Time for a change of approach on welfare

[mongrel]

The proposals are outlined by JRF in A UK without Poverty launched today ahead of the three main party conferences.

The Joseph Rowntree Foundation has criticised successive Government’s attempts to tackle poverty,with overall levels of poverty largely unchanged since25 years ago. This is a waste of human potential, a strain on the public purse, and it means the UK economy does not function as well as it could .

Stagnant wages and benefits, the rising cost of essentials and the hollowing out of the labour market means poverty is forecast to rise, prompting JRF’s call for a different approach. Past strategies have focussed too heavily on the tax and benefits system or single policies in insolation.

http://www.theguardian.com/society/2...itored-charity

http://www.jrf.org.uk/media-centre/p...-children-2020

Billions have been spent on developing systems which were supposed to reduce the benefits bill whilst further billions are paid directly to landlords charging rents that are too damned high, not just the unwages but those on low wages. Every election we have announcement on crackdowns and yet the welfare bill somehow rises as people get less money.

This conventional approach is as failed as the War on Drugs. Can't politicains crack down on the other people leeching off our economy, employers paying poverty wages who expect the state to pick up the tab, ditto landlords whose rent is too damned high and the utilities and transport companies bleeding people dry and tipping the modestly waged into poverty?

[Dromikaites]

Can't politicains crack down on the other people leeching off our economy, employers paying poverty wages who expect the state to pick up the tab, ditto landlords whose rent is too damned high and the utilities and transport companies bleeding people dry and tipping the modestly waged into poverty?

Politicians are the category of people who have created the problems to begin with.

That being said, how exactly do you think they could fix the problems you have mention explicitly?

1) If they stop subsidizing the rents, they are guaranteed to be voted out of office;

2) If they put a ceiling on the rents on short term they would have to fight people who can put together considerable financial resources with the sole goal to abruptly end the careers of those politicians. Even if the private investigators hired with that money won't be able to dig up enough dirt about those politicians, the said funds would go to support another politician. Not necessarily one who would reverse the laws on rent ceilings, but one who would replace the politician who has voted for rent ceilings;

3) On long term, putting a ceiling on rents results in other perverse effects, like the rents ending up not covering the expenses for maintaining the buildings;

4) You may try forcing everybody to own only one house/flat (a radical version of the concept behind the "bedroom tax") but that would result in even more financial power piling up against those politicians, and accusations of "communism" (in many of the communist countries families could own only one dwelling).

Also some would rightly object that such a measure would reduce the mobility of the workforce, because people would be reluctant to abandon their houses and look for work in a distant city where they would have to live together with the family of a stranger (the owner of a single dwelling who rents a spare room). Not to mention that the owner of that spare room might still charge an astronomical rent.

It would be highly unlikely that say somebody in Newcastle would find somebody in London to switch houses with when both change jobs. The market cannot clear easily, especially since people tend to lave cities where there aren't jobs, which means nobody wants to move there, vacating a dwelling in a city where jobs are plenty.

Even in those communist countries which didn't allow multiple dwellings per family there were several landlords owning lots of units and renting them out: the State directly or the State-owned companies.

The State was renting to anybody, the state-owned companies rented to their employees. That way, when the state-owned companies hired more personnel, they also had to build more dwellings or to wait for the State to do so (easy with a planned economy, hard with a market economy).

5) You could have the State buy the landlords out (= nationalize the dwellings not inhabited by their owners) and solve the clearing problem "the communist way", but that would massively increase the public debt. And then there is always the risk some towns or cities would go the way of Detroit and as the result the State would be left with a lot of empty buildings while still paying for the debt incurred on the occasion of the nationalization.

The truth is the problem is just as intractable as coming up with a stable economy.

If somebody would be capable of finding a way to build a stable economy (that is an economy which never has downturns), in such an economy the houses and the wages would be at the right levels and thus such problems like the ones you mention would be forever solved.

Later Edit:
One can imagine an alternative to nationalization which avoids taking on massive public debt. The owner would be allowed to collect a total rent which covers the initial investment + a pre-determined yield.

After that the State would become the owner of the dwelling. The problem with such a system, even though it would seem both "fair" and apparently avoiding massive public debt, would still result in increased public debt because of how politics work: The politicians would try to keep the rents low, while the companies maintaining the buildings would charge whatever they see fit, just like the defense sector does.

