Social Welfare too high - discouraging people from taking up jobs?

[Mpsox]

...it keeps people from going back into the work force..

That's a very braod generalisation but it can act as a deterrent for some people to go back into the workforce, in particular where there is no financial incentive to return to work

 

[Chris]

That's not true. Spending from benefits has knock-on economic effects. Spending by people on benefits has benefits for their community. It keeps people off the streets. It stops people from begging. It keeps their kids in school. It keeps people out of hospitals.

This is a total economic fallacy! You cannot take money out of one part of the economy, give it to someone else within the same economy (while using up some of it) and then claim that the economy and society is better off. It is just as spurious as taking a bucket of water from the deep end of a pool, tipping it into the shallow end, and then claiming there is more water in the pool.
This falls under the same broken window fallacy as I posted earlier here: http://www.askaboutmoney.com/showthread.php?t=152904

Well I guess if a letter writer to the Irish Indo says so, then it must be true. No-one could argue with indisputable evidence.

It is basic economics and does not require indisputable evidence. When social welfare rises to levels where it directly competes with businesses' ability to hire staff then people will not not be incentivised to work. The lower a person's productivity, and therefore potential wages, and the higher the social welfare "entitlement" is, the larger the disincentive.

 

[Purple]

lol! And the girl he's with in the pic isn't bad either - maybe he has the right idea!

You can imagine the conversation in the dole office;
"So Mr.MacDonald, you still haven't got a job. Can you tell us why"

"I'm a lover, not a worker"

 

[Purple]

Chris, you're wasting your time. So long as you understand that then I hope keep posting as I find your posts interesting and informative but don't bang your head too hard off that brick wall.

 

[horusd]

And, unpopular as it is to say it, it encourages people to create more people who will live on benefits, who will in turn create more people - just like this chap:
http://www.dailymail.co.uk/news/art...-cost-taxpayer-1-5m-time-theyve-grown-up.html

As long as it pays to be irresponsible, people will be irresponsible. This is true of government as it is true of society.

Whatever his attraction is, it's definitely not his looks, his money or his trackie fashion sense. One of the girls said he'd moved his xbox in and she had his picture on her phone & screensaver, must be serious so, love in the modern age eh?

 

[Complainer]

Starting with the definition...Poverty trap Definition



Situation created by tax laws and income related social security benefits that prevents people from climbing out of welfare dependency. If these people strive and earn more, they move into higher tax brackets and end up having even less disposable income than before. After trying several times, they generally give up and may accept the situation as their fate.

http://www.thefreedictionary.com/poverty+trap

(Sociology) the situation of being unable to escape poverty because of being dependent on state benefits, which are reduced by the same amount as any extra income gained


From the first page result in Google for Poverty Trap Ireland

http://www.irishcatholic.ie/site/content/lone-parents-caught-poverty-trap

'Often lone parents are living in private, rented accommodation using a rent supplement.

''If they go out to work they can lose that rent supplement, but they are not earning enough to pay the rent and childcare on their own. They are caught in a poverty trap that works against people who are trying to move on and it is crippling lone parents,'' he said.


[broken link removed]

The Children’s Rights Alliance (CRA)
Mr Lenihan’s decision to bring families on the minimum wage into the tax net...will create a "poverty trap for poor working families" who are now faced with the reality that "it makes more financial sense for parents to claim the dole than go to work", the CRA said an increase in child poverty is inevitable.

Read more: [broken link removed]

[broken link removed]

http://www.independent.ie/opinion/a...verty-trap-easier-said-than-done-2573520.html

SOCIAL welfare rates were controversially cut in the last two Budgets -- but they are still so generous that many low to middle-income families would be better off on welfare.

Thanks for the primer, though I note your fairly selective quoting from those articles. Strange that you didn't choose to quote the "The problem is that despite mutterings from the Government, welfare payments are too low and support for children is certainly inadequate" bit.

