"Scroungers": what's the problem?

Ed Miliband and Liam Byrne want to get tough on “evil” benefit scroungers. This is not evidence-based policy making.

Let’s look at the evidence, in the form of table 12g of the ONS’s survey of subjective well-being.

This shows that the  unemployed are significantly less happy than those in work. In answer to the question “overall, how satisfied are you with your life nowadays?” the average unemployed person replied 6.3 on a 0-10 scale, whereas the average employed person replied 7.5.

This is a big difference - equivalent to six standard errors. It means the unemployed are less happy than people who are divorced,  widowed or who have a longstanding illness or disability.

The overwhelming majority of unemployed people, therefore, far from being content to scrounge, are pretty miserable. Any leftist party worth anything would have this as it basic premise.

In this context, the possibility that some people don’t want to work should actually be welcomed by any utilitarian. The fact is that mass unemployment is probably here to stay. If a few people don’t want to work, therefore, this increases the chances of other unemployed people finding a job, and thus moving out of deep unhappiness.

Let’s look at this another way. Let’s assume that a million “scroungers” were to move into work; this is an utterly incredible assumption, given that there are only 455,000 job vacancies, and given that there’s no evidence that there are so many scroungers. But bear with me. By how much would this raise GDP?

If they were all to get full-time minimum wage jobs - earning £11,000 per year - aggregate labour income would rise by £11bn - less than 0.8% of GDP. Add in the fact that it’s profitable to employ them (ex hypothesi) and we’re talking a rise in GDP of around one per cent.

But this is puny compared to loss in GDP caused by the financial crisis. Andrew Haldane at the Bank of England estimated (pdf) this to be 10%. And it’s looking unlikely that we’ll recoup this through faster growth any time soon. 

The cost of “scroungers”, then, is an order of magnitude smaller than the cost of bankers.

The evidence, then, suggests that “scroungers” are, at worst, a mild problem. So why expend political capital fretting about them? The nicest thing I can think of is that this is another example of how moralizing is displacing rational policy-making.

Comments

[Liam Murray]

This entirely misses the point.

Political disquiet over 'scroungers' isn't something that should be proportionate to their financial cost - it should be (and usually is) proportionate to the wider public disquiet and the corrosive effects that has on the welfare model.

[technical writing jobs]

that was fantastic!

[Jackart]

Two words. "Moral Hazard".

1) Why should taxes, taken from people who aren't exactly lovin' their job, at gunpoint, be used to support someone who is happy not to work?

2) Many choose unemployment, even if it is sub optimal from the point of view of happiness. People are lazy. Inertia is strong.

3) Vacancies aren't an indicator of how many jobs there are. I've never got an advertised job. I've been offered a job when I've gone round with my CV. Lots of people enter employment each month, even in recession. Those who look hardest find work quickest. Increacing incentives may yeild happiness if those who are unemployed miserable and lazy are forced to gain employment.

[TACJ]

@Jackart:

To your point 1: Chris provides evidence that the unemployed are *not* happy not to work.

To your point 2: Irrelevant.

To your point 3: Well bully for you, Mister Hotshot.

[guthrie]

How many people are apparently sitting about permanently on benefits? I've seen enough stories of such people, and their 3rd generation worklessness (Not to mention some people I've met down the job centre who clearly were just taking the mickey), and spoken to people who knew such people, to know that there are workshy people who like to sit about all day, maybe do a bit of drugs or shoplifting, then go and get their benefits.

But they are certainly not a majority, and their existence does not in any way invalidate the need for a welfare state and benefits system. However as others say they are a convenient way of trying to destroy such a system.

Certainly the figures of over 100,000 problem families that Cameron was talking about a while back suggest a large scale but certainly not gigantic problem. After all there are more than 300 times as many other people in this country.

So, nice post. Shame the politicians don't care and we can't seem to get enough people together to get them to change their minds about not caring.

[gastro george]

The five most depressing words in the dictionary are "Labour gets tough on welfare".

Do they think that the extra 1 million unemployed since the start of the crisis are all scroungers? Or the legions of unemployed graduates?

[golookgoread]

Some comments about Jackart's comment:

Yes these were methods that I used to use to find a job in the hidden jobs market BUT I ask:

Would you have your daughter walking the streets offering her private and personal details to strangers? As a woman, I do feel very vulnerable by this method of job search, but I do it all the same, without much success. The majority of prospective employers expressed the wish to receive my CV by uploading it via the internet.

