A musing - no, not amusing - on the Welfare State

The IMF says we need to cut - harshly - the levels of benefits:

Britain and other rich nations have been urged by the International Monetary Fund (IMF) to cut benefits and taxes to tackle the worklessness crisis.

Mel Stride vowed to “do whatever it takes to get Britain working” as the IMF said men in particular would be encouraged to find jobs if countries lowered taxes and benefits. More training and childcare support would help more women into work, the organisation said.

The IMF research, which was based on analysis of 38 OECD industrialised economies, including the UK, US and Germany, recommended that higher pension ages would also keep people in work for longer.

The comments are likely to fuel the debate among Conservative MPs over the benefits reforms needed to boost work.

Which leads to the musing.

The current definition of poverty is less than 60% of median household income, adjusted for household size, usually measured after housing costs. It’s also said that “low wages” are those that are less than 60% of median wages. The minimum wage has been pushed up over that 60% level.

Well, OK. It would be harsh to insist that those unable to work should be in poverty, that those working also be in poverty.

And yet we have this problem identified by the IMF - a large portion, too large they say - not working because work’s not worth it. Therefore cut the taxes upon work - at least at the low end - and also cut the benefits from not working. So as to open up the gap between the incomes gained by not working and those gained by working.

But there’s a very strong implication here. Which is that 60% is too high a portion of median income to gain by not working. For, if that can be gained by not working then some to many will make that choice. That is, at the very least, implicit in the IMF’s advice.

The musing at the end of this being, well, perhaps it’s just not possible to have the welfare system raising all up to 60% of median household income and also maintaining the incentives to go to work. Perhaps all that free time to do other than work actually is worth 40% of median income?

Perhaps we need to adopt a lower poverty measure in order to make the system as a whole balance?

It is a musing but one, we think, that does have to be mused through.