I'm well aware of poverty traps, and their dangers. The gist of this thread was not that 'property traps are a problem'. The gist of this thread was that welfare payments must be cut. That's a fairly different argument.

This is a total economic fallacy! You cannot take money out of one part of the economy, give it to someone else within the same economy (while using up some of it) and then claim that the economy and society is better off. It is just as spurious as taking a bucket of water from the deep end of a pool, tipping it into the shallow end, and then claiming there is more water in the pool.
This falls under the same broken window fallacy as I posted earlier here: http://www.askaboutmoney.com/showthread.php?t=152904

No broken windows or swimming pools here. The claim was made that "Benefits paid from taxes to certain individuals only benefit the receivors (sic)". This is factually untrue. Benefits paid from taxes to certain individuals go way beyond those individuals. An awful lot of this money goes into retail, paying for goods and staff. Some of it comes back in tax, particularly VAT and customs duties.

 

[Purple]

Benefits paid from taxes to certain individuals go way beyond those individuals. An awful lot of this money goes into retail, paying for goods and staff. Some of it comes back in tax, particularly VAT and customs duties.

Chris has explained to you in simple factual detail why this is incorrect and you choose to ignore what he said because the truth doesn't suit your ideology.
I will repeat two things I have said in the past;
1) Discussing economics with a socialist is like discussing evolution with a creationist.
2) There are none as blind as those that will not see.

 

[Chris]

Chris, you're wasting your time. So long as you understand that then I hope keep posting as I find your posts interesting and informative but don't bang your head too hard off that brick wall.

I understand your sentiment, and I certainly often feel that way. However, while I don't think an entrenched socialist will ever open their eyes to the realities of economics, I do think that other people reading my posts will benefit from seeing the obvious fallacies proclaimed and perpetrated by socialists.

No broken windows or swimming pools here. The claim was made that "Benefits paid from taxes to certain individuals only benefit the receivors (sic)". This is factually untrue. Benefits paid from taxes to certain individuals go way beyond those individuals. An awful lot of this money goes into retail, paying for goods and staff. Some of it comes back in tax, particularly VAT and customs duties.

But the money welfare recipients spend and hand over to businesses is taken from those businesses and their employees in the first place! No matter how hard you try to explain the economic "benefits" of welfare spending, it is simply economic nonsense. There is no gain to the economy by taking from one group of people and then giving it to another group. The only people that gain are those receiving the benefits at the expense of those that pay for them.

 

[Complainer]

But the money welfare recipients spend and hand over to businesses is taken from those businesses and their employees in the first place! No matter how hard you try to explain the economic "benefits" of welfare spending, it is simply economic nonsense. There is no gain to the economy by taking from one group of people and then giving it to another group. The only people that gain are those receiving the benefits at the expense of those that pay for them.

Money is not 'taken from those businesses and their employees'. Money is collected in taxation through VAT (from everyone who spends money in the State), PAYE (from employees), PRSI/Corporation Tax from businesses, Customs/Excise (from everyone who drives, or drinks, or smokes). 'Businesses and their employees' do not have a monopoly on paying tax.

Those businesses that benefit from welfare spending get particular benefits from that spend. Employees in those retail benefits get particular benefits from that spend.

 

[Chris]

Money is not 'taken from those businesses and their employees'. Money is collected in taxation through VAT (from everyone who spends money in the State), PAYE (from employees), PRSI/Corporation Tax from businesses, Customs/Excise (from everyone who drives, or drinks, or smokes). 'Businesses and their employees' do not have a monopoly on paying tax.

Those businesses that benefit from welfare spending get particular benefits from that spend. Employees in those retail benefits get particular benefits from that spend.

This is nonsense again. The businesses and their employees that receive business from welfare recipients pay taxes to pay those welfare recipients as does everyone else who somehow or other pays taxes. Unless the money comes from a donor outside the domestic economy there is no net gain. You are simply taking from one group of people, wasting some in administration and then giving it to another group. The businesses where welfare recipients spend their money would be at least as well off if they were not taxed as highly in order to pay for welfare. No matter how hard you try to paint some illusory general benefit to an economy through wealth redistribution, it does not stand up to very basic economics.