A hidden job like anything traded via a black market is wrong. It exists to exploit people.

All jobs should be advertised. Hidden jobs should be banned by law. How else can you guarantee that the job is a legal job and a decent job? How else can you guarantee equality of opportunity to the letter of the law? It is about time that this double-standard was eliminated from society. In bad economic times, it is especially important for the jobs market to be completely transparent.

The last time I walked into a job that wasn't advertised was when Job Agencies still treated jobseekers as their clients just as much as their employer-clients. That was sixteen years ago for me.

All that I then needed to get a decent job was to walk into an agency, do a typing test and a spelling test, hand in my CV, and I would have a full-time temporary job within seven days, which would enable me to pay my rent and my bills with money to spare.

Fifteen years ago I was 37 years old, and still looking ten years' younger. There comes a time when it is impossible to disguise one's age. There is no political correctness when you're out on the streets looking for work, that is a real part of the hidden jobs market I guess.

[alastair harris]

in the context of your flawed argument then it is ed and liam that are the problem. In that they are seeking populist soundbites to get out of the mess they find themselves in (so unlike labour politicians!). The real issues are, to deal with the poverty trap that comes with the benefits system we have, and to overhaul a benefits system that is efficient in putting people into it, but poor at helping them out. "Moral judgements" might well sell newspapers but there is no evidence they pervade policy decisions

[Tony Woolf]

Read a bit about evolutionary psychology and you will find out why. We are programmed to be hard on freeloaders, for good evolutionary reasons. The response to scroungers is an emotional one and you will not change it by mere rational discussion.
The challenge is to find a way to move the unemployed out of the scrounger category while giving them enough money to have a decent life. I don't think anyone has really succeeded in doing this yet, though maybe the East German full employment system came near to it.

[UnlearningEcon]

'1) Why should taxes, taken from people who aren't exactly lovin' their job, at gunpoint, be used to support someone who is happy not to work?'

Aside from the standard RW 'workers versus scroungers' line, this gunpoint crap really needs to be called out. Basically you are suggesting that your pretax income is your property and is 100% earned by you. Of course:

a) Property rights and taxation are defined by the state simultaneously, so to call pretax income your property is nonsensical.

b) Your pretax income is a result of the institutions into which you were born; the law and order, roads, and yes, even public health and education have contributed towards your income. Even after tax, your income is higher than if society didn't exist.

So yes, if you don't pay taxes you are breaking the law and will be punished like anyone else breaking the law. But don't come out with all this 'theft' crap because it just doesn't make sense.

[Andrew]

Nice post, it is pretty desperate stuff seeing Labour scrabbling for Daily Mail readers.

I would point out however that being miserable scrounging doesn't preclude being a scrounger. People don't always choose what is best for their long term happiness.

[Churm Rincewind]

I think Liam Murray hits the nail on the head. It's all about confidence in the equitability of the system, not the economic impact.

As for UnlearningEcon, I do think my pretax pay is mine. I have a contract of employment that says so, and payslips that confirm it. (Actually I'm self-employed, but let it pass.) The state, too, says that any cash benefits are mine. The fact that economists may have a different definition of income carries no weight in the day to day.

[Mike Killingworth]

It would be interesting to know whether the likes of the previous poster, who thinks his pretax pay is his, have a higher score on the happiness index than those who only look at the sum that actually enters their bank account.

I have an idea of the answer. After all, no one's ever told me I'd be happier if only I were greedier.

[UnlearningEcon]

'As for UnlearningEcon, I do think my pretax pay is mine. I have a contract of employment that says so, and payslips that confirm it. (Actually I'm self-employed, but let it pass.) The state, too, says that any cash benefits are mine. The fact that economists may have a different definition of income carries no weight in the day to day.'

OK:

(1) Does the contract actually say this? I'm not an expert in contract law but it strikes me that there would be at least a clause on taxation in there.

(2) The contract, enforced by whom? For there even to be a contract you need government, so to have the contract declare that pretax income is yours is contradictory.

[john b]

There are two ways of viewing flows of wealth - roughly, the economists' way, and the lawyers' way. Economists look at what actually happens; lawyers look at irrelevant bollocks written on pieces of paper. Economists are right; lawyers are not.

[gastro george]

"Economists look at what actually happens"

That's arguable, considering the recent record of most mainstream economists.

