The Logical Conclusion Politics and progress

Judge the Left’s Effects, Not Their Rhetoric

It's easy to see why the left can paint themselves as the 'good guys' of the social mobility argument. Their policies often look like they're increasing the standards of life for the poorest, putting the burden of the country's running costs on those most able to pay and offer a safety net to the most vulnerable in society. What we need to do is look past this rhetoric and understand what some of their flagship policies actually achieve for the poorest in society.

I don't often talk about myself here because I want this blog to be about politics and not people, but I feel that I need to offer a small introduction in order to increase your understanding of the angle I'm taking on this. I grew up under a Labour government in a council house with a single mother who worked part-time at a local school. We lived in what the left would consider relative poverty, far below 60% of the average wage in the country between three of us.

Because of this, I've very much seen the benefits system first-hand, through my family's experiences and those of our peers in similar economic circumstances. I'd like to make it clear at this very early stage that I don't blame anybody for taking benefits, and that benefits of some kind are definitely necessary to the national good, so this isn't an attack on social justice policies as a whole, it's an analysis of how the far-left have stretched their social justice mandate to the point where it actually harms the people it claims to help.

We're going to have a look at two things which previous governments made swathing changes to, and are now taken for granted by most people of all political persuasions, and consider the results of those changes with regards to social mobility for the very poorest:

1. Unemployment Benefits
2. National Minimum Wage

All of these policies are supported by the majority, but we're going to look at how much they've actually done and whether they should be left alone, need reform, or just need scrapping in order to actually aid social mobility for the poorest in our society.

With each policy, we will define its reason for inception, expected results if it works well, actual results of the policy in practice and how it could be improved (if at all) from the simple angle of supporting the most vulnerable in society in moving up in life, access to work and higher wages, and overall social mobility.

A key note here: when I say vulnerable, I am talking about people who are poor. Many people on the left will take any argument against benefits and try to drag you off of Jobseeker's Allowance onto things like healthcare benefits or disability benefits. Obviously, we all understand that healthcare is necessary, we all understand that the disabled need help if they can't work or have incurred costs to be able to work. The left either don't recognise that or choose to ignore it, but to compare unemployment benefits with disability and health benefits is a common tactic for the lefties who just don't want to debate the real issue.

1. Unemployment Benefits

Obviously, some level of support for the unemployed will always be required in society, and since 1911, that support has come in the form of state-provided benefits in the UK.

So, the effects of a high quality unemployment support programme would be:

1. Reduction in number of claimants as more people find work.
2. Low fraud rate of people claiming either whilst working or whilst not looking for work.
3. Low rate of long-term unemployment due to benefits not providing a disincentive to work.

How does our system stack up? Well, the last significant changes to the system happened in 1996 under John Major, and his general direction was followed by the previous government, and continues to be followed by the coalition government.

I am using claimant count rather than unemployment numbers, as the unemployment numbers are falsely inflated by full-time students looking for work and people who aren't actually looking for a job. It really doesn't look like the claimant count is tied much to the system (it's tied more to employment and the economic cycle), so it's not a failure or a success on number 1.

Jobseeker's allowance fraud & error are believed to total 5.4% of all payments, or £180 million a year. I couldn't find statistics for the past.

All in all though, these two measures mask the elephant in the room, which is long-term unemployment. This appears to be mostly in the areas of 18-24s and 50+s, and is rising month on month as the same people fail to find work.

Is this a case of benefits proving a disincentive to work? It's quite possibly an element, although work is difficult to find at the moment, there are the horror stories of families with multiple generations of worklessness (we have more than any other country in the EU), and this kind of gross negligence of our state welfare system cannot be healthy in times when we need people working and state money spent more effectively.

Given the fact that many of these families are lone parent households, this obviously has a very negative effect on social mobility for those who often are the worst-off in society anyway, so how can we fix long-term unemployment?

Well, a good start would be to incentivise work in the benefit system, either by regressing benefit rates (i.e. starting with a higher weekly rate and regressing it to a lower one based on length of unemployment) or by providing cash bonuses to those who find work quickly).

Another system which could work is to reduce the utility of the benefits without reducing the amount. Give them out on a pre-paid Mastercard to prevent them being used to pay for drugs, alcohol and clubbing. Give clear orders to vendors that the Jobcentre card can only be used to buy food, necessities (home utilities, bog roll, washing powder etc) and bills. Cutting off luxuries like online gaming, booze and Sky would make the benefit lifestyle choice less attractive without disadvantaging those who need it to live.

