pdf):

    “The Child Poverty Action Group (CPAG) was founded in 1965 by a group of social workers and sociologists who were disturbed that – as they declared in a letter to Harold Wilson – ‘at least half a million children in this country are in homes where there is hardship due to poverty.’ A registered charity since 1986, CPAG now uses a very different measure of deprivation to campaign on behalf of the ‘3.8 million children living in poverty’ – not so much a case of mission creeping as goalpost shifting.”

    The “linen shirt” metric is similar to but not the same as the “the poor is anyone with an income below 60% of the median”. The latter measure really measures inequality. What I want is a metric where the poverty line rises slower than economic growth, i.e. the “linen shirt”/Rowntree metric, as long as it rises slower than economic growth. This would be a more sane measure because it would show that economic growth reduces poverty, unlike crazy metrics where economic growth makes “poverty” appear to increase! But it would still encourage us to give charitably to the poor to ensure “linen shirt” dignity.

    That is, I’m fine with “anti-poverty” campaigners as long as they agree that inequality is just fine.

  4. The “society expects” bar also rises with median income (and the availability of goods), hence the JRF standard includes some things I regard as luxuries.
    Just by the way – the (TUC-sponsored) KPMG survey looks at how many people are earning less than “needed” by a parent of two children but does not ask how many of these people have got two children nor how many have a better-paid spouse/partner. It also says that 90% of waiters get paid less than the “living wage” *excluding tips*.

  5. I’ve long felt for a while that it is inefficient to tax people on low incomes, then hand (some of) it back in the form of benefit payments, tax credits etc. Consequently, I have plenty of sympathy with Tim’s argument.

    However, I heard on this morning’s Public Philosopher ( http://www.bbc.co.uk/podcasts/series/r4sandel : Welfare & The American Dream), an explanation of why FDR paid for his social security program with hypothecated payroll taxes:

    “We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program”

    http://www.archives.gov/exhibits/treasures_of_congress/text/page19_text.html

    Reluctantly, I’m forced to concede that’s a powerful argument. How else could we guarantee that taxpayers could claim their legitatemately-entitled-and-paid-for-benefits when they need them, regardless of the untrustworthiness of intervening politicians? That’s not mere rhetoric, either.

    Tim adds: Yeah. But the problem with the FDR thing is that in the 50s the Supreme Court ruled the other way. There is no legal right to social security at all.

  6. The “expand the economy” people above need to remember that just as poverty is relative, so is economic expansion: specifically prosperity tends to increase geometrically leaving the poor reaping smaller rewards (one reason why % pay rises are iniquitous). That means that relative poverty *is* important because one can have far more money and yet see it purchase far less if the demands of the better off have increased geometrically (two houses instead of two for example).

  7. Alex: yes, that one. The idea that social benefits are contractual or contributory barely passes the laugh test.

    John77 has something of a point here. If someone who’s 18, single and living with their folks is getting the minimum wage, they’re doing fine. But then how on earth do you account for that?

  8. The outcome of Flemming v. Nestor does seem to be unfair, and to have been motivated by anti-communist bias. Worst case, one can see that he might have lost 2/19 of his benefits by virtue of being a member of the Communist Party for two of the 19 years he was paying in, but even that I’d contest as it was during “a period of time during which membership in the Communist Party as such was not illegal and wasn’t even a statutory ground for deportation.” ( http://spectator.org/archives/2011/04/06/social-security-and-the-ghost ).

    That said, we are where we are, and it looks as though FDR’s intention was wishful thinking, as a combination of damn politicians and damn judges succeeded in doing exactly what he was trying to prevent, regardless of either intent or fairness.

  9. “The people are living on what they are being paid so obviously it is not true.”

    That doesn’t necessarily hold true, logically. ‘Living on’ implies a longer-term outlook which is not necessarily applicable here – living is more than just surviving. It is perfectly possible that people are currently surviving on less than the living wage, but have put actually living on hold to do so due to poor economic conditions.

  10. @ Dave
    Quite true. There have been years when my income did not cover fairly modest (I can remember rationing so I still have a 40-year-old tweed jacket) expenditure: at least one of those was solely due to HMRC charging me tax on income that I had never earned despite legislation that gave me the option to be taxed on actual earnings: surprise, surprise I couldn’t afford the odd £million to sue them.
    BUT I am not the “deserving poor” whom JRF et al want us to support.
    There *are* deserving poor – political refugees, the modern equivalent of Huguenots and 1930s Jews. New Labour treated them like dirt, herding them into concentration camps or placing in council flats that Glaswegians from the Gorbals would not take, and simultaneously refusing to allow them to earn a living and setting benefits at half the level for UK/EU citizens.
    IDS has chickened out on this one because he (rightly) wants to get Universal Credit through and the Treasury hates him already. Any support for lobbying IDS and MPs would be welcome.
    PS I am not a refugee – just a mongrel like most Englishmen: one grandparent could trace his ancestry back to before the invasion by William the Bastard, another was Welsh, so regarded his ancestors as “incomers”

  11. Pingback: From the comments and tough to disagree with

Leave a Reply

Name and email are required. Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>