[dirigible]

"Any leftist party worth anything would have this as it basic premise."

Q.E.D

"The cost of “scroungers”, then, is an order of magnitude smaller than the cost of bankers."

The bail-out shows that bankers *are* scroungers. They're just the right class of scroungers.

[Peter Benson]

It seems that most politicians believe that playing to the Daily Mail audience will win them the next election.

When all and sunder cite Taxpayers supporting the idle benefit scroungers.

I have paid taxes in excess of £400 weekly in the past.Yes I was on very good wages Tunnelling.But I never complained about paying large taxes,I was happy,lucky and fortunate enough to be on good wages.I also have claimed benefits so see both sides of the argument.

These whiners that go on about benefit scrounging scum often forget the wealthy cheat all the time.With offshore accounts etc.But instead of moaning about these,these whiners hope to join them.Aspire like a X factor auditioned rising star to get Rich.Drive a Big Car and pollute and strip the planet with there endless chase for the next new thing.Be it the latest mobile phone that they just have to have or the new Niki trainers for their spoiled offspring.

And then they call and whine about those at the bottom.Take a walk in another man's shoes before you condemn him.And thank your lucky stars that you are not unemployed.

[Churm Rincewind]

If my pretax income is not mine, then who does it belong to?

[Keith]

I think that it is doubtful if making speeches attacking benefit claimants is a good political strategy. The problem for a left party under capitalism is that many people clearly do not like their job. This arises from alienation in the marxist sense of the word alienation. But lacking a radical culture this comes out politically as hostility to those in receipt of benefits. But if I claim this or that Benefit that fact is not the reason your boss is a dick or the conditions of your employment are oppressive. The real solution for a left party is to boost the Trade Unions and demand more workers rights. Attacking claimants is displacement activity for both workers and Politicians. For workers who are unhappy with their lack of power and politicos who have no plan to challenge social power relations it is a device to avoid accepting the logic of a defeatist attitude. Namely that you are complicit in boss exploitation if you have no plans to weaken it. Those people who are indoctrinated in Daily Mail propaganda will not vote Labour how ever many speeches Milliband makes attacking claimants. If there was no welfare state or when the tory/ new Labour oxbridge elite finally abolish the welfare state workers will off course be even more alienated as they will be more exploited and despised by the boss as they will have even less power. As with the Governments tendentious arguments about pensions does any one really think workers in the private sector will get better pensions when state employees pensions are savaged? No. This is sound bite politics and it leads only to defeatism for the mass of the people. Labour only makes itself more ineffective and unelectable in the long run when it sells out ( I use the words advisedly ) the claiments and Trade Unions in struggle. More cuts to pensions and conditions of employment more attacks on the social safety net only demobilise the masses, create alienation from politics and makes social culture more mean and divisive. The Labour leadership are digging their own political grave but do not seem to understand the result of their own actions. Despite losing the last election with plenty of rhetoric about british jobbs for british workers and the introduction of ESA etc.

[Working class hero]

Your economic model isn't dynamic. All workers in the private sector add value to society. Their work can and does create more jobs. The key issue for the 'left' should be long-term unemployment. Job churn and retraining isn't ideal (but is unavoidable), but the long-term unemployed who have no skills and have been badly educated in state schools are the fault of successive politicians (after all, they took the money away from their working parents to educate their children and failed).

[Bert]

@ Liam Murray:

"Wider public disquiet" has been at the very least stoked (and I believe largely manufactured) by politicians and press looking for an easy target on which to load the ills of the country. For some data to substantiate this look at the constant stream of corrections FullFact (a non-partisan factchecking site) have to request from the papers for misrepresentation of the basic verifiable facts relating to benefits, and the recent research from University of Glasgow which charted the massive change in language used in the press when referring to people with disabilities.

The recent Crimestoppers campaign is another example - in it's launch material it states that the public perception is that benefits fraud is massivley higher than it is, but despite the public being *factually wrong* the government must be seen to respond, and therefore must launch yet another high-profile anti-benefit-fraud campaign... therefore fuelling even further the public perception that benefit fraud is a significant problem - this is clearly circular logic.

Finally, today the Mail and Telegraph ran stories alleging that around half of JSA claimants were somehow fiddling the system because they failed to attend workfare programmes (which include stacking shelves in Poundland for six months for approx £2/hr) - when challenged on the source of these figures it was revealed that they were anonymous briefings from within the DWP. Having succeeded in demolishing public acceptance for disability benefits it seems they are now moving onto basic income replacement benefits.