[tarvu]

Politicians are the category of people who have created the problems to begin with.

That being said, how exactly do you think they could fix the problems you have mention explicitly?

1) If they stop subsidizing the rents, they are guaranteed to be voted out of office;

2) If they put a ceiling on the rents on short term they would have to fight people who can put together considerable financial resources with the sole goal to abruptly end the careers of those politicians. Even if the private investigators hired with that money won't be able to dig up enough dirt about those politicians, the said funds would go to support another politician. Not necessarily one who would reverse the laws on rent ceilings, but one who would replace the politician who has voted for rent ceilings;

3) On long term, putting a ceiling on rents results in other perverse effects, like the rents ending up not covering the expenses for maintaining the buildings;

4) You may try forcing everybody to own only one house/flat (a radical version of the concept behind the "bedroom tax") but that would result in even more financial power piling up against those politicians, and accusations of "communism" (in many of the communist countries families could own only one dwelling).

Also some would rightly object that such a measure would reduce the mobility of the workforce, because people would be reluctant to abandon their houses and look for work in a distant city where they would have to live together with the family of a stranger (the owner of a single dwelling who rents a spare room). Not to mention that the owner of that spare room might still charge an astronomical rent.

It would be highly unlikely that say somebody in Newcastle would find somebody in London to switch houses with when both change jobs. The market cannot clear easily, especially since people tend to lave cities where there aren't jobs, which means nobody wants to move there, vacating a dwelling in a city where jobs are plenty.

Even in those communist countries which didn't allow multiple dwellings per family there were several landlords owning lots of units and renting them out: the State directly or the State-owned companies.

The State was renting to anybody, the state-owned companies rented to their employees. That way, when the state-owned companies hired more personnel, they also had to build more dwellings or to wait for the State to do so (easy with a planned economy, hard with a market economy).

5) You could have the State buy the landlords out (= nationalize the dwellings not inhabited by their owners) and solve the clearing problem "the communist way", but that would massively increase the public debt. And then there is always the risk some towns or cities would go the way of Detroit and as the result the State would be left with a lot of empty buildings while still paying for the debt incurred on the occasion of the nationalization.

The truth is the problem is just as intractable as coming up with a stable economy.

If somebody would be capable of finding a way to build a stable economy (that is an economy which never has downturns), in such an economy the houses and the wages would be at the right levels and thus such problems like the ones you mention would be forever solved.

Later Edit:
One can imagine an alternative to nationalization which avoids taking on massive public debt. The owner would be allowed to collect a total rent which covers the initial investment + a pre-determined yield.

After that the State would become the owner of the dwelling. The problem with such a system, even though it would seem both "fair" and apparently avoiding massive public debt, would still result in increased public debt because of how politics work: The politicians would try to keep the rents low, while the companies maintaining the buildings would charge whatever they see fit, just like the defense sector does.

How could the free market fix these problems?

If you take away all forms of welfare provided by the government then as you point out the "unstable" economy would result in thousands if not millions of people left homeless practically overnight.

The costs to society of this would be far greater and longer lasting than the relative pittance modern nations spend on welfare. Besides politicians while setting forth policy, are not the ones who come up with anti-poverty strategies. Giving up the fight against poverty, and saying it is just the "natural way of things" is not a solution, not only because it doesn't help the poor themselves but because of the great harm it would do to all of society.

[Dromikaites]

How could the free market fix these problems?

If you take away all forms of welfare provided by the government then as you point out the "unstable" economy would result in thousands if not millions of people left homeless practically overnight.

The costs to society of this would be far greater and longer lasting than the relative pittance modern nations spend on welfare. Besides politicians while setting forth policy, are not the ones who come up with anti-poverty strategies. Giving up the fight against poverty, and saying it is just the "natural way of things" is not a solution, not only because it doesn't help the poor themselves but because of the great harm it would do to all of society.

Maybe my English is not good enough, but my intention was to say:

1) Politicians are part of the problem, not of the solution;

2) There isn't a way to permanently fix the issue of wages or rents because that would imply fixing the economy. And that is impossible. So any fixing would be temporary, till it becomes inadequate, like the subsidizing of the rent was.

[Thorn777]

A +-20% share of the population in poverty are the results of deliberate policies all trough out the west. Workers powers where on its zenit in the 70's and that period was the stuff of nightmares for the capital-returns class. Since then that situation got under controll untill now the capital-returns class is running out of controll again.