2. National Minimum Wage

Ahh, never has an idea seemed so noble yet had such sinister unintended results as this one. The national minimum wage was introduced on the premise of fairer wages for working people, and more social egalitarianism. So, let's see what effects you'd want out of it (if you supported it in the first place):

1. Greater social mobility for the low-paid.
2. Sustained growth not massively affected by the NMW.
3. No major increase in unemployment due to wages being unaffordable.
4. No huge negative effect on youth wages, which are already very low.

It's worth noting, before going into further analysis, that the minimum wage wasn't only opposed by the Tory right in the 1990s. Consider this statement by Ed Balls, current shadow chancellor and prominent member of the Labour party, made in 1991:

"The allure of a minimum wage is deceptive and should be resisted ... Fostering a high wage, high skill economy is the only way to reverse Britain's relative economic decline and to generate the resources to eradicate poverty. But the minimum wage is not the answer. If anything the minimum wage will make it even harder to achieve these ends."

Likewise, many of the trade unions opposed the minimum wage, as they felt that it would undermine collective bargaining and make wage structures above it fall apart. Many on the left attempt to brand any opposition to the minimum wage law as far-right nonsense, but up until the 1990s and Tony Blair, it was their de facto policy line.

So, what happened to the gap between the rich and the poor after thirteen years of left-wing Labour rule? Well, it widened. What about social mobility since the NMW came in? That fell, too. So, for all their rhetoric about equality, they've only damaged the prospects of the poor.

What about growth? Actually, growth did pretty well under Tony Blair, though it's difficult to say how much of this was to do with borrowing. As Money Week put it in 2005:

"There’s a very good case to be made that recent GDP growth hasn’t really been growth at all. In the same way that you don’t measure your wealth by the size of your credit-card bill, deficit-financed growth is illusory and must be paid back at a later date. The Government has a budget deficit (or at least it would have if it wasn’t for some last-minute statistical jiggery-pokery by the Office of National Statistics) while household-sector debt has breached the £1trn mark and the nation’s trade deficit is £58bn, one of the worst on record."

Update: Further to evidence presented to me by HeritageTom, I find it difficult to stand by my earlier conclusion that NMW has a causal relationship with youth unemployment.

But again, the huge issue is the third: youth unemployment. Typically, the youngest people are the least well-paid in society, as they have less skills and experience than their older counterparts. Therefore, if a minimum wage policy is going to keep people out of work (because their market value is significantly below the minimum wage) then it will be the young.

This graph shows that not only during the recession, but also through the good years, youth unemployment continued to rise under Labour. A lot of this must be put down to the fact that hiring inexperienced workers with few formal skills just isn't worth the investment which the minimum wage law requires.

Another very major issue appears to be the effect of 'bite', that is the minimum wage as a percentage of the median wage. If minimum wage stays the same, and bite increases, this means that the median wage is being driven down.

This is the level of the bite of the National Minimum Wage, seperated by rate (source: Low Pay Commission Report). Pay special attention to the vast increase in the bite on wages of 18-20 year olds since the introduction:

Essentially, wages above the NMW are falling in order to accomodate NMW pay for workers who are deemed below the value of the market. In practice this means that the jobs above the NMW are being squeezed, and less chance for wage progression exists within company structures for young people. It is in no way sustainable to have a bite which continues to climb like this, as youth unemployment continues to soar.

It turns out, and I never thought I'd say this, that Ed Balls was right. This policy seems to keep the young and the unskilled out of work or in very specific areas of work, keeps wages low even upon gaining skills and makes some people unemployable. We should scrap it immediately, and save this generation of young people from a lifetime of poverty.

Conclusion

We can see from this brief look that these two left-wing policies, with the best of intentions, only serve to entrench poverty in the people they claim to want to help. Social mobility depends upon young people being able to get onto the careers ladder, learn skills, gain experience and then move up from basic roles into management.

Whether you use a minimum wage law to disincentivise an employer from offering work or a benefit system to disincentivise a young person from taking it, you really aren't helping those people to make this first step onto the careers ladder, to maximise their own potential earnings and to maximise their tax yield in future years.

By reforming the benefits and scrapping the effectual jobs ban, we can make work desirable again, we can make employing young people valuable to employers again and we can encourage investment into the country which is currently stifled by these left-wing policies.

Ideology alone is often a very dangerous foundation for policy.