Sunday, 2 March 2014

The 100 Year Old Buccaneer, Responses

Thanks to the character limit of the comments section below, I once again find it necessary to provide a response in post rather than comment format.

Please see the comment section of "The 100 Year Old Buccaneer" for the questions to which this is the answer:

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 Hi Alex,

Thanks for taking the time to read and comment, always interesting to hear people's responses. As mentioned in the main post the exact nature of how a "welfare in kind" system would work is a topic that really deserves a series of posts to adequately cover, however, with that said I've given some "broad strokes" responses below.

Expense:
The biggest problem I came across in trying to assess the cost of the current system on a per head basis is that most households receiving welfare also have income from other sources. Although around 2/3rds of households receive some kind of state support, only a third are "dependent" on welfare (over half of their income), and I could find no figures for households which only had welfare as an income means.

Coming at this from a different direction, £250 billion is, at present exchange rates, worth around $420 billion, which deflated to 2012 prices (for ease of comparison using wiki) is roughly $415 billion. If a country had a GDP of $415 USD(2012) it would be the 27th largest economy in the world - slightly bigger than Austria but smaller than Argentina. Without some detailed budgeting I can't categorically say that the provision of "university hall" style accommodation and basic sustenance for the poorest households in the country would cost more then buying Austria, but it seems unlikely. The second point on this is that even if the system is (somehow) more expensive per head the expectation is that it would reduce the welfare-claiming population by providing significant incentives to work, coupled with far less autonomy and a far lower standard of living for those on welfare.

As you mention a combination of social housing and existing programs are going to be fundamental building blocks, but I feel we should be looking to the universities and the military for the basic approach. Both successfully house (and in the case of the latter feed and clothe) large populations in relatively small geographic areas and provide facilities perhaps beyond the level I would be proposing.

Free Riders:
The lazy/mediocre is a problem unfortunately all welfare systems of any kind suffer from. Ultimately the effort of working will always be outweighed by freebies for some people, regardless of the level of living the freebies allow. The hope with the welfare-in-kind system is that it allows such a basic standard of living that this problem is minimized as far as possible. It may not the be most enlightened position but I also feel there would be less resentment/tension between those who pay for the system and those who are seen to be free-riding when the free-riders have none of the luxuries enjoyed by the working population. From my experience its not necessarily people receiving some support while unemployed that drives resentment, its those same people affording £100 trainers, plasma TVs and foreign holidays - all the things the low income tax payers can't afford.
(An aside here - this to some extent funded with a degree of petty criminality the welfare-in-kind system could take a much harsher view towards.)

Foreign Nationals
There are a few different scenarios I can see arising here; UK national lives abroad and retires back here - The question inevitably has to be: what have you been doing overseas? If you've been working and accumulating an income of some kind before retiring then you are unlikely to be 'caught' by this level of safety net. If you've been largely unemployed overseas, or spent all your money, before coming back, its not massively different to if you'd stayed in this country all your life and done the same thing. The only difference is we haven't had to pay to support you during the unemployed years in the middle (so a net saving).

Foreign nationals moving to the UK presents more of an issue, and I think the real challenge here is around immigration policy in general. The majority of economic migrants to the UK do become employed (though there is an issue with the UK becoming a low-wage low-income nation driven by hiring ever more people with ever lower skill-sets; a trend that unlimited migration has certainly contributed towards). For the remainder there is very little we can do under current EU directives. Even if you do deport unemployed migrants there is nothing to stop them coming back, so this seems to be a cost you have to lump regardless. At least the "in kind" system reduces the potential for fraud or abuse, and can, to some extent, be used to more forcibly require a degree of cultural assimilation (particularly language and laws).

Incapacitated
Sickness and disability is a controversial subject - since it can certainly be seen as falling into the "unlucky" camp. The first point here is that with increasing technology we should be seeing a decrease in the number of people unable to work - when your only employment options are physically demanding then any kind of physical disability potentially renders you unable to work. Is the same true in a world where many jobs take place via laptop, phone and video conference? I work from home one day a week so it takes no extra physical abilities that day-to-day living wouldn't. As an insight to this I'd suggest tracking down a BBC document about the post-WW2 welfare system. From memory both of the people followed who were signed off as unable to work ended up with jobs by the end of the program by taking advantage of employment opportunities that had very low physical requirements. The NHS still covers those with injuries or illness at a "critical" level so that wouldn't change.

The best solution I can come up with on the fly is some kind of "second stage" or "premium" welfare system, where the individual contributes some funds and the state provides slightly more. Those who have worked could potential build up entitlements to this higher level of support, while those in certain situations (disability/illness) could be assessed as being entitled directly. This may also give a way of people moving back into working life through part time or temporary work by removing the income-trap created when cash benefits are withdrawn at the same time tax is added. To your point about insurance it would be easy to see how an insurance market could exist to provide an income sufficient to met the requirements for this "contributory" level of welfare-in-kind in the event of sickness/illness/unemployment and so on. There also isn't any particular reason why this premium level is more costly to run per head, since the expectation is that the individuals involved are now contributing towards costs themselves

Thanks,

/Z

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