The system they dominate thrives on this large segment of bottom dwellers to drive wages for jobs down. Note that jobs not necessarily paid wages. Not at all. But when there is so much compitition, now on top of that also including students, immigrants, seniors and even people with college degrees, then that keeps a tight lit on wages for jobs staying and hence capital-returns staying what they are supposed to be.

To make an example of how this line of thinking is also getting on to the proffesional-class. In industrial Germany there is a huge media/political campaign telling us how there is a shortage of several 100k of engineers, while that number was created by the employer-orgs simply making "a rough estimation and then multiplying it by 3". The argument is that we need to get foreign engineers, while in reality there is a surplus of Germans who graduated engineering. This is all about getting engineering wages down.

Little tweaks in welfare and what not dont affect the real driving forces that are slowly destroying middle-class majorities and the humanistic foundations of how we shaped societies.

[Ludicus]

Little tweaks in welfare and what not dont affect the real driving forces that are slowly destroying middle-class majorities and the humanistic foundations of how we shaped societies.

Sweden's opinion,

An opinion survey by Gothenburg University's SOM Institute found last year that seven out of 10 Swedes believed the country's experiment with letting private companies profit from public welfare had been a mistake

Free-market era in Sweden swept away


------

Sweden's Turn Left Could Deal A Blow To European Austerity
"They have sold out our country," one Stockholm resident said of Reinfeldt's government, according to the Associated Press.(1) "The rich are getting richer and things are getting worse for the poor."

"Income inequality is on the rise, unemployment hovers stubbornly high around 8 percent, and the nation's GDP growth has slowed. Moreover, many Swedes aren't particularly taken with the ruling party's policy on privatizing schools and hospitals -- an issue that has come to the forefront with recent media reports on overcrowded hospitals and people mistreated in elder care"

"Why the voters' change of heart? Concern that pro-market reforms are tearing into the nation's famed social safety net, a point of great national pride, appears to be the primary reason"

----

A +-20% share of the population in poverty are the results of deliberate policies all trough out the west

Obviously.

(1)

Many Swedes say they no longer recognize the country once considered the quintessential welfare state — an almost classless society where high taxes supported a generous social safety net.

[conon394]

For once I agree with you Thorn777

To make an example of how this line of thinking is also getting on to the proffesional-class. In industrial Germany there is a huge media/political campaign telling us how there is a shortage of several 100k of engineers, while that number was created by the employer-orgs simply making "a rough estimation and then multiplying it by 3". The argument is that we need to get foreign engineers, while in reality there is a surplus of Germans who graduated engineering. This is all about getting engineering wages down.

Basically the same in the US companies don't face a shortage of Engineers just a shortage of Enginners who want to work for peon pay and often the inability allow and offer alternative benefits etc.

[Gaidin]

Basically the same in the US companies don't face a shortage of Engineers just a shortage of Enginners who want to work for peon pay and often the inability allow and offer alternative benefits etc.

That's what happens when engineers don't run engineering companies.

[Thorn777]

However thats causing things like GM being able to now offer us a 707 HP muscle car thats as comfertable to drive as a Mercedes for 50000$.

Life is better than ever if you are one of those who have a solid income, but its comes at a cost you dont pay.

Another reason why all these moral stories of "I earned it" and "welfare leeches" etc drive me crazy. We live in a world of division of labor, and a govt role of making sure everybody had their share, but somewhere along the line we gave away govt. At least what we had of it.

[Condottiere 40K]

1. Engineers - a short term solution would be a tax credit to companies that hire (nationality) engineers. The long term solution is to create demand for high paying engineering jobs.

2. Housing - this is specific regionally and nationally; I rather like the idea of container housing that you can ship any where, and stack up like lego bricks, until such time the private sector catches up. Municipalities only need to designate appropriate areas, build infrastructure like water, electricity and transport, and then hook up container skyrises, which can be combined in more imaginative fashion and possibly connected together for families.

[Denny Crane!]

Sigh - Mongrel I thought you had made a post actually providing some answers!

I mean the conservatives have already put in place a cap on the amount landlords can get out of the state. Other than that if you want the rents to come down it is a two stage problem. Reduce the amount of work concentrated in London and build more houses.