The tragedy of this is that millions of people who will need social support in the hard years to come will find it is not there, because a deliberate campaign of misinformation has had 'a corrosive effect on the welfare model' and has led to the gutting of the safety net.

[UnlearningEcon]

@Churm:

The post tax income belongs to you; the taxed part belongs to the state or public.

[Maclomaclee]

The idea that they're all scrounges would require that the number of people prepared to scrounge increases at times of financial crisis. Unlikely. Much more likely they are the unwitting victims of a financial. Risks made elsewhere.

And if anyone really think that salaries (or for the self employed their charge out rates) are offered or accepted without reference to taxation rates (or indeed pensions offered) they are wilfully selecting the bits of an argument they agree with and ignoring the rest.

[Amateur Economist]

@UnlearningEcon

When you end up debating with people who can't understand the points you are making, quit. Great first post though...

[Steve Williams]

@Jackart,

Sorry, but your comment makes little sense.

'3) Vacancies aren't an indicator of how many jobs there are. I've never got an advertised job. I've been offered a job when I've gone round with my CV. Lots of people enter employment each month, even in recession. Those who look hardest find work quickest. Increacing incentives may yeild happiness if those who are unemployed miserable and lazy are forced to gain employment.'

Vacancies aren't a perfect measure, I agree. But when combined with data on the number of people looking for work, they provide a pretty good picture. People who get jobs in your beloved hidden jobs market don't show up on government statistics as 'looking for work'. Also, the only way the presence of the hidden jobs market, in and of itself, could invalidate the value of the vacancies metric, is if the hidden jobs market became proportionally larger as vacancies went down, but nobody thinks that is the case.

Finally, simply saying 'moral hazard' isn't an argument. The mountain rescue service is blighted by moral hazard, but most people think it's an acceptable part of our society.

[BenP]

Why, because Labour policitians are cowards and too scared to challenge the Rights attemtps to divert attention from banks as the cause of the mess we are in.

We are now a country to big to fail with UK financial services responsible for debt up to 600% of GDP due to re-hypothecation rules or lack thereof - http://www.debtdeflation.com/blogs/2011/12/31/debt-britannia/g

[BenP]

Sorry this was what I was thinking of - http://www.debtdeflation.com/blogs/2011/12/31/debt-britannia/

[Churm Rincewind]

I rather agree with Amateur Economist, but I'll have one last try. The State calculates an individual's tax liability on the basis of their pretax income - that is, it assumes that all the pretax income belongs to the individual, otherwise the State couldn't coherently hold that the laibility for tax calculated on this basis also belongs solely to the individual (which it does). The State can't tax people on money which doesn't belong to them - that would be a nonsense. The fact that the tax paid belongs to the State is the end result of the process not the beginning.

[Churm Rincewind]

@UnlearningEcon: If the proportion of my income which represents my tax liability does not in fact belong to me, why does the State include this amount in order to calculate my tax liability - a liability which, the State maintains, does belong to me? See, for example, the HMRC website throughout, which consistently refers to "your" income, by which they certainly don't mean post tax income.

If "my" income only comprises my post-tax income, is the State taxing itself?

[UnlearningEcon]

The way income is referred to by HMRC is a red herring and largely irrelevant to the abstract argument. My point is that to say you own your pretax income makes no sense. Pretax income simply a money flow that is heavily influenced by how the legal system is set up, including property rights themselves, and taxation.

It is simply illogical to claim ownership of your pretax income when it cannot exist without taxation.

[The Thought Gang]

That the unemployed are less happy than the employed doesn't really tell us much. First there's a chicken/egg question.. am I unhappy because I am unemployed, or do I have a negative outlook on my life/prospects which has contributed to my being unemployed?

Secondly, I may feel that even if I were employed, being so would not improve my life very much.. for my employment is most likely to be in a relatively low paid and, perhaps, unfulfilling job. I don't expect to find work as a well paid professional who is able to afford the lifestyle that I consider will make me happy. You must therefore not compare my happiness with all those who are employed, but only those employed in jobs that I fell I can realistically aim for. If they are still demonstrably happier than I am, then the premise is sound.. but if not then I may reasonably conclude that being a 'scrounger' is a rational choice.