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Cutting Benefits Works!

by | 8th, March 2012

YES, yes, we know, they’re really only Tory Bastards intent on grinding the faces of the poor into the dirt. However, this process of grindingthefacesofthepoorintothedirtbycuttingbenefits does in fact work.

It reduces unemployment, you see?

It shouldn’t come as much of a surprise to anyone who has been paying attention that the registered unemployment rate is pretty meaningless these days. So many people have been offered the slightly better terms of early retirement, incapacity benefit and the like that the number sitting around doing fuck all and waiting for the cheque from the taxpayers is a multiple of those we call “unemployed”.

It’s been going on a long time too: I certainly recall Maggie doing it and those with longer memories might recall cases before that.

So, we’ve really two things to look at: the portion of the working age population which isn’t working and then also those actually registered as unemployed. The former has been rising strongly in recent decades as statistical tricks have been tried to stop the latter rising too alarmingly.

But, of course, what really determines the future is not how many people are claiming dole as opposed to incapacity. What really matters is what portion of the population is not working at all. And we have interesting evidence from Sweden about how to deal with that:

The Social Democratic government in Sweden got into trouble for exploiting insurance programs such as sick-leave and early retirement to hide unemployment. Reinfeldts center-right government took power by promising to reduce Total Joblessness (“Utanförskap”). They made entitlement less generous while reducing tax rates, making it more attractive to work rather than live off welfare.

Riksdagens Utredningstjänst (the equivalent of the Congressional Budget Office) recently calculated total hidden unemployment in Sweden since 2006, finding that joblessness actually declined during the economic crisis.

As a share of the 16-64 population, Total Joblessness (“Utanförskap”) declined from 26.7% December 2006 to 24.6% December 2011.

The employment rate of this age category also increased during the period. Considering that employment rates fell sharply in the OECD during this period, it is impressive that the Swedish numbers managed to go against the stream. Making it less attractive to live off the state instead of working led to reduced dependency on welfare, as predicted by economic theory.

Isn’t that excellent, eh? Cut taxes for the low paid, cut benefits for those on them and the unemployment rate drops.

And best of all The Guardian will just love this. For they are always telling us that we must be more like Sweden, aren’t they?



Posted: 8th, March 2012 | In: Money Comments (3) | Follow the Comments on our RSS feed: RSS 2.0 | TrackBack | Permalink