Because rents up my neck of the woods, well they could be lower but they are only just slightly to high and only in some places. We have the cheapest place in the country and less congestion, shift some more public sector business our way amongst other things. You certainly can't want rent controls, they are a disaster.

And an idea that is just anathema to the Conservatives (it shouldn't be because the likes of M Friedman supported it) either basic income allowance or negative income tax, I've been trying to get my head around how they are different but they are. The end result is largely the same, no more signing on and no more persecution of the jobless or poor or mentally unstable.

Oh and end the war on drugs. Pointless discussing anything else until these most basic ideas have been sorted out. Housing is the single biggest expense of rich and poor but it hurts the poor the most. Why worry about more problems if you can't fix that one.

[mongrel]

Sigh - Mongrel I thought you had made a post actually providing some answers!

I mean the conservatives have already put in place a cap on the amount landlords can get out of the state. Other than that if you want the rents to come down it is a two stage problem. Reduce the amount of work concentrated in London and build more houses.

Because rents up my neck of the woods, well they could be lower but they are only just slightly to high and only in some places. We have the cheapest place in the country and less congestion, shift some more public sector business our way amongst other things. You certainly can't want rent controls, they are a disaster.

And an idea that is just anathema to the Conservatives (it shouldn't be because the likes of M Friedman supported it) either basic income allowance or negative income tax, I've been trying to get my head around how they are different but they are. The end result is largely the same, no more signing on and no more persecution of the jobless or poor or mentally unstable.

Oh and end the war on drugs. Pointless discussing anything else until these most basic ideas have been sorted out. Housing is the single biggest expense of rich and poor but it hurts the poor the most. Why worry about more problems if you can't fix that one.

Lets get back to where things were in 1988, when landlords had to seek arbitration from the local council to rasise rents, and even then any amount charged would eb compared with a "fair rent" for the local area. Not good for property developers sure, but there again they have had an helping hand anyway as councils for soem reason can't borrow to build and rent. I 'd abolish that too.

Increasing the minimum wage , I would say for medium for large firms to start off is also necessary. it is ludicrous that these companies, now so often foreign-owned and paying no or very little Corporation Tax, pay wages so low that the state is effectively paying much of their employees' wages. Let us wean these companies off Britannia's golden tit. Money into workers pockets is taxable, whereas money siphoned off to Luxumburg or Delaware is not.

We live in a world of division of labor, and a govt role of making sure everybody had their share, but somewhere along the line we gave away govt. At least what we had of it.

Agreed. LEt us hope mthat the English people taske some lessons from the Scots. The political consensus is broken now.

[Denny Crane!]

Lets get back to where things were in 1988, when landlords had to seek arbitration from the local council to rasise rents, and even then any amount charged would eb compared with a "fair rent" for the local area. Not good for property developers sure, but there again they have had an helping hand anyway as councils for soem reason can't borrow to build and rent. I 'd abolish that too.

I absolutely disagree I might disagree a little less if this wasn't such a clear cut case of supply and demand. The supply has been artificially restricted by the UKs backwards approach to planning and development and the lack of actual social housing being developed.

We are a million houses short. Nothing less than that.

Increasing the minimum wage , I would say for medium for large firms to start off is also necessary. it is ludicrous that these companies, now so often foreign-owned and paying no or very little Corporation Tax, pay wages so low that the state is effectively paying much of their employees' wages. Let us wean these companies off Britannia's golden tit. Money into workers pockets is taxable, whereas money siphoned off to Luxumburg or Delaware is not.

And if you are a company that pays all of its taxes in the UK then what? Do they get a discount?

I gave a number of things that need to get done and a paltry small increase in minimum wage isn't going to help someone, mine might.

Turns out that going from £6-> £8 an hour isn't going to help you buy a house worth £280k. Getting house prices back down by reducing the artificially stoked market might.

[mongrel]

I absolutely disagree I might disagree a little less if this wasn't such a clear cut case of supply and demand. The supply has been artificially restricted by the UKs backwards approach to planning and development and the lack of actual social housing being developed.

We are a million houses short. Nothing less than that.



And if you are a company that pays all of its taxes in the UK then what? Do they get a discount?

I gave a number of things that need to get done and a paltry small increase in minimum wage isn't going to help someone, mine might.

