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August 29, 2010



Where do withdrawal rates fit? I would suppose that the difference in income between employment and unemployment is more important than absolute levels. If you are in receipt of various benefits as a result of being unemployed with dependents, you can suffer 100% marginal withdrawal rates in taking low paid employment.
I am not anti welfare, but I am anti aggressive benefit withdrawal rates.

Luis Enrique

3. is a v good, much overlooked point. Although there might be some more things going on at the macro level. I'm not sure about the dynamics of getting to it, but a situation with higher employment might mean higher aggregate demand, lower taxes. So there might be more than "lower wages" to increase the supply jobs.

Luis Enrique

oh, I see your footnote covers that. I should add I think you're spot on about the right focusing on one margin, and granting it far too much explanatory power.

Ralph Musgrave

I don’t think point No. 3 is 100% valid (as your footnote seems to imply). It is true that those on benefits tend to go for jobs at the lower end of the jobs market, but these are nowhere near exclusively minimum wage jobs or even “double the minimum wage jobs”. To illustrate, I am sure a significant proportion of those able to earn double the minimum wage find benefits plus leisure a more pleasant option, at least for a few months. Indeed, I personally know some of these people. Cutting these peoples’ benefits would not induce them to go for minimum wage jobs, thus the min. wage is not an obstacle to their finding work.


thank you for an interesting post which challenged my thinking on this subject - it is nice to in a convincing way be told that i am probably wrong about something.

however - contrary to the first sentence of the last paragraph - i don't think that any malicious intent to stigmatize the unemployed is a necessary or even common ingredient in the process of arriving at the possibly false conclusion. in my humble experience, it is rare that my political opponents have arrived at their positions with the intention to be evil; usually we disagree about facts, causality and which potential outcome is more desireable, but share an honest intent to better society.

Luis Enrique

here's a relevant recent MR post


james c

rent £150
jsa £60
cash in hand work £100
£310 per week

job @ £20,000
£315 per week

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