 

[Complainer]

The businesses where welfare recipients spend their money would be at least as well off if they were not taxed as highly in order to pay for welfare.

I'd really love to see your economic analysis to back this up. There are many businesses that do very well from welfare spenders. There are some businesses in some parts of the cities that depend almost entirely on welfare spending, and would simply fold up without it.

The primary beneficiaries of welfare are of course the welfare recipients. But unless they are sticking it all under the mattress, there will be, as a matter of fact, downstream economic benefits from that spend.

 

[Sunny]

Complainer, your argument does not stand up economically. If what you are saying is true, then why not give benefits to everyone as long as they spend it? Why are you so against tax breaks that encourage investment? As Chris says, all social welfare does is re-distributes wealth. It does not add anything to economic growth.

 

[orka]

But unless they are sticking it all under the mattress, there will be, as a matter of fact, downstream economic benefits from that spend.

What is the economic benefit in taking an extra €10 of tax from me and giving €10 of extra benefit to a welfare recipient? It's €10 less for me to spend and an extra €10 for someone else to spend - where's the 'economic benefit'?

 

[Complainer]

Gents, perhaps you'd like to go back and look at the issue that I'm actually argueing here. Firefly said;

Benefits paid from taxes to certain individuals only benefit the receivors (sic).

I pointed out that, as a matter of fact, this is not true. The retail businesses where benefit recipients spend their money also benefit. That is a simple fact.

 

[Sunny]

Your argument is still flawed. If no benefits were paid, people would pay less tax and therefore have more spending power or the money would be spent in another way. Therefore the overall effect on the economy is the same. The paying of benefits doesn't benefit businesses. It's a social policy, not an economic policy.

 

[horusd]

Your argument is still flawed. If no benefits were paid, people would pay less tax and therefore have more spending power or the money would be spent in another way. Therefore the overall effect on the economy is the same. The paying of benefits doesn't benefit businesses. It's a social policy, not an economic policy.

Sunny there maybe a counter-argument to this. If a person is paid so much that it exceeds their ability to spend it and they save it instead (or indeed use it abroad), then this money is effectively removed from the real economy and becomes unproductive. If on the other hand the money is redistributed via the tax and welfare systesms all of it is spent because it must be spent by the recipient, then the it re-enters the active economy and contributes to economic activity which entails jobs, more taxes etc. In short, it keeps money circulating.

 

[Complainer]

Your argument is still flawed.

Which of my arguments specifically are you referring to?

 

[Purple]

Sunny there maybe a counter-argument to this. If a person is paid so much that it exceeds their ability to spend it and they save it instead (or indeed use it abroad), then this money is effectively removed from the real economy and becomes unproductive. If on the other hand the money is redistributed via the tax and welfare systesms all of it is spent because it must be spent by the recipient, then the it re-enters the active economy and contributes to economic activity which entails jobs, more taxes etc. In short, it keeps money circulating.

That's a very specific example. It's more probable that the high income person will spend more of their money on goods and services that incur VAT and so return more to the exchequer.

 

[ontour]

If welfare spending has such a positive economic impact, then as unemployment rises many businesses must be doing better.

Alternatively we could double the current welfare rates to provide the economy with the boost needed. The businesses would then need more staff and......

 

[Perplexed]

I just want to add a new dimension to this thread. My brother who has lived in Australia for over 40yrs has a Plant Hire business there. In the usual run of things he employs a lot of Irish lads.

Recently there were a few employees who decided they were coming home. When he asked why, they said they'd be better off at home on the dole!!

He was absolutely shocked. He had never seen such an attitude in his working life and thought it no wonder Ireland is in such dire straits if that's the attitude that prevails now.