Blindingly Obvious

Nice to welcome Migrationwatch to one of the better known ideas in economics:

The report says more effort should be expended on getting our own population into work rather than encouraging immigration.

But this becomes more difficult with generous benefits and means testing.

The report shows that:

* A family with two children is just £30 a week better off working on the minimum wage than not working.

* A single person under 25 on the minimum wage of £193 per week is only £10 a day better off than a non-working person.

* A family with two children and one working member receives £79.50 a week of Working Tax Credit. However, after means testing he keeps only £6.77.

* Working families with children and one working member on the minimum wage are slightly worse off than the same family receiving the maximum Incapacity Benefit.

* A single person on the minimum wage would be £3 a week better off than a single person on the highest level of Incapacity Benefit.

Sir Andrew Green, chairman of Migrationwatch, said: \’\’We keep hearing that we need immigrants to do the jobs that the British won\’t do.

\’\’It has been suspected for some time that benefit levels are a real disincentive to take work that is on offer and our research spells out why this may be so."

He added: \’\’An important factor is that wages are now so close to benefits that there is very little financial incentive for unskilled British workers to find a job.

\’\’By contrast, Poles have very strong financial motivation.

\’\’On the minimum wage in Britain they are earning four to five times what they would earn at home.

You can have open immigration or you can have a welfare state. Having both will necessarily cause this sort of problem.

As to what we can do about it, well, while we\’re in the EU, we can\’t change the open immigration part. So we\’ll have to change the welfare state part. Which is, I think, an interesting idea. The EU is based upon the idea, at least as far as welfare is concerned, on cementing the social democratic ideal. But as we can see, other parts of the mission make this difficult.

As to quite what we should do about the welfare state part, that again has problems. For what we need to do is "make work pay" and we can do that in one of two ways. Either lower benefits or reduce the amount of means testing (or, the same thing but different language, raise the taper rate, ie withdraw benefits more slowly as people earn more). Neither of which will really fly politically.

Which leads us to a citizens\’ basic income, something which has no taper rate at all (although some versions have it being reclaimed at high tax rates, say around where the current upper tax rate starts), which rather neatly solves the problems of those working seeing such high marginal tax rates. And thus, as is complained of, not actually working, having been (rationally) persuaded that working at 90% marginal tax rates isn\’t worth the candle.

However, this solution also requires leaving the EU, as we cannot pay such a benefit only to citizens, we must pay it to all, including the immigrants.

So, first step is to leave the EU, then we can decide which of the two solutions we\’d like to employ. But leave the EU we must.

12 comments on “Blindingly Obvious

  1. could we not simply declare that CBI is available by definition only to British citizens and let the Eurocrats rant and rave? They could kick us out of course but would they dare?

  2. Like all good questions of policy, it starts with the line, First leave the EU.

    Though Mark T does have a good point.

  3. ARGH! I just can’t understand why nominally sane people can support CBI. It would be a statists’ wet dream. A bureaucratic utopia. A loafers’ charter. A criminals’ smörgåsbords.
    Can we just have small government please?

  4. “A bureaucratic utopia”, like Child Benefit, with administration costs of a fraction of a %, barely measurable fraud and error, a modest underclaim of 1 or 2% and no disincentive for parents to work?

  5. “could we not simply declare that CBI is available by definition only to British citizens and let the Eurocrats rant and rave? They could kick us out of course but would they dare?”

    So someone who immigrated here from Spain in 1989 doesn’t get it? That’s a nice kick in the teeth.

    “Can we just have small government please?”

    That is precisely what CBI gives you. Instead, we have an army of leftist snoopers who intrude and hector and twist ever more complex rules on a welfare system. A CBI is so simple that the vast majority of these odious people would end up subsisting on the CBI.

  6. Mark and Kay,
    We have a universal health care system, the NHS, do you think an universal benefit system, the CBI, will fare any better?
    (Mark – fraud will be far higher because the reward will a magnitude greater).

  7. “We have a universal health care system, the NHS, do you think an universal benefit system, the CBI, will fare any better?”

    I think it’ll be as badly administered as the NHS, yes. As badly administered as the benefit system, yes. But a heck of a lot cheaper than either of those.

  8. “But a heck of a lot cheaper than either of those.”

    60 million x £6 thousand = £360000000000/year

    Thats not cheap. I can see the likes of Polly licking her lips at the thought of the state controlling that proportion of the economy.

  9. “Thats not cheap. I can see the likes of Polly licking her lips at the thought of the state controlling that proportion of the economy.”

    The CBI proposals are neutral. The State won’t take any more money than it already does. That’s the whole point: it’s a reform of the benefit and taxation system, with lower overheads, not a whole new spending project.

  10. Set the CBI at the current max pension of arround £115pw – that’s a reasonable start for a “safety net”. Make it for all British citizens over the age of 2, except up to 16 it is received in the form of education vouchers. Then make first tax band cut in at 1xCBI to reduce impact on low paid workers. Make NI 10% for employers and emloyees with no upper limit so and adjust bands to keep total take the same as now. Adjust CBI on a trailing average of nominal GDP growth – keeping it at a fixed 25-30% of GDP and thus sharing in economic growth. This significantly reduces ability of politicians to reward lobby groups with our money. There could be many more refinements; make council tax a 10% tithe on CBI which with education vouchers paying for schooling should be more than sufficient, set council tax rents at 15% of CBI per eligible adult, allow mothers to claim 50% of father’s CBI for a family, 50% of redisual for each subsequent family (interesting incentives at work there if you think about it). Most important you provide a safety net without means testing or a poverty trap, you remove the disincentive to part time legal employment, and you reduce the massive surveillance and collection bureacracy. If someone who immigtrated from Spain in 1989 wants to become a citizen then they can receive the CBI. The only real admin/ potential for fraud is in obtaining British citizenship. Not trivial to be sure, but the vast majority of recent immigrants currently receiving a wide variety of state benefits would certainly not be eligible and as such would almost certainly cease to flood to our shores. As Tim always says, incentives matter.

  11. Of course the European Welfare State was built on them outsourcing their defence expenditure to the US and then spending the money saved on creating this wonderful construct.

    I think the Americans might have changed their minds about the continuing subsidy by now and it doesn’t look as if the welfare state does what it said it would on the tin.

    Oh well. Back to the drawing board.

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