Turns out that going from £6-> £8 an hour isn't going to help you buy a house worth £280k. Getting house prices back down by reducing the artificially stoked market might.

An increase in the minimum wage will bring the benefits bill down and prevent large corporations living off the state's golden teats. I don't see why a hotel chain in New York can apy union rates for its staff , yet in London they can't be asked to pay the living wage. I am not sure why I , as a taxpayer, have to subsidise their wages, when the the hotel's multi -million £ owners can stump up . As for those companies that do pay decent wages and pay their CT, well excelent they are doing their duty to this country. My issue is with those that don't.

We have 26 years to test whether the market would produce decent rents through competition and a vibrant housing market where suitable accomodation was affordable for all. That is long enough to demonstrate failure to me. There are properties being built, especially in London, but there are those for sale in the high end of the market, the £300k + for single apartments, with a token number of "affordable" flats available to the plebs, as long as they use the side entrance. Planning should be geared towards building proper social housing for ordinary working people.

Councils would love borrow to build houses ( which will pay for itself) and retain their dwindling stock. But the government prevents that. We need a party that will let them do that and charge a fair rent, rather than fork out for unnaffordable , squalid private rabbit hutches. And house prices do need to come down. That means facing off those vested interests , perhaps capital gains taxes on all properties might do something there, or a massive increase on stamp duty (weighted for London , of course)which should deter property speculators.

[Phier]

Being I'm not part of this, I'm looking for some education here.

So, in the UK, the government pays for peoples rent, in the private sector, as part of the dole?

[Ludicus]

Money into workers pockets is taxable, whereas money siphoned off to..... is not.

Well said. In doubt, ask the Espirito Santo Bank
Behind the Collapse of Portugal's Espírito Santo Empire
Essentially, money-laundering and tax evasion in large scale.

[G-Megas-Doux]

Yes, it also pays people's mortgages as well. This is something that Gordon Brown's government brought in when the credit crunch hit. It is unsustainable.

[Condottiere 40K]

Unless they don't want the housing market to collapse, a great deal more homelessness, and cascade into another financial crisis.

[G-Megas-Doux]

Unless they don't want the housing market to collapse, a great deal more homelessness, and cascade into another financial crisis.

But where does the government get the money to pay it? That is what I mean by unsustainable. The government issues bonds and takes loans on it's ability to raise revenues from economic activity and taxes. If no one is working and the government is paying for everything then it only receives back in taxes a proportion of what it pays out. It is an equation of decreasing returns. Social spending and debt repayments are the two biggest expenditures of the government. By social spending I mean health, education, emergency services and the benefit system. The longer people live the more sick people we have to pay for. The longer people live the more elderly we have to pay pensions to. The less employment the more people we have to pay welfare for. The less employment the fewer people we can raise taxes from. If people are not working there is less income to move round and financial institutions will be unable to grow the economy fast enough to limit the risk of purchasing government bonds and financing government initiatives.

[Simon Cashmere]

An increase in the minimum wage will bring the benefits bill down and prevent large corporations living off the state's golden teats. I don't see why a hotel chain in New York can apy union rates for its staff , yet in London they can't be asked to pay the living wage. I am not sure why I , as a taxpayer, have to subsidise their wages, when the the hotel's multi -million £ owners can stump up . As for those companies that do pay decent wages and pay their CT, well excelent they are doing their duty to this country. My issue is with those that don't.

There it is everyone - our economic problems worldwide solved in a paragraph. Just raise the wages, and then there won't be any inflation from wages expansion, companies won't lay people off because the cost of their wages bill increases - nor will they outsource and send jobs overseas where wages are cheaper. No not at all, what will happen is that people will suddenly have loads more money to spend. prices will stay the same, probably even go down, and companies will be glad to pay higher wages, and will neither seek to pass those additional wages costs onto the consumer by raising prices - nor flee the jurisdiction entirely to a place with cheaper labor. In addition, international producers who have neither the tax burden nor the wages burden of the UK, will not undercut the Uk market and, in fact, inspired by this act of sheer generosity, will sell their products at exactly the same price so no one loses out.

In short - why hasn't anyone thought of this before? It has made redundant millions of pages setting out classical and neoclassical economic theorems.

Beginner pro-tip - buy Adam Smith and perhaps read 'The Wealth of Nations' or The Theory of Moral Sentiments before entering the debate again.